Is Sri Lanka really experiencing a tourism boom?

The Daily FT spoke to the Immediate Past President of Sri Lanka Association of Inbound Tour Operators (SLAITO) and Chairman and Managing Director of Conniassance de Ceylan Ltd., on the state of post-war Sri Lanka tourism industry, the progress and key challenges as well as future prospects and how best they could be harnessed. Here are excerpts

Q: The Government spearheaded by the Ministry of Economic Development recently released official tourism related statistics to support their claim that tourism as a sector was booming in Sri Lanka. Does the industry share this sentiment?

What are your comments on the quote below: “Sri Lanka attracted 327,902 tourists during the first five months of the 2011, compared to 233,922 tourists in the first five months of 2010, a 40.2 per cent increase on year on year basis. Tourist arrivals increased by 46.1 per cent in 2010 to 654,476 from 447,890 in 2009 surpassing all the previous arrival records. Investments in the tourism sector accounted for US$ 132 million during the first quarter of 2011. This is the highest ever quarterly FDI inflow into Sri Lanka for tourist sector. Direct employment in the tourism sector increased to 72,899 by the end of 2010 from 52,071 in 2009, while indirect employment increased from 55,023 in 2009 to 77,032 in 2010. Total income from tourism increased to US$ 575.09 million in 2010 from US$ 349.03 million in 2009.” Courtesy: www.med.gov.lk (Ministry of Economic development)

A: After the cessation of hostilities in May 2009, a very conducive business environment was created for tourism. And figures indicate a definite increase of tourist traffic into the country.

Perhaps 20% of these figures are VFR (visiting friends and relations) and most of these arrivals stay either in apartments or private residences. Their needs are different to those we can term ‘normal tourists’, however they contribute in a big way to the economy too, maybe in the informal sector and other services, i.e. car rentals, restaurants, etc.    

Q: How has this recorded growth translated to the individual businesses engaged in tourism related activities in Sri Lanka?

A: Definitely it has had a huge effect on individual businesses engaged in tourism. Some 300 new travel agents have been registered with the Sri Lanka Tourism Development Authority (SLTDA) and new hotels counting 500 rooms have officially started operating.

Home stays of 600 homes have registered with the Sri Lanka Tourism Development Authority (SLTDA) providing a new segment of tourism marketing.  Also, large conglomerates have started investing in the industry by way of acquiring existing hotels, refurbishing and upgrading them, and investing in transport, i.e. aviation and rail.

Q: Were the growth figures on par with industry expectations or above industry expectations?

A: Well above industry expectations. According to the Tourism Marketing Plan and Forecast prepared by Sri Lanka Tourism Promotion Bureau (SLTPB), the expected increase is 20%, hence well above expectations.

Q: Is the recorded growth only due to occupancy and arrivals or is yield also a factor? How does the average yield compare with other South East Asian countries and similar tourism markets like Thailand, Malaysia and India?

A: When compared with South Asian countries, the average expenditure is US$ 100 per day in Sri Lanka, which is more than Thailand or Malaysia.

   Q: How has the increase in hotel rates between 40%-60% from the pre-2009 era made an impact on the industry? Arrivals? And other related service providers such as SLAITO members?

A: Hotel rate increases have had very little impact in other areas in Sri Lanka, but in Colombo the minimum rates are overpriced for certain properties which are not refurbished or up to standards expected. Further, the statutory increases, i.e. entrance fees, Cultural Triangle, wildlife, temples, etc., are unacceptable. It will definitely slow down the round trip clientele.   

 Q: How do Sri Lanka’s hotel services and rates compare with its competitors in the region? How does this affect SLAITO and other industries that are part of the tourism umbrella providing supplementary services to accommodation?

A: Sri Lanka hotel services are somewhat acceptable except for the so called 5-star hotels in Colombo. It’s difficult to compare with others in the region, i.e. Thailand or Malaysia since they are over capacity, even India, whereas Sri Lanka is running at less than 20,000 rooms across the island.

Q: Do you believe this growth can be sustained in the short and medium term? Or is it a bubble which will burst soon?

A: No one can sustain 46% growth. World tourism growth is 2%-4%. However, I believe we can sustain at least 20% growth year on year, if we can provide other supplementary services and accommodation which are of an acceptable standard.  

Q: What factors or conditions do you see as needed to be in place to sustain this development in the tourism sector?

A: To sustain this development we need an aggressive market strategy to attract the five new immerging markets. I would place the number one markets at:

Middle-East: Long stay clients and upmarket clientele

Russia: Longer stay clients

India: Close proximity and big MICE market

China: Still to be explored

These are markets where Sri Lanka has direct air connections and also where access is easier.

Q: Minister of Economic Development Basil Rajapaksa launched a home stay and boutique hotel programme. Rural youth training programmes for the tourist sector as well as handicraft and cottage industry development programmes and a village tour and stay (Grama Charika) programme for the tourist sector. Have we seen any active promotion of these types of stays overseas or it is too soon to expect any reaction to these initiatives yet?

A: The Minister’s vision on tourism is commendable. However, these programs will take a little time to market. At the moment there are many village tours, bullock cart rides and elephant safaris, which are being promoted heavily by SLAITO members. The Minister’s vision to promote authenticity and biodiversity will cause Sri Lanka to be different and competitive in the region.

Q: How does SLAITO view the current developments in the industry and what changes would SLAITO like to see from a regulatory perspective to make the growth more sustainable?

A: To start with, we would like to see given more incentives and facilities to hotel developers. Together with this, assistance to fast-track current development, especially the rapid development of the east coast, which will help wipe out the concept of ‘off season’. Tourism is developed between two bridges — Kochchikade and Aluthgama — where you find the most number of hotel rooms, at the moment. Now with the 'Nagenaahira Navodaya' program taking tourism to the east coast as well as the deep south and other provinces (other than the Western Province), the opportunities will be created to be economically sound.

Accelerating the Kalpitiya region development with foreign investors is an excellent move because Kalpitiya could be the most diversified beach resort in Asia due to the fact that Kalpitiya is surrounded by a variety of attractions. i.e. marine (the best coral reef, whale and dolphin watching, kite surfing and other water sports), wildlife (with elephants, bear and leopard at Wilpattu and bird watching) and culture (one hour drive to Anuradhapura, Thanthirimale, etc.).