Travel & Tourism Industry in Sri Lanka to be worth US$ 7B by 2020

reogma|Travel & Tourism Industry in Sri Lanka to be worth US$ 7B by 2020
9 mins read

The contribution of travel and tourism to GDP for Sri Lanka was 11.6 per cent in the year 2017. Travel and Tourism generated US$7.6 trillion and 292 million jobs in 2016, equivalent to 1 in 10 jobs in the global economy.

  • Definition / Scope
  • Market Overview
  • Top Market Opportunities
  • Market Trends
  • Industry Challenges
  • Technology Trends
  • Regulatory Trends
  • Other Key Market Trends
  • Market Size and Forecast
  • Market Outlook
  • Competitive Landscape
  • Competitive Factors
  • Strategic Conclusion
  • References
  • Appendix

Definition / Scope

Tourism refers to traveling of people away from where they live for reasons of business, leisure or recreation, for not more than a year before they come home. Tour operators, tourist attraction, Transport providers, accommodation and local tourist information are businesses that provide services to tourists.

Market Overview

Sri Lanka is a beautiful island country blessed with blue seas, sandy beaches, green hills, cascading waterfalls, coconut groves, tea estates and much more. Sri Lanka, popularly known as beach destination, offers variety of experiences such as wellness tourism, Ayurvedic treatments, Mice, adventure and wildlife travel.

It is famous for cultural heritage, tropical forests, beaches, archaeological sites, hospitality, etc. These factors make Sri Lanka a wonderful tourist destination.

Sri Lanka is ranked 64th out of 141 countries in the Travel and Tourism Competitiveness Report 2017 of the World Economic Forum. Tourism is the third largest export earner in the economy, after remittances and textiles and garments.

The Sri Lanka government established the Ceylon Tourist Board in 1966. The Board is responsible for development and promotion of tourism sector in Sri Lanka.

Some of the major attractions in Sri Lanka are described as below –

Wildlife – There are amazing wildlife species in Sri Lanka, from leopards, elephants, and sloth bears to small fluttering birds and creepy crawlies. Sri Lanka is rated among the 34 biodiversity hotspots in the world.

Beaches– Sri Lanka is well known for beaches. Beaches at Negombo, Hikkaduwa, Beruwala, Unawatuna, Mrissa are considered as famous tourist beaches in the country.

Sports and Adventure– Sri Lanka is a fantastic holiday destination for those who want to indulge in some exhilarating water-sports or climb a mountain. Trek through Sinharaja Rainforest, white water rafting down the rapids at Kitulgala, climbing at Adam’s Peak, Sri Lanka’s sacred mountain are some of the options.

Heritage– Eight sites of Sri Lanka have been inscribed in the UNESCO World Heritage. These are Anuradhapura, Central Highlands of Sri Lanka, Dambulla cave temple, Galle, Polonaruwa, Sigiriya, Sinharaja Forest Reserve and Temple of the Tooth.

Top Market Opportunities

  • Sri Lanka’s proximity to source markets such as India and its connectivity to Middle East and China will help in sustaining tourism growth.
  • Several international and regional hotel chains have begun building or operating in Sri Lanka, such as Marriott and Shangri-La. This creates employment opportunities for engineers, mason, waiters, chefs, cleaners, guides, etc. Tourism helped to create more than 319,000 local jobs in 2015. It is estimated that tourism and its supporting industries will employ 600,000 Sri Lankans by 2020, with women accounting for 10 per cent of the workforce.
  • The tourism sector should represent significant opportunities for US suppliers in a range of areas such as infrastructure, technology, consultancy services, spa and fitness equipment, food and beverages, furniture, etc.
  • More than 85 per cent of visitors to Sri Lanka are traveling for leisure and participate in mainstream activities such as going to the beach, visiting historical and cultural sites, and viewing wildlife. There are abundant resources and investment opportunities in these activities.
  • At present, visitors and major investments are concentrated in clusters and corridors around Colombo as commercial hub, the beaches of South coast, the tea estates and forests of the hill country. There are many other areas which have potential but are untapped.

Market Trends

Range of attractions

Sri Lanka is targeting youngsters, cruise visitors, middle-aged tourists and niches such as health and wellness tourism. The middle-aged and old tourists are interested in historic sites and exploring culture, while youngsters are into adventure tourism such as trekking, surfing and water rafting.

This diversification is reflected by major hotels. Leisure travel spending (inbound and domestic) generated 79.1 per cent of direct travel and tourism GDP in 2016 and rest 20.9 per cent was generated by business travel spending.

Affordable destination

Sri Lanka is considered to be affordable tourist destination when compared with other destinations such as the Maldives and Singapore.

For instance, whale watching is priced on average at only US$26 per person in Sri Lanka, whereas internationally the closest price is US$ 78. National park entrance fees are also lower compared to other destinations.

Business purpose

There has been growth of hotels and resorts such as Shangri-La and Movenpick in Colombo, luxury sustainable hotel Tri Lanka and a rise in foreign investment. This has helped in fueling business tourism.

Connectivity with India

Sri Lanka is one of the closest neighboring country to India. Since India’s economy is growing at fast rate, with around 300 million middle class, the tourism sector of Sri Lanka is seeing prospects with the ever increasing Indian tourists visiting the island nation.

The number of middle class tourists visiting to Sri Lanka from India has surpassed more than 300,000 annually which is in turn helping the island nation’s hospitality industry. In the recent years the two nations have opened their aerospace for an easier movement of the flights. For instance, the Sri Lankan airline flies 126 flights per week to 14 cities in India.

Social Media

The online posts showing the country’s serene beaches and natural landscape have acted as impactful viral marketing tool. Social media has been major factor in influencing people to go to Sri Lanka. In 2013,

Lonely Planet nominated Sri Lanka as the #1 destination in the world to visit. In 2015, Forbes Magazine ranked the island among the “top ten coolest countries” to visit. Global influences including Conde Nast Traveller, Rough Guides, Lonely Planet, the Guardian and the New York Times identified Sri Lanka as a top location to visit in 2016.

Industry Challenges

High Cost

The cost of construction makes investment in hotels and other tourism projects unfeasible while the lack of regulation results in substandard accommodation, which takes a toll on the visitor experience and government revenue streams.

Exposure to Tsunami

The Tsunami catastrophe in 2004 has affected the tourism industry. Approximately two-third of the coastal area including tourist infrastructure facilities was destroyed. Sri Lanka’s position in the Indian Ocean makes it vulnerable to one of the world’s largest natural disasters.

Language Barrier

Language barrier is a major concern when it comes to dealing with tourists. This is because only 1 out of 10 Sri Lankan citizens speak English.

Human Resource

Another major challenge is human resource management. There is shortage of well-trained tourism personnel coupled with high rate of turnover. With the increase in number of tourists, the number of total hotel rooms is also expected to increase. However, the question arises as to whether the human resources are adequate to meet this increase in hotels.

Technology Trends

  • Hotel chains and large hotels are leveraging technology in Sri Lanka. As technology gets more affordable, hotels from small and standalone to chain and boutique are leveraging technology to book hotels, personalize their stay and get insights into guest requirements for future use.
  • As travelers get tech savy, an increasing number are turning to web to plan their holidays, overseas trips and book hotel rooms. Travelers are turning to Hotel Finder due to their numerous benefits in locating best hotel rates, opportunity to compare hotels and book the right ones.
  • While travelling people also want to be connected, either to get destination ideas, options regarding places to visit, share their experience with friend via social media or find directions to points of interest. As a result, investing in network service helps companies to offer more seamless and highly personalized experience to customers.

Regulatory Trends

Tourism Vision 2025

In July 2016 the government drew up a draft for its next endeavor, Tourism Vision 2025, which aims to position Sri Lanka strategically on the international tourism market, and to catalyze the growth in tourism and the overall economy.

Rather than focusing on arrival numbers, the vision places emphasis on building value, attracting more high-spending visitors and pushing up yield. It also aims to improve management, investment in assets and infrastructure and draw FDI in to the industry.

Action Plan

The Tourism Vision 2025 will be followed by two strategic action plans, encompassing 2017-20 and 2021-25. These will provide more detail on how SLTDA and the Tourism Ministry will promote tourism development. The formulation of these plans has entailed extensive, open consultation with stakeholders.

Easing Visa requirement

Easing visa requirement for tourists is an important step for developing tourism as the basis requirements of entry into the country must be streamlined. Sri Lankan government is mulling to grant visa-free entry for tourists from countries like China, India and some European countries. It is also possible to get tourist visa on arrival.

Other Key Market Trends

Major market

  • India is the single biggest market for inbound tourism to Sri Lanka. In 2016, there was 13 per cent increase in the number of visitors from India.
  • The second biggest market is China. There were 271,577 visitors from China in 2016, which is up 26.4 per cent from the previous year.
  • In third, fourth and fifth place are traditional European markets (UK, Germany, France) where affluent citizens have become increasingly interested in Sri Lanka as s destination.

Market Share

  • By region, Western Europe is the biggest tourism market for Sri Lanka, accounting for 30.7 percent of arrivals in 2015, followed by South Asia (25.5 per cent) and North-east Asia (15.2 per cent).

Visitor profiles

  • Sri Lanka attracts visitor from wide age group, from young families and backpackers to old cultural tourists and business visitors. In 2015, 22.6 per cent of the visitors were in 30-39 age group, 18.9 per cent were aged 40-49, 17.8 per cent 20-29 and 17 per cent 50-59.

Attractions

  • Sri Lanka offers a mix of attractions including beaches, wildlife parks, rain forests, Buddhist cultural sites, ancient ruins, etc. Eastern Sri Lanka is an area that offers significant potential as the beaches in this area are considered world class. Locations such as Pasekudah and Arugam Bay are premier destinations, especially for surfing enthusiasts. The country has several parks, forests, flora and fauna and is considered a biodiversity hotspot by several international environment groups.

Seasonality

  • December to March is generally regarded as peak season. In 2015, arrivals peaked in December, with 206,114, while in May there were only 133,529 visitors.
reogma|Travel & Tourism Industry in Sri Lanka to be worth US$ 7B by 2020
reogma|Travel & Tourism Industry in Sri Lanka to be worth US$ 7B by 2020
reogma|Travel & Tourism Industry in Sri Lanka to be worth US$ 7B by 2020

Market Size and Forecast

  • Tourism has become the third largest for Foreign Exchange Earner (FEE) IN Sri Lankan economy.
  • As per market research firm Euromonitor International, Sri Lanka welcomed over 1 million inbound visitors in 2012, rising to 2.2 million in 2017.
  • In the past five years, growth in visitor numbers has been unprecedented, averaging more than 22% year on year, of which 80 per cent to 90 per cent was visitors coming to Sri Lanka on holiday.
  • In 2015, 1.8 million international visitors came to Sri Lanka, stayed on average of 10.1 days and generated an estimated US$ 2.98 billion. In 2016, international visitor arrivals reached over 2 million and revenue generated was approximately US$ 3.5 billion.
reogma|Travel & Tourism Industry in Sri Lanka to be worth US$ 7B by 2020

Market Outlook

It is estimated that more than 3 million visitors will be there by 2022. By 2025, it is hoped that Sri Lanka will be identified as a place for memorable, authentic and diverse tourism experiences.

The new tourism strategic plan introduced in 2017 aims to increase revenue to US$ 7 billion by 2020 and create 600,000 workers in support industries.

Competitive Landscape

The table below shows the travel and tourism’s contribution to GDP and employment for Sri Lanka and its regional peers. The highest tourism contribution to GDP and employment is for Maldives followed by Cambodia and Thailand. Sri Lanka’s tourism contributed to 11.1 per cent of total GDP and 10 per cent to the overall employment.

reogma|Travel & Tourism Industry in Sri Lanka to be worth US$ 7B by 2020

Competitive Factors

When product and services are homogeneous, there is tendency for operators to undercut each other in a price war to the bottom to gain market share of a relatively inelastic demand situation. This has been the case for Sri Lanka’s tourism industry.

For example, experiences such as whale watching can garner high price because of their market appeal but the current lack of value addition and poor management in Sri Lanka doesn’t justify it. A spot price check for 3 hour whale watching excursions reveals that Sri Lanka is priced on average at only US$ 26 per person whereas internationally the closest price is US$ 78 and the highest price charged is in Greenland at US$ 120.

Similarly, national park entrance fee for non-resident foreigners in Sri Lanka are lower than in many other countries. Sri Lanka mostly competes on price and is seen as affordable tourist destination.

Strategic Conclusion

The tourism industry makes a significant contribution to the growth and diversification of Sri Lanka’s economy. It should be considered a key pillar of the economy and a priority in government decision making.

Tourism provides several economic benefits to Sri Lanka’s economy by creating employment opportunities, maximizing net foreign exchange income, and spreading development.

Further Reading

  • https://www.export.gov/article?id=Sri-Lanka-Travel-and-Tourism
  • https://news.wtm.com/the-reasons-driving-a-boom-in-sri-lankas-tourism/
  • https://www.slideshare.net/BTOEducational/sri-lanka-tourism-strategic-plan-and-action-2017-2020
  • https://www.scribd.com/document/226359969/Tourism-Industry-Opportunities-and-Threats-in-Sri-Lanka
  • https://www.ukessays.com/essays/tourism/sri-lanka-tourism-challenges-and-opportunities-tourism-essay.php
  • https://oxfordbusinessgroup.com/overview/rising-star-government-setting-out-its-plans-sector
  • https://www.wttc.org/-/media/files/reports/economic-impact-research/countries-2017/srilanka2017.pdf

Appendix

  • FDI – Foreign Direct Investment
  • GDP – Gross Domestic Product
  • SLTDA – Sri Lanka Tourism Development Authority
  • US – United States

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