Sri Lanka's hotels overcharging for rooms: minister

Sri Lanka's hotels are overcharging for rooms in an attempt to cash in on growing visitor numbers after a decades-long war, a minister said Thursday.

Investment Promotion Minister Lakshman Yapa Abeywardena said some hotels had hiked up room rates 10-fold since the end of the war in 2009 without improving service.

"Soon after the war, the industry took off and people started investing in hotels. Existing hotels which were charging $50 to $60 suddenly increased rates to $600," he said, describing the rates as "unrealistic".

"These high rates are destroying the entire tourism industry," Abeywardena told reporters in Colombo, arguing that the country could pocket more from an increased number of visitors if room rates were lower.

The minister made the comments after giving formal approval for development of an $850 million "mixed development" complex -- an official euphemism for a casino and hotel -- in the capital.

"We can't impose a ceiling on rates, but they should realise that they are sending tourists to much more value-for-money destinations like Thailand and Malaysia," Abeywardena said of some hotel owners.

"We should keep rates low like in Thailand and make more money from other things like entertainment, shopping and restaurants."

Tourism has been growing since the end of the ethnic war between Tamil Tiger rebels and military forces, a conflict that claimed up to 100,000 lives.

Despite drawing a record one million holidaymakers to the island last year, tourism contributed just one percent to Sri Lanka's $60 billion economy.

The number of holiday makers coming to Sri Lanka in the first five months of this year increased by 13.2 percent compared to the same period a year earlier.

The minister said discussions were also at an advanced stage with the local partner of Australia's gambling mogul James Packer for a $350 million "mixed development" in Colombo.

Local media reports have said that two large scale casinos could add a billion dollars to the gaming industry in the country and help Sri Lanka reach its target of 2.5 million tourists by 2016.