Tourism Market outlook
In the sixties, other than the Rest Houses in Hikkaduwa and Bentota
there were no hotels of any standard in Sri Lanka. The Confifi Beach
Hotel was the first Star Resort Hotel that was started in the West Coast
in Beruwala followed in 1972 by the Bentota Beach Hotel in Bentota and
the Coral Garden Hotel in Hikkaduwa. From about 1970 when tourism
started up to 1982, the industry flourished as there was an enormous
demand from overseas Tour Operators to send tourists to Sri Lanka. The
war with the LTTE ended on May 19, and now hopefully a new era for
tourism is about to begin.
In the history of Sri Lanka, more appropriately in the history of the
world, the names of our President Mahinda Rajapaksa, the Defense
Secretary and the Heads of the Army, Navy, Air Force and Police will be
carved in golden letters for all time for the world class unprecedented
record of achievement in completely annihilating the most dangerous
terrorist group that ever existed in recent history. While envy and
political jealousy may render some people unable to admit facts, both
the Sri Lankan sceptics and the International community should not deny
the heroes their dues. There is no doubt, for Sri Lanka a new era is
about to begin.
Arrivals
The ethnic conflict started in July 1983, and from then on the
tourism sector's fortunes fluctuated according to the level of violence
in the country.
The Sri Lanka Tourist Board statistics show that the total arrivals
to Sri Lanka in 1982 amounted to 407,230 and it remained on the average
around 500,000 p.a. mark for 25 years up to 2008, in which year the
figure went down to 438,475.
Given below is a graphic illustration of the tourist arrivals from
the inception in 1966.
The figures clearly show that the drop in arrivals from Western
Europe was partly compensated by the increase in East European arrivals.
Another significant feature is the sizable traffic from North America,
East and South Asia and Australia where the majority were non tourists -
namely Sri Lankan expatriates returning home.
July 26, 1983, the Sinhala Tamil riots began in Sri Lanka and from
that day onwards tourist arrivals have been very erratic dependent on
the ground situation.
In the period 1970 to 1983 tourists arrivals to Sri Lanka increased
by about 20 per cent per year, and from the time of the beginning of the
Northern conflict the arrival figures per year hardly changed. Whereas
competing destinations have gained from the unfortunate situation in Sri
Lanka and enriched their tourism prospects by leaps and bounds, Sri
Lanka continued to suffer with fluctuating arrival figures.
Thee is no doubt that in the intervening 25 years, the tourist
traffic to other competing destinations increased by massive
proportions.
Competing destinations
The Sri Lankan tourism offer which has the multi-faceted features of
sandy beaches, ancient cities, wild life parks, highly desirable
climatic conditions, both upcountry and low country and a friendly
population is a hard to match tourist product.
Only a few countries in the world such as Thailand or Cambodia could
offer similar products. As things stand at present, competing
destinations enjoy higher tourist arrivals, e.g. Thailand (12 million),
Malaysia (10 million), Bali (2 million), Caribbean countries (5
million). And even the new destinations that started only about a decade
ago such as Vietnam (2 million), Cambodia (over 1 million) and Laos (1
million) have had tremendous growth, and Sri Lanka is still receiving
only around 500,000 "Foreigners". Amongst these foreigners are about
100,000 Sri Lankan expatriates living abroad returning home for a visit
and about 50,000 Indians and Business people who are strictly not
tourists.
Therefore, if the 150,000 of tourists are deducted from the
"foreigners" who enter Sri Lanka each year, the genuine tourists are
only about 350,000 per year - a paltry figure in comparison to other
competing destinations. It is estimated that if in the next 12 months
the number of genuine tourists who come to Sri Lanka increase by 100,000
the current supply of registered rooms, both in the cities and in the
Resorts would be hardly adequate to accommodate the surge.
In effect therefore there is a tremendous potential to increase
prices and the room capacity which gives the existing hotels an edge in
the interim period, as hotel construction in Sri Lanka normally takes
about 3 years or more from the point of BOI approval.
Room capacity
The figures in the table below clearly reveal that after forty years
of tourism in an exotic, unmatchable destination like Sri Lanka, the
room capacity has been no more than about 14,700 (estimated) at end
2008.
In the last four to five years hardly any new hotels of distinction
have been built in the South West Coast of Sri Lanka other than Fortress
Hotel in Koggala and the Amanwella Hotel in Tangalla.
Tourism Industry in Sri Lanka has not really taken off in 25 years
mainly on account of the war in the North and East of the country. The
tsunami in December 2004 did not help the situation either.
Travel Advisories
It's common knowledge that the overseas media, for one reason or
another have overplayed the violence scenes and as a result underplayed
the actual ground situation.
Whereas the war was confined to the North and East it hardly affected
the South where the tourist hotels are located. But the impression
created was that the war was all over the island. The city of Colombo
was no more unsafe than the city of London in the last decades or so,
but media reporting carried its bias. Consequently tourist arrivals were
kept artificially low.
In this scenario, in the midst of the media's appetite for displaying
the carnage (with old footage) the Western countries indirectly exerted
a form of trade sanctions by introducing Travel Advisories which
virtually discouraged tourists from travelling to Sri Lanka. That was
the scenario before the LTTE was completely routed on May 19, 2009.
Now that the war which was the excuse for the Travel Advisories is
over, the hotel trade is anxiously awaiting the Travel Advisories to be
lifted, at which point tourist arrivals to Sri Lanka are expected to
increase by leaps and bounds.
Prices
It is well-known that the price of the Sri Lankan tourism products
have been kept very low, as the Tour Operators found it increasingly
difficult, during the period of war, to attract tourists to Sri Lanka.
Both City hotels in Colombo and the Resort hotels in the coast and in
the ancient cities have been keeping their fires burning with
unreasonably low prices. The trade reckons that in comparison to
competing destination norms, the current Sri Lankan Hotel prices are
only about one third of what any comparative foreign product fetches at
the present time.
Outlook
There is no doubt that in the Post Prabhakaran period, one of the
sectors of business in Sri Lanka that is waiting to take off in a
significant way is Tourism. Sri Lanka has something like 1600 kms of
excellent coastline with warm waters (22-26 C) and sunshine round the
year.
It also has luscious greenery, especially in the hill country which
is easily reachable within about four hours.
It has beautiful beaches, wild life parks, ancient ruins, hill
country hotels, golf courses and a friendly nation of people who are
capable of adequately communicating in at least one international
language - English.
Some of the best tourist development sites such as in Arugam Bay,
Passikudah, Trincomalee and Nilaveli in the Eastern Province have been
hardly touched by tourism. Equally new sites such as in Kalpitiya are
yet to be developed.
Considering the fact that Sri Lanka has scarce natural resources it
will have to increasingly rely on the Service Sector in the future, and
in that scenario, Tourism which is number four in the order of
importance for economic development is bound to be given heavy emphasis
as the potential for quick profitable development is extremely high.
The advantage of Sri Lanka from the point of view of its location in
the Indian Ocean to offer itself as a South Asian hub is by itself a
tremendous potential from a market outlook.
M.T. A. Furkhan
Chairman
Confifi Group
|