Revising tourism growth expectations

By Cheranka Mendis

A renowned hospitality consultant from HVS South Asia predicts Sri Lanka tourism arrivals to be 498,509 lower than the Government projection of 1.5 million at the end of 2012.

HVS South Asia Chairman Manav Thadani sharing his insights on the country’s tourism growth at a presentation hosted by Jetwing Hotels last week stated that according to HVS Research for Sri Lanka tourism, the year is likely to end with only 1,001,491 arrivals, contrary to the anticipated 1.5 million by the Government authorities. 

He revealed that projections show October bringing in 83,476 tourists, a 20% increase from the previous year, while November and December will welcome 109,067 and 117,020 tourists respectively. Percentage increases for the months have been estimated at 20% from the same period in 2011. The projected growth for the year is an increase of 17%.

Following the projections for 2012, the arrival target for 2016 has also been set few steps back with Thadani estimating that the 2.5 million Government target could only be achieved by 2020 and not by the expected 2016. Estimating tourist arrivals by market share, the country is likely to bid ‘Ayubowan’ to only 1.93 million by 2016, he said.

Sri Lanka, though poised for growth, is still not fully prepared to welcome the anticipated 2.5 million tourists, he said. “Even though a lot has been done to come this far in the industry post war, whether 2.5 million in four years is achievable is a question,” he said. If the country is to welcome the set target, room capacity must increase by 33,000 rooms to add up to a total 47,704 room inventory by 2016.

Assuming 60% of the rooms will be upscale and 40% mid-market and assuming the weighted average development cost at US$ 168,000 per key, 33,000 rooms in the next four years would mean a US$ 5.5 billion investment by 2016. 

“Assuming the same room ratio of 60% and 40%, upscale and mid-market and supposing the staff ratio of two per key and 1.5 per key, it can be estimated that the country needs 59,400 trained professionals by 2016.”

He noted that for the future, along with the big boys in hospitality such as Shangri-La, Mariott and Movenpick, the country should also focus on the budget and mid-market hospitality segment. “Domestic tourism is important for Sri Lanka and for that there must be more mid-market hotels offering mid-level prices as opposed to the big numbers.” Blessed with external beauty, Sri Lanka could then develop this to compete with regional players such as Thailand, he said.

From the Government, support should be extended to infrastructure development as well as for affordable land sales. “Land is expensive and is most often a key issue for those looking to build hotels. The Government should ideally look at giving concessions and or long term lease benefits for hoteliers, especially those targeting a mid-level market,” Thadani told the Daily FT.

While the industry is poised for growth in the long run, in order to accelerate the growth of the industry, the country should develop its commercial front as well, he added. “Singapore is both a holiday destination as well as a commercial/business destination. Sri Lanka could aim at that. When the commercial front builds up, tourism will also increase.”

While Sri Lanka’s strong points are the presence of diverse attractions (culture, wildlife, beaches, history), along with the close proximity to growing economies such as India, China and Singapore, investor policies, 100% FDI in tourism and simple visa policies, the weaknesses lie in the currently limited office space development, Colombo being the only commercial hub and road and rail infrastructure among others. 

Presenting a SWOT analysis, Thadani said: “Foreign investors are adopting a wait and watch policy due to high political risks. Also, the lack of transparency in Government procedures adds to the concerns.” He also noted that as of now, there are investors willing to actively spend in the country but are concerned about transparency. 

Opportunities for the country are many. Creating destinations as large entertainment projects, increasing integrated development projects such as Kalpitiya and Passikudah and hosting major events such as the World Cup and the Sunburn Festival would give the country a lot of mileage for development. Increasing air connectivity, targeting MIC segment from India and other destinations and increased marketing would also further the cause.

On long term tourism growth, Thadani quoting statistics from World Travel and Tourism Council 2012 Annual Research stated that by 2022, direct contribution to GDP from the industry will be close to Rs. 402 billion, an 83% increase from 2011’s Rs. 220 billion. 

Direct contribution to employment will be 24% higher than 2011, creating 293,000 jobs. “Visitor exports are expected to increase by 74% to Rs. 244 billion as opposed to Rs. 140 billion in 2011 and investment in the industry is expected to rise to Rs. 127 billion, an 84% increase from Rs. 69 billion in 2011.”

– Pic by Upul Abayasekara