Sri Lanka seeks $2.7 b post-war tourism investment

Colombo (Reuters): Sri Lanka aims to attract $2.7 billion in investments to upgrade its post-war tourism capacity, with the goal of growing revenue by more than 700 per cent by 2016, the State-run Tourism Board Chief said on Friday.

Since the end of a 25-year war in May 2009, the Indian Ocean island nation’s tourism industry has been surging with arrivals in the first 10 months climbing near a new peak and revenue reaching a record of $437.9 million.

The teardrop-shaped island off India’s southern tip still attracted tourists during the war with the Tamil Tiger separatists, which ended in May 2009, but the long conflict cut investment into a sector that even now is straining its capacity.

“We need about 50,000 rooms to cater to 2.5 million tourists. Right now, Sri Lanka has only 14,000,” Nalaka Godahewa, the Head of Sri Lanka Tourism Authority, told Reuters in an interview.

Godahewa said the country needs investment of up to Rs. 300 billion ($2.7 billion) to construct around 30,000 high-quality rooms in the next five years.

The size of investment will determine the tax concession on offer, he said.

The Government’s goal is to attract 2.5 million tourists and $2.5 billion in revenue from them annually by 2016.

“The main bottleneck is the capacity. At the moment, the focus is on infrastructure, which is happening and will happen quite aggressively in 2011,” Godahewa said.

The Colombo Stock Exchange’s hotel and travel index has outperformed the overall market, gaining 290 per cent since the end of the war against the 243 per cent rise in the wider bourse, which is Asia’s best performer this year and last.

‘Virgin territory’

President Mahinda Rajapaksa’s Government has made tourism’s revival a core of his plans to renew Sri Lanka, which for decades was a prime destination because of its abundant beaches, wildlife, ancient temples and misty green hills.

But its hotels and quality of service, neither what they once were before the war, now have to compete with the nearby Maldives, where remote atolls attract people to $1,000-a-night rooms, and other Asian destinations like Thailand and India.

Godahewa forecasts 700,000 arrivals and $1 billion in revenue in 2011 against the expected 600,000 and $590 million this year. The key will be raising the average daily spend of tourists to $125 from the current $80.

“More value, nightlife with gaming and tax exemptions on quality luxury branded items will naturally attract more high spend tourists into the country,” Godahewa said.

Sri Lanka in November fully legalised gambling, smoothing out a regulatory structure that had hampered big investments.

The Government has ambitious plans to move its buildings off of prime land in Colombo so they can be leased to hotel investors and a luxury entertainment zone with casinos is on the drawing board around the capital’s Beira Lake.

That will free up what is arguably some of the prime sea frontage in Asia, just as the Government’s military victory freed up prime and unspoiled beaches around the former war zone in the north, northwest and east.

“This is a virgin country for investors. Land prices are not expensive and lands are available. So this is the right opportunity,” Godahewa said.

Investment

The Government wants investment not only into beaches, but also into wildlife sanctuaries, health resorts and religious tourism. There are ancient Buddhist, Hindu and Christian pilgrimage sites all over the island.

Sri Lanka has already established one tourism zone with 14 small islands on the north western coast and two others in the old war zone on the east coast. Total investment is expected to reach $700 million for construction of 8,000 top-end rooms.

“We will also identify lands as well as little islands all over the country which will be put into a land bank and we will open it up for investments,” Godahewa said.