Bright prospects for tourism

by M.T.A. Furkhan

In the sixties, other than the rest houses at 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 at Beruwala followed in 1972 by the Bentota Beach Hotel at Bentota and the Coral Garden Hotel at Hikkaduwa.

From about 1970 when tourism started, upto 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, 2009,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 Hon. Mahinda Rajapaksa, the Defence 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 tourist 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 upto 2008, in which year the figure went down to 438,475.

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-tourist - namely Sri Lankan expatriates returning home.

On 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 tourist arrivals to Sri Lanka increased by about 20 percent 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.

There is no doubt that in the intervening 25 years, the tourist traffic to other competing destinations increased by massive proportions.

The Sri Lankan tourism offer which has the multi-faceted features of sandy beaches, ancient cities, wildlife parks, highly desirable climatic conditions, both upcountry and low country and a friendly population is a hard to match tourist product.

Competing destinations

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 non-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 the 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 violent scenes and as a result underplayed the actual ground situation. Whereas the war was confined to the North and the 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.

There is no doubt that when the demand for the Sri Lankan products increase in the next six months, the current prices would certainly see significant upward revisions to fall in line with industry norms overseas.

In such a situation the profitability of the existing hotels which were built at yester year costs are expected to boom.

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 1,600 kms of excellent coastline with warm waters (22 - 26 degrees 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, wildlife 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 langauge - 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 sits such as in Kalpitiya are yet to be developed.

Considering the fact that Sri Lanka is a country with 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 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.

Now that the Northern war is over, Sri Lanka is indeed a "Miracle" waiting to happen - in every sense.

The writer is the Chairman of the Confifi Group. He was a Professor of Management Accounting of the University of Sri Lanka.