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Tourism is booming. Tourist arrivals increased by 40 percent in the first five months of the year compared to the same period of last year when arrivals rose 46 percent compared to the previous year. There has been an increase in tourist arrivals after the war ended. In the five months to May arrivals are so far up 40.2 percent to 327,902 from the five months of the earlier year.
The current boom in tourism has led to high expectations of it being a key services input into the projected high trajectory of economic growth. The contribution that tourism makes to the economy is both directly and indirectly by boosting other economic activities. Tourism not only increases earnings in the hospitality trade but its backward linkages are of immense importance to several other economic activities. Travel, gem and jewellery trade, arts and crafts, agriculture and food processing are among the industries that benefit from the tourist revival.
When tourism dipped after the July 1983 violence, many sectors of the economy including banks and investment finance institutions were badly affected and the government had to bail out hotels and financial institutions. Tourism never regained its lost potential till the end of the war. There were spurts of growth as during the Cease Fire Agreement and during the Tsunami period. Yet these were ephemeral. Now the position has changed drastically and there is every prospect of an exponential growth. The peaceful conditions and the global economic recovery have been responsible for this tourist boom. As a nation we must hope that peaceful conditions would prevail and that the global economic recovery would gain momentum.
Recent tourist arrivals
There have been new trends in tourist arrivals that give much expectation for the industry. The increase in recent tourist arrivals to Sri Lanka was led by increases in visitors from India and East Asia. By May visitors from India rose 55 percent to 16,649.Tourist arrivals from South Asia was up 53 percent to 21,016. Indian tourists are finding the proximity, the value for money due to the exchange rate differential and the frequency of flights good reasons to visit Sri Lanka. India’s huge middle and upper classes are an enormous potential for the future, as the image of Sri Lanka as a destination for leisure improves. However there is the notion that a lot of Indian tourists are low spenders. It is therefore important to attract the richer higher spending Indian tourists. There is a potential for attracting the super rich Indians.
Similarly there is a surge of East Asian visitors whose numbers rose 66 percent to 6,605. A noteworthy feature of recent tourism is the sharp increase in Chinese visitors. Arrivals from China increased 100 percent to 1,337 in the first five months exceeding the increase in Japanese tourist arrivals that rose 43 percent to 1,054. There were increases in tourist arrivals from other Asian countries too. Arrivals from Malaysia increased by 57 percent to 1,194, while Thai tourists increased by as much as 179 percent to 785. The implications of these trends are that with the rise of Asian economies expenditure on travel is increasing. The growth in Asian tourism is the result of increases in per capita incomes in the region. Information on Sri Lanka and added attractions could increase regional tourist traffic.
However, tourists from Western countries continue to be most important. Arrivals from Western Europe rose 17.4 percent to 12,419 with French visitors rising 81 percent to 2,758. Visitors from Britain fell 0.4 percent to 4,452 while German arrivals rose a modest 3.2 percent to 2,137. Sri Lanka’s resort tourism is now in the off-season for European and American visitors who are enjoying their summer either travelling in their own countries or in the northern hemisphere. After October when winter sets in a surge in western tourists could be expected. This would be particularly so if airfares were to come down with oil prices declining.
Targets expectations and investment
The target is to attract 1.5 million tourists by 2016. The shorter term objective is to attract 1 million tourists in 2011/12. This is not an unrealistic goal provided the global economy continues to grow and travel costs do not rise sharply. In recent years quite apart from the problems of security here, there have been setbacks to tourism owing to global conditions and rising costs. We have no control of these. What we have to do is to prepare ourselves for this volume of tourists.
There is a considerable amount of investment needed to cope with the expected increase in tourists. Quite a large proportion of the total capacity of about 15,000 rooms requires to be refurbished to international standards. This requires substantial investment. Even after such improvement, the industry will be able to accommodate only 800,000 arrivals, leaving a gap of another 700,000 to be accommodated within the next 5 to 6 years.
Investments have already been made and many hotels, especially in the higher grades have been refurbished. Some hotels that were closed in the Eastern province have been refurbished and opened to tourists. Meanwhile there has been a growth of domestic tourism to nearly all parts of the country, especially to the North and East. In response to these there have been a number of guest houses that have been opened. It is very important that domestic tourism is not ignored. Lesser cost comfortable lodging must be provided for the growing number of Sri Lankan travellers in the country. The East Coast which provides sunny weather at this time of the year is being developed for tourism.
The large foreign direct investments this year have been in the hospitality trade. Large extents of suitable land has been bought from the state and plans to build five star and even 7 star hotels are afoot. These facilities would take time to complete but would attract tourists in the fullness of time.
Cautious optimism
The euphoria that is gripping the country with respect to tourism must lead to policies that are not ultimately detrimental to the industry, society and the environment. It is important not to overprice our accommodation. Sri Lanka is one among a number of tourist destinations and tourists are very price sensitive. Therefore the pricing of accommodation and food should be competitive. Sri Lanka is more expensive than many other countries for 4-star and 5-star accommodation. Sri Lanka is only more economical than its competitor markets for three-star rated beach resort hotels. Room rates in Sri Lanka have gone up following an influx of tourists after the end of the war, with those in Thailand, Indonesia, Vietnam and Kenya being lower. It is important to not over price ourselves from this competitive market. The government regulation of charges is an unhealthy development. The hotel industry itself must determine rates and they know best.
There are also threats to the moral fabric of society by encouraging gambling and with it prostitution. There are also many aspects of tourist development that affect the environment adversely such as the developments in Kalpitiya. In the long term interests of the country, these concerns must be addressed. Tourism must not be viewed solely as a money spinner.
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