One of Sri Lanka's leading hoteliers has complained about the on-going price war that has depressed prices in the resorts and strongly urged that government should consider a moratorium on new rooms until "this situation has been remedied.''

"We find that hotels in general are not registering adequate occupancies resulting in a `price war' making hoteliers competing fiercely with each other. (In this situation), tour operators are able to obtain very low rates and attractive special offers which once again lowers the actual rates,'' Mr. George Ondaatjie, chairman of Tangerine Beach Hotels has told shareholders.

"Obviously there is an over-supply of rooms in almost all parts of the country and it has been suggested that the government should seriously consider a moratorium on the subject of new rooms until this situation has been remedied.''

Tangerine has a 30% stake in Royal Palms Beach Hotels promoted by the Mercantile Investments Group controlling Tangerine. This group also owns Nilaveli Beach Hotel in Trincomalee which is not a quoted company.

Presenting Tangerine's annual report and accounts for the year ended March 31, 1988, Ondaatjie said that they were able to increase occupancy from 51% to 58% by aggressive promotions. This helped boost turnover and the earning of a Rs. 21.2 million operating profit, up from Rs. 9 million the previous year.

The net profit after tax was Rs. 7.4 million, up from Rs. 1.6 million the previous year. The chairman noted that this profit was earned after paying Rs. 24.7 million as interest and said that "shareholders would realise that if we had more equity in the company, we could pay generous dividends.''

No dividend had been recommended for the year under review.

Ondaatjie said that the company had raised some equity by way of a rights issue at Rs. 20 per share when the market was around Rs. 52. He said he was convinced that shareholders appreciated this investment opportunity in the context of investment relief offered by the 1998 budget to purchase of new shares in existing quoted companies. The additional funds were utilised to liquidate a part of high interest bearing loans relieving the company of financial charges to some extent.

Tangerine is refurbishing and the chairman said that 11 sea view rooms overlooking the swimming pool are undergoing complete refurbishment. They also had plans to overhaul the air-conditioning and hot water systems which are now over 15 years old and hope to complete the work before the next winter season. They will make use of duty free concessions announced by the tourism ministry for this purpose.

"We would like to refurbish more rooms and upgrade the public areas of the hotel, but the high cost of borrowed funds prevents us from doing so. In this situation, we echo the call of the hotel sector for the government to make available low cost funds at non-commercial rates to enable the hotel sector to upgrade their plant to international standards, Ondaatjie said.

He said that their conference hall at Tangerine, widely acclaimed as the best along the southern coast, had contributed immensely to the financial results. Besides wedding of people of the area and banquets held quite regularly, it had become popular with corporate clients and NGOs for weekend resident seminars and workshop.

At the conclusion of the Royal Palms initial public offer (which was over-subscribed), Tangerine's holding had grown to about 30%. Thus a large part of Royal Palm earnings during its 10-year tax holiday would accrue to Tangerine.

"It is our desire to redistribute these dividends at the earliest available opportunity to the shareholders of Tangerine making full use of the tax free status. I take this opportunity to thank our shareholders who have direct investments at Royal Palms made through private placements and the IPO placing full confidence in the up-market hotel project promoted by our company,'' he said.

The directors of Tangerine are Messrs. George Ondaatjie (chairman), Naveen Rajapakse (Managing director), Lucian. Perera, Herbert Cooray, V. Balasubramaniam, Mrs. C.A. Ondaatjie, W. Edwin de Silva (alternate: Mrs. S.D. de Silva, G.V. Divitotawela, A.R. Peiris, Sumith Adihetty, J.P. Van Twest, Gerard Ondaatjie, Ms. Angeline Ondaatjie and Travis Ondaatjie.