Monday Nov 25, 2024
Monday Nov 25, 2024
Monday, 25 July 2011 00:00 - - {{hitsCtrl.values.hits}}
Following is the speech delivered by Tourist Hotels Association of Sri Lanka (THASL) President Anura Lokuhetty at the THASL AGM last week:
Honourable Minister of Economic Development Basil Rajapaksa, Hon. Deputy Minister Lakshman Yapa Abeywardena, Secretary to the Treasury and to the Ministry of Economic Development Dr. P.B. Jayasundera, Chairman Sri Lanka Tourism Dr. Nalaka Godahewa, excellencies, distinguished invitees, colleagues from the industry, ladies and gentlemen, it gives me immense pleasure and it is my privilege to come before you once again, the backbone of the industry, to welcome you to the celebration of the dawn of the 47th year of the Tourist Hotels Association of Sri Lanka.
Tourism is presently regarded as the most important civil industry in the world. The hospitality industry, which is an essential support infrastructure provider to tourism, is second only to the global oil industry in terms of turnover and is by far the largest employer around the world. Seven percent of the world’s work force is in the tourism industry and 10 per cent of the world’s GNP comes from tourism, as per the UNWTO.
Inbound tourism has become one of the world’s major trade categories; as an internationally traded service. The overall export income generated by inbound tourism, including passenger transport, had exceeded US$ 1 trillion in 2010, or is close to US$ 3 billion a day.
According to the April 2011 interim update of the UNWTO World Tourism Barometer, international tourist arrivals grew by close to five per cent during the first two months of 2011, consolidating the rebound registered in 2010. International tourist arrivals are projected to increase by 4% to 5% in 2011.
Asia has shown up as the strongest growing region with a growth rate of +13%, in 2010. International Tourist Arrivals into Asia reached a new high at 204 million last year, up from 181 million in 2009.
Potential of tourism
Considering the strength and potential of our beautiful country and the socioeconomic significance of tourism, we are glad that President Mahinda Rajapaksa’s manifesto, the ‘Mahinda Chinthana,’ has envisioned the future Sri Lanka as a ‘dynamic global hub’. The economic prospects for the nation’s post-conflict development hinge primarily on a few ‘thrust’ industries. Among them, tourism has the potential to create the highest impact all round.
We are happy to note the outlook for the industry has now completely turned around after nearly three decades of operating in extremely challenging circumstances amidst a military conflict. I wish to take a moment of your valuable time to thank all those industry leaders who had the commitment, irrespective of the circumstances, to continuously sustain the industry during those bad times. I also salute the industry professionals among our membership for their role in sustaining the industry through the era.
The vision for tourism has been stated as, and I quote from the Annual Report of 2010 of the Ministry of Finance and Planning, ‘establish Sri Lanka as the most treasured island in Asia, highlighting its beautiful beaches warm and friendly people, with a strong nature, culture and adventure offering, raising its profile to that of an Asian tourism icon’.
Arrivals to Sri Lanka
As per the Sri Lanka Tourism statistics, foreign tourist arrivals to Sri Lanka hit a record high of 654,476 in 2010 with 46.1 per cent year-on-year rise, surpassing the previous record of 566,202 set in 2004. We are also happy to note that the tourism revenue per guest night in 2010 has increased from US$ 81 to US$ 88 which is +10% year-on year. The growth forecast for this year is 20%; exceeding 780,000 FTAs (Foreign Tourist Arrivals).
The hotel and tourism industry’s contribution by way of revenue to the national economy in 2010 recorded US$ 575.9 million as against US$ 350 million in 2009. Earnings through tourism rose by 40 per cent compared to the corresponding year. In the first four months of this year to $ 270.6 million an increase of 64.8 per cent, compared to the first four months of 2009.
Apart from the revenue, we must take into account the multiplier effect in tourism. At present there are approximately 150,000 persons directly and indirectly employed and during the next five years, as per the projections, this will increase to 500,000. When you consider the dependents, the total number of dependents on tourism will be two million, which will be 10% of the total population of the country.
The President set a target of achieving 2.5 million arrivals per year by 2016 and four million per year by 2020. The tourism sector is expected to create one million employment opportunities and an annual income of US$ 8 billion by 2020. Based on the current status quo, it would tantamount to the industry providing sustenance to over four million people, which is the equivalent of 20% of the population.
This is not a difficult task at all, when we consider the strengths of our beautiful country and the tourist arrivals recorded in the region and their forecast for the future.
Regional performance
To get a proper understanding, let’s have a look at performance of some of the countries in Asia. Singapore has exceeded its target of 11.5 to 12.5 million FTAs in 2010 earning US$ 18.8 billion, exceeding the year’s revenue forecast of US$ 17.5 billion. Despite political and economic turmoil, as well as natural disasters hitting Thailand in 2010, FTAs to Thailand stood at 15.6 million, surpassing the target for the year, which was 15.1 million.
A total of 24.6 million tourists arrived in Malaysia and had spent about US$ 19 billion in 2010 compared to 23.6 million tourists spending about 18 billion in 2009. Malaysian Tourism is targeting 24 million arrivals in 2011. Having looked at countries in the region, we are confident that the target set by the President is achievable.
Room capacity
In order to achieve and facilitate the targets earmarked, the most vital factor would be the room capacity. At present there are 22,700 rooms out of which 15,000 rooms in the formal sector and the balance coming from the informal sector. This number can only cater to a maximum number of 850,000 tourists. It must be noted that out of the 15,000 rooms of the formal sector, about 30-40% of the existing rooms and the related facilities need to be refurbished/upgraded with immediate effect.
Some may argue that building hotels is not tourism, but one must understand all other tourism related activities and opportunities with regard to tourism revolve around quality accommodation units. Therefore, a tourist hotel is considered to be one of the most vital elements. I wish to state that some are of the opinion that first we must have the infrastructure before building the hotels. Whilst agreeing that it is a good concept, we should start both these activities simultaneously or otherwise we will lose the window of opportunity we have got after 30 years.
It is necessary that the private sector take the initiative in meeting the additional room requirement of 20,000 to 25,000 rooms in the next five years. Therefore, it is imperative that the Government stimulates the process by incentivising the investors for both new builds as well as refurbishments / upgrading.
Niche markets and new trends
In the process of constructing new hotels, and the refurbishing of those already existing, currently underexplored niche markets and new trends in tourism, such as health tourism, boutique hotels, eco hotels, etc. cannot and must not be ignored. For example, health tourism in Thailand has become a major source of revenue, as it welcomes upwards of seven million health tourists annually. An advantage of promoting health tourism is that the individual tourist seeking health care is more often than not, accompanied by at least two other family members.
It must be mentioned that the biggest hindrance to local investors who embark on new hotel projects in the hospitality trade, is to find a suitable land at an affordable price. The high price charged by the authorities for lease of State land is a hindrance. If an investor is called upon to pay Rs. 20 million an acre, for 10 acres he has to pay Rs. 200 million upfront. This will definitely raise the question of viability of the project. Therefore it is prudent to have a mechanism to collect such lease payments over a period of time. However, we are thankful for the Government for its initiative to identify the correct investors.
We must also place on record our great appreciation for having been able to get international brands such as Shangri-la to come and invest in two hotels in Sri Lanka. Such major groups investing in Sri Lanka will improve the image of our country and will also help to market Sri Lanka as a destination. We were also very happy to hear from the Vice President of the Shangri-la group that they decided to invest in Sri Lanka because of the fact that Sri Lanka is the best country of the world today to invest in tourism.
Cost of construction
The cost of construction is considerably high in Sri Lanka compared to that of the region. It is estimated that a 5-star hotel room would cost between 15 to 20 million. In this backdrop it is important for the Government to support the investors by introducing some methods to reduce the construction cost in order to lure the foreign and local investors, in meeting the challenge of constructing 20,000 to 25,000 additional rooms over the next five years.
While encouraging the investment in hotels and being mindful of the requirement of facilities of different categories, we must however be careful to ensure that the identity and profile of Sri Lanka tourism is not tarnished by those seeking quick short term financial gain.
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Marketing the destination
Whilst considering all those targets, the most important matter that we have to address urgently is marketing the destination!
We are somewhat concerned about the school of thought that there is no urgency at this juncture to engage in aggressive marketing and promotions, until the infrastructure comes into place and we build the additional capacity. Whilst agreeing with the importance of developing infrastructure and support services, marketing strategically and aggressively is of paramount importance and right now! We can’t afford to allow Sri Lanka to fade into oblivion in the minds of the travelling public overseas. We need to take in to account all dynamics in play to avoid this situation.
Sri Lanka has stood still over the last 30 years compared to the evolution of the tourism products in many similar destinations in the region, due to our continuous marketing efforts in the past. If not for the efforts we would not even be in the current position today. We should not tarry any further lest we be faced with a dilemma of not being able to fill even the existing capacity. Marketing is thus of very high priority!
We must not forget that Sri Lanka cannot be considered the only girl on the beach anymore. We must not forget the fact that many new destinations with better tourism products have emerged in the recent past. At this stage I wish to thank the Government for having appointed a committee to look into this matter urgently.
Charter operators
If you look at the history of Sri Lanka tourism you will observe that up to about 1990, 60% of our tourists were brought to Sri Lanka by the charter operators which were dropped to about 40% by 2000 and by today the charter market has gone down to about less than 3%.
People have a wrong opinion of the charter market thinking that the charter guests means guests of low spending power, which is totally incorrect. If you look at Maldives today, they get about 70% of tourists from charter operators.
The importance of charter market is that the charter operators take lot of effort to market the charter flights. Therefore, even though our budget for marketing was not so great when you compare to other destinations, having a high number of charter operators helped us to market our destination efficiently and effectively.
Therefore, we must also take extra efforts to get back to charter market which could only be achieved through effective consumer marketing to activate charter operators to operators charters.
Occupancy levels
Whilst we are very happy to see the increase in tourist arrivals, we would also wish to place on record that it does not correlate to the occupancy in the hotels. This is a paradox that could be very harmful to the industry in the context of policy and planning for the future. THASL is in the process of addressing this issue so that the reasons for the disparity could be firmly established and appropriate corrective measures adopted.
When you consider the other demand factors of tourism they comprise tourist attractions and activities, accommodation and other tourist facilities and services. Attractions include natural, cultural and special types of features such as theme parks, zoos, botanic gardens and aquariums and the activities related to these attractions. Accommodation includes hotels, guest houses, boutique hotels, motels, apartments and other types of places where the tourists stay overnight.
In regard to the many places of interest in Sri Lanka such as water falls in Sri Lanka, we need to improve the signage and prepare some marketing materials of those places. We should include them in our website to keep the guests informed of these places. This in turn will help to popularise this places and will help to create additional revenue.
I am sure we can do this through our provincial councils as we are prepared to give any assistance to the Government to improve such places through our regional associations.
Domestic tourism
Another area of importance that we should not forget is our domestic tourism. In this respect it is required to identify certain areas and develop them for the use of Sri Lankans. I am sure we have a good infrastructure already considering the rest houses, circuit bungalows, etc. The only thing what we may have to do is to upgrade some of these facilities and have a good management system to ensure that value for money for Sri Lankans are provided in those locations.
Looking at the other issues faced by the industry, a major issue appears to be the various taxes imposed by the local government authorities without any uniformity. This problem has been going on for long years and we are thankful to the Government and particularly to Dr. P.B. Jayasundera, Secretary to the Treasury, for giving a patient hearing and taking measures with regard to the taxation policy and tariff structure relevant to the tourism industry by trying to simplify and manage it centrally.
We must also be mindful of the fact that any tendency towards introducing or increasing any taxes on tourism will only result in burdening the industry further. Sri Lankan hotels will find it difficult to be competitive among the tour operators. Though we understand the need for fiscal consolidation, the Government should be alerted to the fact that any additional taxes imposed, would seriously affect tourism’s proven capacity to stimulate arrivals and economic growth. It will have a negative impact on the whole industry and the economy.
Human resource requirement
Looking at the human resource requirement, we envisage that there will be a dearth of competent employees in the hospitality sector. Thus we are faced with the challenge of increasing the number employed in the sector to 500,000 from around 150,000 at present, in meeting the Government’s target of tourist arrivals in 2016.
The members of THASL in a rather invisible way would have trained more employees than any other hospitality institution in Sri Lanka. In order to meet up with the future demand, as an initial step THASL is planning to implement a career guidance programme through our regional associations by addressing the school children and highlighting the prospects in the hospitality industry in Sri Lanka. THASL has also in its action programme for the next six months drawn up a ‘Future Skills Action Plan’ mainly focusing industry into vocational training and professional development.
As a PPP initiative, THASL would be entering into a MoU with the Vocational Training Authority this August to further on-the-job training and creating employment opportunities and promote hospitality as a preferred career choice among the youth of Sri Lanka. We will be helping the VTA to formulate the syllabuses in their vocational training to match the industry requirements.
To take a further step in regard to the development of tourism, we will get the assistance of VTA to create sufficient awareness of the benefits of tourism by using their offices and training centres islandwide. I am sure this will help to reduce the tourist harassment issues that have created a negative impact on development of tourism.
Interests of the hotel industry
The association has always been representing and protecting the interests of the Sri Lankan hotel industry. At Government level, we were able to take up some major issues that remained unresolved: Removal of provincial council taxes, obtaining the electricity tariff applicable to other industries to the hotel industry and the removal of the proximity rule with regard to issuance of liquor license for hotel projects exceeding US$ 4 million in city and US$ 2 million in resorts.
At present we have been canvassing with the authorities not to treat hotels as a separate segment for the purpose of electricity tariff, but to place us under the ‘industries’ category. We hope that this will be looked at in a positive way.
I strongly believe that we are at a critical juncture in the industry’s history and that we need to take intelligent and holistic, national-minded strategic decisions in order to usher this industry to the place of its true potential.
‘Wonder of Asia’
I must thank the President for restoring peace after three decades which has released the shackles that bound tourism, the Minister of Economic Development Basil Rajapaksa, Deputy Minister Lakshman Yapa Abeywardena, Secretary Dr. P.B. Jayasundera and the Sri Lanka Tourism Chairman Dr. Nalaka Godahewa for their valuable contribution and for all the support given to us so far. I as the President of THASL will wholeheartedly support the Government in its initiatives regarding tourism.
We are very happy that after long years, we have got a great team appointed by the Government. Together we are confident that we will be able to surpass the target set by the President, thereby elevating tourism to the position of the highest foreign exchange earner in Sri Lanka and truly making Sri Lanka the ‘Wonder of Asia’.
Thank you.
