By Dimithri Wijesinghe
Photos Krishan Kariyawasam
MSD Productions has been around for nearly 15 years, expanding at an impressive rate. It now has nearly 10 restaurants under its purview, located around the island. With a sundry of concepts adopted in each of their establishments, the group takes care to diversify customers’ experiences at each venue, bringing something new to the table every time.
In recognition of their efforts, the company was mentioned in renowned Condé Nast Traveller UK – a luxury and lifestyle travel magazine published by Condé Nast Publications Ltd. under American mass media juggernaut Condé Nast, which attracts over 164 million consumers.
The honour was bestowed upon the group’s most recent venture – Sugar Beach in Thalpe – which was included in “The hottest new beach clubs in the world for summer 2019” list in the magazine. Sugar Beach is in fantastic company, featured amidst some of the best in the world, with Goa being the only other mention from South East Asia.
While Sri Lanka’s been experiencing a boom in the tourism industry as of late, MSD Productions entered the scene before the upward trend, and has come a long way since.
Today, the group features standalone restaurants under three main concepts – bistro, beach club, and what they refer to internally as night-time.
Sugar Bistro is a chain of establishments under the first concept, offering casual dining, with outlets at Crescat, Odel Promenade, and Galle Fort Dutch Hospital. Another outlet was set to launch at Barnes Place on 3 June, but was delayed due to the events that unfolded last month on Easter Sunday. The launch is now set for September. Their Barnes Place outlet will be up and running within the next month and a half.
Establishments under the night-time concept include 41 Sugar, Silk, and Bailey’s Street Merchants. The first two venues are currently being revamped, but Bailey’s Street Merchants – a speakeasy style cocktail bar located down Mudalige Mawatha in Fort – continues to be an interesting new fixture in the area, adding to its culture and rich history.
Finally, their beach clubs are Sugar Beach, Mount and Sugar Beach, Thalpe. The beach club concept is immensely popular around the world. Having started in the Mediterranean, it’s a restaurant-bar that promotes all-day patronage and provides live entertainment to boot.
The Sunday Morning Brunch sat down with Dinesh Wijesinghe and Gehan Fernando – Directors of MSD Productions – to discuss what they and the local hospitality industry need to continue garnering recognition on a global scale, the challenges they are currently facing, and how the country’s security situation has affected their business.
Wijesinghe and Fernando were very clear about the direction they hoped the Sri Lankan Government would take with regard to the tourism and hospitality in the country.
Everything gets taxed
The duo stated that their main challenge was pricing. “Everything gets taxed,” they said, adding that tourists especially found issue with alcohol prices.
They also mentioned that in about 50% of the food items in their menu, they utilise imported goods in its preparation – from the wheat to the basmati rice.
Tax is levied on industry-specific equipment as well. They said: “We would like to maintain internationally accepted standards of health and hygiene, but there are no concessions for the industry.
“If we buy a refrigerator for the house, there is a tax, and the same tax is applicable when we buy a refrigeration unit for a restaurant. So there are no concessions in this regard; not for setting up restaurants, purchasing cutlery, crockery, glassware, or other equipment, nothing.”
Wijesinghe said that as of recent times, the island had received a lot of international attention, with hype being generated around it as a fresh, cool place to visit. However, he said that before we are able to make that status mainstream, Sri Lanka was destroying its own potential by making it a very expensive place to visit.
Sri Lanka has a task ahead in making itself more inclusive and accessible, considering it competes with destinations like Thailand, Vietnam, Indonesia, etc., which have a more established industry, better service standards, and most importantly, cheaper offerings. “It’s almost like killing the golden goose before she actually lays the egg,” he said.
According to two of them, the country’s alcohol prices are “ridiculous”. They stated that if you go to a bar to have a cocktail in Sri Lanka, what you pay here is what you would pay in New York or London. When considering the difference in the value of the currency, they’re not wrong.
The duo said that while they understood the need for the country to generate revenue, heavily taxing tourism-related imports was going to kill the country’s emergent tourist industry.
They elaborated on the matter of excise taxes, stating: “We’re not even talking about luxury brands or top-end alcohol. For that matter, any alcohol, before it even comes to us, already has a 150% tax added onto it.
“Let’s take a look at a bottle of wine priced at Rs. 1,000. By the time it comes through customs, it’s already about Rs. 2,500, and the distributor then takes their 25-30%, after which we have to add on to that as well. So something that lands at a price of about Rs. 1,000 is sold at a hefty amount of about Rs. 4,500.”
It is a fact that in addition to the value of your bill, you are required to pay 30% in taxes, they said, adding that on a daily basis, tourists refuse to pay such an inconceivable amount for tax.
“If you go to a place like Baxter’s Inn (seventh best bar in the world), you pay around 15-20 Aussie dollars for a cocktail, and if you go to any bar in Sri Lanka, a decent cocktail costs within the Rs. 2,000 to Rs. 2,500 range. So it’s pretty much the same price, and this way not a lot of people can afford to go out regularly.”
The two provided that considering how Sri Lanka is a middle-market economy, we must remain price conscious. While in five to 10 years we may be able to thrive while in this price bracket, we certainly can’t right now.
A seat at the table
A major concern for those solely in the F&B industry is that their business is considered almost as an afterthought when Sri Lanka looks at tourism.
It appears that, while independently-owned establishments cater to a massive portion of the tourist industry, only hotels are considered when legislating for the industry.
Speaking about this disparity, Wijesinghe and Fernando both stated: “We don’t get the recognition we deserve, and we feel quite strongly about this,” adding that despite paying 1% of their revenue in the form of the Tourism Development Levy (TDL), similar to every hotel, they are not consulted in the industry policy-making process. “The hotels pay it and we pay it, but still we are yet to be recognised as equal partners in this,” they said.
The modern traveller is very different to the traditional one from the 80s and 90s. Back then, it was all about full-board, buffets, etc., however, modern travellers wish to experience a more authentic side of the destination.
This is a global phenomenon; travellers leave the hotel in the morning and spend the day experiencing their destination, to return to the hotel to only sleep. As such, during the day, they dedicate the majority of their time to independently-owned business and restaurants. “This is even more evident Down South. And without those independently operating outlets, there is no tourist offering in this country. So given these circumstances, we believe these people need to be supported and encouraged,” they said.
Invest in skills development
Sri Lanka has barely invested in skills development in the tourism and hospitality industry. “We haven’t interviewed a single person from Ceylon Hotel School who has come to us and said they want to be a waiter or a barman. Such training is only done by the private hotel schools.”
The duo stated that the Government needs to take initiatives to develop all the necessary skills for this industry, considering how it in fact requires highly-skilled professionals and is an industry that is on the up and up. They stated that while the Government talks the talk, they just don’t offer the necessary support.
Speaking about the necessity of trained individuals to further the industry, they added: “If we had the cash, we’d invest in a hotel school. We’re a very small company, and yet we bring down experts to train our stuff, to give them that exposure. Just recently, we had an Australian champion mixologist we brought down to do demonstrations for our staff. This is how we lift our game, by looking outside and not by looking inside for that support.”
If there are places you’d recommended to a tourist for an authentic Sri Lankan experience, Fort would be on everybody’s list. It’s beautiful, chaotic, and has history.
Bailey’s Street Merchants is situated in Fort, and the duo stated that that they were excited to move into the hundred-something-year-old building complete with its own rich history. However, they stated that the road from which one enters the speakeasy-style cocktail bar was currently closed due to the terror attacks on the 21st because Presidential Security Department (PSD) staff is housed down the road.
The two stated that due to this closure, they had about 25 staff members idle, and were uncertain on how they could continue to keep them on payroll. However, the duo stated that considering the country’s situation, the imposition of security measures was understandable.
However, they also made a point in stating that there were many historical buildings in Sri Lanka that were still occupied, which could otherwise be utilised as tourist attractions. “The Government needs to give out these beautiful structures, give them away to be maintained as restaurants, hotels, or similar, or do something with it themselves. They simply can’t be occupied as it feels like such a waste.”
They referred to the Dutch Hospital as an example, citing what it has done for tourism in that area, stating: “Before it was developed, it was used as a staff quarters for the STF. Look at the difference it has made to Colombo. These are national treasures that need to be taken care of in an effective way.”
The current situation
Speaking of the current situation, post the terror attacks in April, both Wijesinghe and Fernando said: “We are battling for survival. We can speak form our experience – our group is doing 25% of the sales we used to do pre-attack, and a 75% drop is not a small thing.”
They provided that industry individuals had been getting together regularly to discuss the situation, and said that therefore they were confident in saying that everyone was in the same boat, right across the board. They added that if things continue in the same manner for the next couple of months, they may have to close shop.
Going into specifics, they stated that tourist contribution, including the two outlets in the Galle Fort and Thalpe which amounts to 80-90%, the overall contribution from tourist was about 30%; the rest was from locals. They stated that as Sri Lankans no longer felt safe enough to go out, they were also not in the right headspace to have a good time.
They also added: “None of it is being helped by these random messages that circulate. Unfounded, unsubstantiated claims going unaddressed, and the fact that there is absolutely no leadership or guidance as to where we are and what is being done, causes a vacuum of information.”
On a very serious note, they both stated: “If this continues, and if people do not go out and we do not continue to live our lives as we used to, it is a guaranteed reality that we will have to terminate operations.”