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SRi Lanka Travel & Tourism Essay

With over 1,600 km of coastline, Sri Lanka is well known for its tropical beach resorts and related sports such as water sports, deep-sea fishing, underwater photography, scuba diving at shipwrecks and coral reefs, and whale watching. Other major tourist attractions include ancient heritage sites and forest resorts in Wild Life Sanctuaries.

There has been a significant improvement in Sri Lanka’s tourism with the return of peace to the island nation, following the May 2009 declaration of conclusive victory over insurgent forces. Since the 1980s, Sri Lanka’s tourism was adversely affected because of the ethnic conflict. Tourist arrivals shrunk from 407,230 in 19821 to 302,000 in 1996. Since then, the tourism industry picked up with tourist arrivals increasing to 566,200 in 2004, following the ceasefire between the Sri Lankan military and the rebel Tamil forces in 2002, but there was a substantial decline in the later years. In 2005, there was an adverse effect because of decline in global tourists after the Asian tsunami of December 2004 combined with the break-down of the cease fire agreement reached in 2002.

By 2008, tourist arrivals were down to about 438,000. There was a consequent decline in employment as well in this sector, from 60,516 in 2007 to 51,306 in 2008. Over the course of 2010, countries in Europe and North America relaxed their advisories against travel to Sri Lanka. In 2010, international tourist arrivals to Sri Lanka increased by a significant 46 percent over 2009 to 654,477 and hotel occupancy rates increased from 48.4 percent in 2009 to a record 70.1 percent. Domestic travel and tourism spending by Sri Lankan citizens increased 6.5 percent, in real terms, contributing to LKR 134.6 billion, compared with a decline of 5.3 percent in 2009. These trends have continued into the first half of 2011 with a 37 percent annual growth in international tourist arrivals.

Tourism is among the most important source of foreign exchange for Sri Lankan economy. It accounted for 2.6 percent of foreign exchange receipts in 2009. Foreign exchange earnings from tourism increased 49.9 percent in 2010 amounting to LKR 56.24 billion, as compared to an increase of 1.1 percent in 2009. According to the Sri Lanka Tourism Development Agency (SLTDA), the total number of persons employed directly in the tourism sector increased 1.5 percent, in 2009 to 52,071 persons, compared with a decline of 15.2 percent in 2008. With the restoration of peace in the country and the promise of global economic growth, the stage is set for several years of strong growth in Sri Lanka’s tourism arrivals and tourist revenues.

We estimate International tourist arrivals to Sri Lanka to increase 15 percent in 2011 to reach 750,000. Domestic travel and tourism spending is also expected to increase in 2011 by nearly 7 percent. Estimates by the World Travel & Tourism Council (WTTC) indicate that the Sri Lankan 1

In this document, FY means Fiscal year denoting April-March. Thus, FY2011 or 2010-11 means the period April 2010March 2011. Statement of year, e.g. 2010 and so on, without a prefix FY means calendar year from January-December. Thus, 2010 or CY2010 means period January-December 2010, and so on. Q1FY (year) means quarter April-June; and so on and 1Q (year) means quarter January-March. Thus, Q1FY2011 means April-June 2010, and so on. 1Q2010 means January-March 2010, and so on. H1FY (year) means period April-September, e.g. H1FY2011 means April-September 2010, and so on. 1H (year) means January-June, e.g. 1H2010 means January-June 2010, and so on.

Travel and Tourism Industry in Sri Lanka travel and tourism industry is expected to generate 210,000 jobs directly in 2011 (2.7 percent of total employment). By 2015, T&T is forecast to generate 225,000 jobs, an increase of 2.3 percent per annum over the period from 2011-15.

Sri Lanka primarily attracts tourists from India (19 percent of international tourist arrivals in 2010), UK (16 percent), Germany (7 percent), Maldives (6 percent), and Australia (5 percent). India’s real gross domestic product (GDP) has increased at an annual average rate of 8.4 percent during the period, FY2007 to FY2011. With real GDP growth forecast to increase at an annual rate of over 8 percent during the period, FY2011 to FY2015 and increasing disposable incomes, the number of Indians travelling overseas is estimated to double every decade creating strong demand for recreational tourism, meetings, incentives and conferences. Because of its proximity to India, Sri Lanka is better positioned to compete for this market than many other destinations in South Asia and South-East Asia.

Both the Sri Lankan Government and the country’s private sector are aware of this strategic advantage and have begun to jointly invest in products and promotional efforts geared to attract Indian tourists to circuits such as a `Ramayana’ sites featured in the ancient Hindu epic. Further, with a more secure environment, Sri Lanka is also expected to attract more tourists from North America, Asia-Pacific and Western Europe. The Sri Lankan Government is prioritising tourism and has started taking a number of steps to strengthen the sector. The Ministry of Economic Development in its report titled: `Tourism Development Strategy 2011-16’, has identified the following key objectives: Double hotel room capacity from around 23,000 rooms at present to 45,000 by 2016 Accommodate 2.5 million annual arrivals as compared with over 650,000 in 2010 Increase foreign exchange earnings from US$501 million in 2010 to US$2.75 billion in 2016 Increase tourism employment to 500,000 by 2016

Attract US$3 billion in Foreign Direct Investment (FDI) within the next five years Position the country as one of the most attractive destination in the world To realise its tourism potential however, Sri Lanka will have to significantly improve its international air and domestic surface linkages and, invest substantially in improving domestic transport, energy and telecom infrastructure.

The development of an island-wide road network at national, provincial and rural level is essential to ensure safe and quick connectivity to the various tourist destinations. Recent Plan projections indicate that public investment in road sector is expected to gather further momentum with an investment of LKR 128 billion in 2011. It is planned to be increased to LKR 174 billion by 2013 and, thereafter, to be maintained at LKR 175-200 billion, annually. The country’s overall investment requirements are not expected to be met through public funds only. There is also an urgent need to attract both domestic and foreign investment to substantially improve hotel accommodation capacity and quality. However, there is a perception that the Government is sending some potentially conflicting signals about the role of the private sector in economic development.

Travel and Tourism Industry in Sri Lanka

Sri Lanka has suffered from overlapping authorities from multiple government agencies, and in the past projects stalled by litigation despite having government approvals. Investment approval procedure needs to be accelerated, and speedy approval and procedures will have to be ensured to accelerate the implementation of proposals and reduce start-up times. The government has started a comprehensive process to address legal and bureaucratic barriers to investment and the high cost of doing business in Sri Lanka. Increased transparency and improved governance could also bolster market confidence and lead to higher investment.


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