Tourism Watch

A Look Back On 2018

Sigiriya Rock is a famous tourist attraction. Picture shows tourists at the bottom of the Rock

Arrivals

Sri Lanka has been recording a steady YoY growth in arrivals in the post-war period; 2017 saw 2.1 m arrivals, with a CAGR of close upon 19% over the past five years. Total arrivals for 2018 reached 2.33 m arrivals, with a marginal 10.3% increase over 2017, missing the target of 2.5m arrivals set by the government.  In the absence of any strong and cohesive marketing campaign, which the private sector has been clamouring for over two years now, the YoY growth percentage has been slowing down.

Foreign Exchange (Forex) Earnings

Forex earnings decreased slightly down to USD 3.48 Billion from 3.9 Billion USD in 2018, with average tourist spend per night now standing at USD 170. From sixth place among the leading foreign exchange earning sectors a few years ago, tourism has now come down to third place, and today it accounts for about 4.5% of the country’s GDP. However, in real value added terms, it could perhaps beat the apparel industry, which has a higher value added component, to the second place.

Minimum Room Rate

The government withdrew the imposition of a minimum rate structure for star class hotels in the city, which had been in operation for about seven years. This has met with a mixed reaction, with travel agents welcoming the move and many hoteliers opposing it. This price control mechanism was imposed immediately after the end of the war, to correct the depressed price structure, which was prevalent at that time.

Room stock

In the meantime, many new hotels are being built, and consequently room stock is rapidly increasing. As at September 2018, there were 530 conventional hotel units, with 36,190 rooms, while the supplementary sector (boutique hotels, guest houses and home stay units) accounted for 1,809 units with 13,236 rooms. Thus, the total room stock stands at 49,426 while another 5,192 new ones are expected to come on line in the next few years. (SLTDA). This has fuelled wide spread concern of possible over-supply in certain areas, and consequent price wars.

tourist graphic

Marketing and Promotion

In late 2018, a long waited digital marketing initiative was finally launched at the WTM under the slogan ‘So Sri Lanka’.  There has been a mixed reaction to the concept with some controversies related to the content.

Whatever that may have been, the launch itself was a damp squib, when the political turmoil in the country hit the industry hard. Not only did this affect the launch but also caused cancellations to trickle in, and new bookings slowed down for the peak season, fuelling serious concerns of a sharp downturn.

Ironically, Sri Lanka certainly received a big boost for 2019, just before the political crisis when the Lonely Planet designated Sri Lanka as its No 1 destination for 2019. This would have certainly augured well for Sri Lanka, and efforts should have been made to make the most of this exposure and leverage greater awareness in more diverse and newer markets worldwide.

This great exposure was also overshadowed by the political turmoil, with some international experts querying the wisdom of choosing Sri Lanka for the award.

Thankfully, following the resolution of the political issues, there seems to be a good and rapid rebound of tourist arrivals, making the fears of a possible bad tourist peak season unfounded. Most hotels today are reporting a healthy 90%+ occupancy level and everything seems to be back on track—hopefully.

The informal Tourism sector

There is strong growth in the unregulated informal sector as well as the registered smaller home stay units and guest houses. These two sectors together, termed the non-conventional accommodation providers, now account for about half of all arrivals in the country. (Miththapala 2018: The detailed figures for 2018 are still not available. Hence the 2017 figures are used in the analysis)

There is a strong perception that the informal sector is slowly ‘sucking the lifeblood’ of the tourism market in Sri Lanka, and possibly having some detrimental effects on the overall real growth of tourism in the country.

The lament of the formal operators is that these smaller units operate outside the proper legal framework, without conforming to regulations and without paying proper taxes to the state. There could be some truth in this, where currently with the service charge (S/C), which is levied by the formal sector, a good 31% of the top line revenue is reduced due to S/C and taxes. Which means that for every USD 100, charged by the formal sector, the effective net revenue to the institution is only about USD 69.  Many of the informal establishments which operate outside the jurisdiction of the SLTDA pay these levies and thus have an immediate price advantage.

However, the other side of the coin is that these smaller operators are providing an exciting, rustic, authentic, value for money and more experiential product offering, which seems to be one of the main drivers of Sri Lanka tourism currently.

There is always a safe beach in sunny Sri Lanka
There is always a safe beach in sunny Sri Lanka.

Over-tourism

There is evidence of rapidly developing ‘over tourism” (when there are too many visitors to a particular destination) in specific tourism sites.

Some 600 Jeeps enter the Yala National Park each day during the peak season, carrying over 2,000 visitors per day while another 250 or more enter the Uda Walawe National Park. (Miththapala 2018)

On the average some 3,500 people (both local & tourists) climb the Sigiriya rock every day. (SLTDA Annual statistical report 2017)

Over 73% of all tourists to Sri Lanka visit Kandy (SLTDA departing Guest Survey 2017), the most popular tourism destination of the island. This means that approximately 1.7 m tourists (excluding locals) visit Kandy and the visits average 4,660 a day. The severity of traffic congestion in and around Kandy is only too well known.

These are just 3 examples of severe over-visitation which is beginning to dent the product and experience provided and causing serious issues regarding environmental sustainability

The Independence Square.
The Independence Square.

Human Resources

In 2017, there were 146,115 people employed in the hospitality industry (SLTDA). Of this, 15% were in senior operational management, 51 % in supervisory levels, and 34% in manual operative areas. A chronic lack of proper trained staff continues to plague the industry. With the 5,000 odd rooms expected to be added to the stock, industry experts estimate that there will be a shortfall of about 100,000 trained staff within the next few years. Young persons, especially women, are reluctant to join the industry, due to misconceptions.  The training institutes, currently, operating in the country have limited capacity and could supply not more than 15,000 trained staff every year, which is far short of the need for 100,000 within the next three years. Added to this is the continued demand for Sri Lankan hospitality staff for employment abroad.  It is estimated that some 30,000 leave annually for employment abroad (Miththapala, 2018)

About the Author
Srilal Miththapala has over 25 years of wide experience in the hospitality industry, firstly in hands operational management, and then in strategic tourism development.
With a first degree in Electrical Engineering, and then embracing the hospitality industry, his career commenced with gaining good hands-on experience in operations, managing Sri Lanka’s leading 200 room 4-star Resort Hotel Riverina Hotel in Bentota. He then gradually moved up the ladder into leading group operations overlooking 4 resort hotels, and strategic business management, marketing and development. This gave him substantial experience in conceptualizing and evaluating the financial feasibility of setting up new hotel projects in a sustainable manner.
His last 10 years in the private sector was as CEO of Serendib Leisure Management, which had a portfolio of 4 popular resort hotels under its management. He is credited with transforming one of the group’s hotels, Hotel Sigiriya, into a well-known eco-friendly hotel, during his tenure as CEO. The hotel went onto win several awards both nationally and internationally for its work on sustainable development and consumption practices. PATA commissioned a case study on the success story of the hotel.
For his efforts he was awarded the Green Jobs award in 2008 by the Government of Sri Lanka
Srilal has also had a considerable exposure in the international hospitality arena, participating and presenting papers in many international symposiums, workshops and travel fairs, particularly in the Asia Pacific Region.
He has spear-headed environment friendly and sustainable tourism development, some of which have been recognized and acclaimed in the Asia Pacific Region.
He was the President of the Tourist Hotels Association of Sri Lanka (THASL), the main private sector national tourism organization in Sri Lanka from 2009 to 2010, and he has had substantial involvement at national level planning, restructuring and development activities. Of particular importance was the exposure he had in the development of a new private-public sector partnership model for Sri Lanka Tourism, and the development of a new positioning and branding strategy for Sri Lanka Tourism.
After working in the Private Sector, he led the very successful EU funded SWITCH ASIA ‘Greening Sri Lanka Hotels’ project administered by the Ceylon Chamber of Commerce which was Sri Lanka’s main tourism sustainability platform. The project was adjudged as the best EU SWITCH ASIA project in South Asia and was showcased at the EU in Brussels.
Now retired, he engages in various consultancy assignments in Sustainable Tourism Development, Environment & Wild Life. He has worked with many private sector organizations, including MDF (the contracting arm of the Australian DFAT program), You Lead (a contracting arm of USAID) and the World Bank in Washington.
Srilal has also been a visiting guest lecturer at the Plymouth University UK and Monash University Melbourne on Sustainability themes. He also conducts training workshops in sustainable consumption practices, gives lectures and presentations on Sustainability, Wild life and environment to schools and other organizations. He has been the key note speaker at several eco-tourism and sustainable tourism forums.
He is a fellow of both the Institute of Electrical Engineers UK, and Fellow of the Institute of Hospitality UK.
During his free time he now pursues his passion of enjoying wildlife and the environment.

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