Travel

Sri Lanka's booming tourism industry:

Mega resorts the way forward

Currently Sri Lanka Tourism is enjoying an unprecedented revival after the cessation of hostilities. The monthly occupancies have shown huge year on year increases with the first 4 months of 2010 showing almost a 50% increase said, Srilal Miththapala delivering the key note address at the AGM of the Institute of Hospitality recently.

It is not only the increase in arrivals that is noteworthy, but according to Central Bank statistics, the earnings of the first quarter of 2010 is up by 70% to 141 million USD from 83 million USD last year.

This indicates that the yields are also increasing, due to reduction in last minute discounting which has been practice in the past.

With the contracts for the fourth coming winter now completed, there will be a new revised post war main structure in place and the earnings and yields should increase quite dramatically after December 2010.

He said, that in the face of the tremendous odds the industry faced, tourism dropped from being the 4th largest exchange earner to the country in the 1990's, down to 6th position.

However, unlike some of the other foreign exchange earning sectors, the Tourism Industry is almost a 100% value adding industry.

Another lesser known factor about tourism is the impact it has on the livelihoods of common people. Although the industry has close upon 60,500 directly employed staff, there is a large indirect work force engaged in the informal sector which includes suppliers of vegetable/ fish/ meat / dry food, and many more.

It is estimated that this informal sector could be as much as three times the formal sector.

Thus, it can be safely concluded that some 240,000 people are directly and indirectly involved with the tourism industry. If one were to assume four persons to a family, the number of dependants on tourism would then be close upon 1 million persons, said Miththapala.

It is evident therefore, that tourism in Sri Lanka has a profound effect on the large informal sector.

The indirect sector will flourish and thrive, only when the direct sector (large hotels) successfully attract larger numbers of tourists.

Tourism also has a large multiplier effect which impact other industries such as Food and Beverage, Construction, Handicrafts, Transport, IT , Gem and Jewellery.

To day, the tourism hotel sector has close upon 14,700 rooms, spread over all star categories and newer boutique hotels.

The entire tourism investment is private sector funded and on a replacement cost base, depreciated by 25%, the value of the investment in the hotel plant to day is very approximately estimated to be in the range of Rs. 150 billion (USD 1.4 billion) at the very minimum (without considering the value of land) (Ref. Tourist Hotels Association of Sri Lanka).

Of course we must not forget that we are currently riding a pent up demand and that there are many challenges ahead of us.

The urgent requirement is for upgrading of the hotel product which has been neglected and needs revamping to catch up with the competition in the region.

Several bigger resort hotel chains have already closed or are partly closed for refurbishment.

We estimate that some USD 125 million has already been pledged for this exercise and around 1,200 rooms will temporarily be out for the next few months.

In the short-term the general consensus is that the 14,700 rooms currently available, plus the new additions in the pipeline, supported by some large scale refurbishing of the existing plant, can yield around 700,000 Tourists by 2011. 2011 being featured as 'Visit Sri Lanka Year', will help sustain the current interest and momentum of arrivals to Sri Lanka and help achieve these numbers. Earnings should increase to at least 550 million USD or more.

In the long term there are two avenues we can go down to develop Sri Lanka Tourism - The first is to stimulate the building of new resort hotel rooms, as we have done in the past and certainly there will be a growth of an organic nature, perhaps 5% - 10% year on year. On the other hand if we really want to maximize on Sri Lanka's Tourism potential and make the industry an important force in Sri Lanka's economy, we have to think radically out of the conventional mode, requiring a diversification of the current tourism product.

He said that according to the SLTDA, there are 23 hotels which are being constructed currently around the island, which will bring in around 520 new rooms into stock. It is interesting and noteworthy that almost all these hotels are small with the largest being a 75 room hotel.

Over and above these, there are another 900 odd rooms where the applications are being processed, but here again other than new John Keells Hotel in Beruwela of 190 rooms and another in Trincomalee of 70 rooms, there are no large-scale developments in the horizon. Hence, there is no real investment committed by any 'new player' either foreign or local, said Miththapala.

There is no question that we are a beach destination and the sun, sand and sea will continue to be our major selling propositions.

However, over and above this will be the value added offerings of nature, culture, wild life, eco, adventure, Ayurveda and well-being niche markets. We need to therefore embark on a planned approach to develop all these niches around our core product offering.

There will be a need to undertake mega resort developments in selected areas of the island. such as Kuchcheveli, Nilaveli, Pasikudah, Jaffna, Arugam Bay, Kalpitiya.

This should be on a private sector and public sector partnership model (PPP), where after land alienation, the entire tourism resort infrastructure including water supply, sewerage disposal, green reservations should plan out under strict environmental guide lines. The basic parameters for the size and type of hotel should also be specified, so that individual developers can then bid for respective developments within the resort.

In this manner, we would be able to contain these mega developments in specified areas to minimize any possible environmental, and socio-cultural problems arising due to large scale tourism expansion.

Even a fully-fledged gaming zone, somewhat on the lines of the successful model of Genting Highlands in Malaysia, should be considered under proper regulated, strict guide lines.

In addition, the development should also encompass efforts in the transformation of Colombo and its environs into a hub city status, with large scale shopping malls, entertainment complexes, and most importantly, a fully fledged congress centre to accommodate about 5,000 people or more.

In this manner the further very lucrative and important segment of Meetings, Conventions and Exhibitions (MICE) segment of tourism can then be attracted specially from the Asian Region.

This will call for a further 3000 rooms or so within the city and urban areas.

There will be a huge challenge in the human resources area where there will be a need to produce professional staff for the enhanced tourism industry in large numbers. Training and development facilities and regional hotel academic industries will have to be set up and the Institute of Hospitality will certainly have a major role to play in this regard.

In this manner one can then expect around 2.2 million arrivals, earning some USD 2.4 billion annually in the next 5-6 years.

IATA blasts Europe's handling of volcanic ash crisis

The International Air Transport Association (IATA) called on European governments and air navigation service providers to urgently develop more precise procedures to identify ash contaminated air space and allow more flights. The call came in the wake of 1,000 flight cancellations on Monday (17 May) as a result of the continued volcanic eruptions in Iceland.

This problem is not going away any time soon. The current European-wide system to decide on airspace closures is not working. We welcome the operational refinements made by the Volcanic Ash Advisory Centre (VAAC) in their theoretical model but we are still basically relying on one-dimensional information to make decisions on a four-dimensional problem. The result is the unnecessary closure of airspace. Safety is always our number one priority. But we must make decisions based on facts, not on uncorroborated theoretical models, said Giovanni Bisignani, IATA's Director General and CEO.

Bisignani noted some successful exceptions which provide examples to follow.

France has been able to safely keep its airspace open by enhancing the VAAC data with operational expertise to more precisely determine safe fly zones. Today, the UK Civil Aviation, working with the UK NATS (the air navigation service provider), announced another step forward by working with airlines and manufacturers to more accurately define tolerance levels while taking into account special operational procedures. Both are examples for other European governments to follow, said Bisignani.

Bisignani called for (1) more robust data collection and analysis (2) a change in the decision making process and (3) urgency in addressing the issues.

Data Collection and Analysis Numbers show that the current system is flawed.

Over 200,000 flights have operated in European airspace identified by the VAAC as having the potential presence of ash.

Not one aircraft has reported significant ash presence and this is verified by post-flight aircraft and engine inspections.

We must back the theory with facts gathered by aircraft to test ash concentration. France and the UK are showing that this is possible.

If European civil aviation does not have the resources, it should look to borrow the test aircraft from other countries or military sources, said Bisignani.

Changing the Decision-making Process We have lost confidence in the ability of Europe's governments to make effective and consistent decisions. Using the same data, different countries have come to different conclusions on opening or closing airspace, said Bisignani.