Addressing the white elephant in Lankan economic development in tourism

In the past, Sri Lanka has focused on increasing the number of tourists coming into the country and showcased the

 increase in tourism without much concentration on the growth of our economy in retrospect. Lonely Planet listed Sri Lanka as the number one tourist destination for 2019 whilst Sri Lanka simultaneously boasted of 2.2 million tourists at the closure of 2018. None of these however focus on the economic growth brought in. To put it simply, there wasn’t much of economic prosperity as a majority of these tourists coming in were backpackers with a weekly spending budget of less than $ 500. The question however lies in why doesn’t Sri Lanka attract tourists with a higher spending power? 

A closer look at the issue

Upon closer inspection and analysis, it was concluded that Sri Lanka does not attract tourists with higher spending power who are willing to spend more than $ 300 per day. This is largely due to our country lacking the proper infrastructure to support this level of tourism and the free availability of ‘affordable’ resources as opposed to having more high-end facilities in the country.

Let’s take a step back and analyse this situation through the eye of a potential tourist. There are currently limited direct flights connecting large countries to Sri Lanka. Any potential visitor must predominantly select between Etihad, Qatar Airways or Emirates when flying to Sri Lanka from North America and Europe, resulting in sometimes lengthy transits before arriving at Bandaranaike International Airport. After a long flight, guests are then succumbed into a six-hour drive should they wish to visit the north of the country or another six-hour drive should they wish to visit the south. The lack of better roadways and alternate methods of travel in Sri Lanka leaves guests only the option of travelling on sub-par roads, adding exhaustion to a tiring journey.

Limited qualifying luxury villas and 5-star accommodations in Sri Lanka

Sri Lanka can currently accommodate guests in up to 4,200 five-star hotel rooms with a total staff count of 250,000 to serve these tourists, out of which only 250 rooms belong to luxury boutique villas and hotels that cater to clients on the higher spectrum of spending power.

Room rates in the Cultural Triangle, North, South and Central regions offer half-board accommodation at a rate of $ 90 (Rs. 16,167) per double room. Once taxes are deducted, the hotel is left with Rs. 12,442 from which once Rs. 3,200 is reduced for two breakfast and dinner meals, the hotel is ultimately left with only Rs. 9,242, which doesn’t provide much of a profit margin for a hotel and the industry to sustain profitably, much less allow the hotel to provide a great customer experience through constant innovation.

Looking ahead and getting proper infrastructure in place

To attract tourists with a higher purchasing power, Sri Lanka must not only grow in number of luxury hotels and villas, but also take an initiative to develop our infrastructure. For a tourist to visit the country, they must at times spend lengthy transit hours since we do not have a direct air carrier who flies directly from America and Europe to Sri Lanka. The many hours spent on transit coupled with the many hours spent travelling to various locations around the country from the airport isn’t attractive for potential tourists. 

Even though Sri Lanka’s road infrastructure is yet to reach groundbreaking heights, the Government has taken the right initiative through the Megapolis Ministry that aims on developing roads, railways and the landscape of the city by 2030 with a marina, a cruise centre, a waterfront promenade and housing for an estimate of two million people. 

In addition to roads, railways and the development of the megapolis, Sri Lanka must also look at alternative methods of domestic travel. Currently there are only a few providers offering domestic aircraft carriers, with two of them being large conglomerates in the country. However, these aircraft carriers can only accommodate eight passengers per flight and come at a very high cost making this an unattractive mode of domestic transport, despite the savings in time. 

For tourists looking to visit Sri Lanka and spend a vacation here in luxury, either basking in the misty hills or travelling in the north getting to know about part of our heritage or even enjoy the Southern sea, Sri Lanka’s level of infrastructure and support facilities aren’t attractive enough. Having to travel for six hours to reach the north or south after a tiring plane ride or having to charter an expensive domestic flight with limited travel availability due to their limited flying hours simply isn’t attractive enough to bring in tourists with higher spending power. To bring about economic growth through targeted tourism, it’s time Sri Lanka began developing our urban cities, infrastructure and value added services to attract the right clientele. 

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Sri Lankan tourism; all that glitters is not gold

Tourism in Sri Lanka was said to have reached an all-time high last year with a staggering 2.2 million tourists visiting the country. While news articles widely publicised this never before seen rate, little did anyone pay attention to return in investment and surge in local sales brought by these tourists. 

Most of the tourists visiting the country spend less than $ 500 a week – bringing very little income and indirect employment to our locals, which in turn does not contribute to our economy drastically. So what seems to be the issue here despite having a never before seen rate of tourists pour into Sri Lanka to enjoy our sandy beaches? Let’s dig a bit deeper into the issue. 

Digging deeper into the root cause

Whilst it’s important that Sri Lanka has a steady inflow of tourists, our legislative and other bodies do not pay attention to the type of tourists that visit the country. There has been a growing increase in budget hotels and other budget accommodations both in and out of Colombo, and this number only seems to be in the rising. Although the industry must cater to all levels of tourists, our tourism sector must pay special attention to bring down tourists with higher spending power as this is where the real sales and surge in our economy lies. 

In the past few years there has been a surge in many accommodations coming up in the North, Central Highlands, South and the Cultural Triangle of Sri Lanka. Almost 80% of these hotels have room rates below $ 90 for double half-board basis. Additionally, more and more hotels are coming up in these regions simply because owners find this lucrative market attractive and get into business either because they were advised by a friend or saw someone do well in the same trade. 

Diving headfirst into ventures without a proper plan

This isn’t healthy for hotels, banks and the Sri Lankan economy as there needs to be a substantial financial and business knowledge and planning put into a venture. The business will find it very hard in the long run to pay back their bank loans as it will take them between 10-12 years to breakeven whereas a hotel with a good business and financial model will breakeven between 5-7 years; simply because there was no solid financial plan at the inception therefore having a painful effect on the growth of the business. 

Tourists visiting Sri Lanka with lesser spending power, are not contributing to the growth of our economy. With a tourist spending less than $ 500 a week by cutting down on food, travel and any other possible expense whilst opting to stay at budget hotels, their actions are not helping indirect employment opportunities to grow. With foreigners choosing to either back-pack or choose low cost travel options like travelling by bus in town or train for long distances, they are not providing our local tuk tuk drivers and cab services indirect employment. 

Time for hotels to step up and improve their game

In addition to the majority of tourists Sri Lanka attracts, hotels too must take a step up and improve their services. Hotels can no longer rely on their restaurants and buffets to help make profits, as this accounts only up to 40% of the total sale. Hotels must focus on the remaining 60% that is the real value addition; accommodation services. However our fiscal standing doesn’t make higher priced hotel a beguiling destination for the cadre of tourists we attract. With 30% of a tax charged (with a breakdown of 10% Service Charge, 15% Value Added Tax &2% Nation Building Tax) in addition to the normal rates, tourists and locals alike are disheartened to yield a higher spending power. 

Corrective measures 

In order for Sri Lanka to attract the right kind of tourists which will in turn positively affect our economy and help our nation grow and provide our locals with direct and indirect employment, Sri Lanka must look into developing infrastructure and providing higher valued goods to attract the right level of clientele. Await to find out how Sri Lanka can facilitate an economic surge during our next publication. 

(The writer is an accountant by profession turned Head of Operations. He possesses over 29 years of expertise in the hospitality industry including 20 years of strong financial administration at five-star hotels. His expertise is spread throughout his various stints in various regions around the world including USA, The Caribbean, Middle East and Singapore as well as holding the position of an operation and commercial oriented Director of Finance, with a wealth of business experience. He is a highly result oriented professional, who believes in cohesive work environments and team work. He is now retired and consults professionally to a leading international consulting firm, whilst residing in his home in Colombo.)

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Sri Lanka's Tourism sector achieves US$ 4.4 billion revenue target

Jan 19, Colombo: Sri Lanka has earned over US$ 4.4 billion from tourism this year with revenue steadily increased by 11.6 percent compared to 2017, Sri Lanka Tourism Development Authority (SLTDA) said.

According to the SLTDA, the data suggests that an average duration of stay per person is 11 days in Sri Lanka while average expenditure is approximately 2000 U.S dollars.

The Industry expectations for 2019 are 3 million tourist arrivals and revenue of 5 billion U.S dollars with lonely planet naming Sri Lanka as the Number one destination to travel in 2019.

India, China, and Britain have managed to remain as the leading markets throughout the year in 2018 as well.

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Kishu Gomes appointed Chairman of Sri Lanka Tourism Development Authority

Kishu Gomes will be officially appointed as the Chairman of Sri Lanka Tourism Development Authority and Sri Lanka Tourism Promotion Bureau today, Tourism Development Ministry said.

Accordingly, Minister John Amaratunga is to present the letter of appointment to him this afternoon.

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Sri Lanka tourism industry in drive to fill 100,000 worker shortfall

ECONOMYNEXT- Sri Lanka’s leisure industry says it will carry out a five year program to boost the output of skilled trainees and make the sector attractive to school leavers and females as a worker shortfall worsens amid a tourism boom. 

Sri Lanka Tourism and Hospitality Workforce Competitiveness Roadmap 2018-2023, devised by a skills development committee made up of key leisure sector companies said there is an annual shortfall of up to 20,000 workers. 

“[W]e need more and better trained people entering the industry,” Malik Fernando, from Sri Lanka’s Dilmah group, who chairs the Private Sector Tourism Skills Committee, which devised the 5-year plan. 

“We need 100,000. The Tourist Board thinks it’s closer to 90,000, but that doesn’t include the informal sector.” 

According to the roadmap, only 10,000 trainees come out of hotel schools in the country annually.

But about 25,000 to 30,000 are needed each year to staff new hotels and related businesses and also to fill positions falling vacant as older workers retire and others migrate to greener pastures.

Sri Lanka has a falling rupee, making foreign jobs in countries with sounder central banks which provide stronger currencies such as the Maldives and the Middle East, more attractive. 

“We cannot standby and watch anymore. Our complacency will kill the industry,” Fernando said.

“We hope others will join us, but we don’t intend to wait.” 

The skills committee which includes tourism player like Jetwing, John Keells, Dilmah, and Shangri-La is backed by the Sri Lanka Tourism Development Authority (SLTDA), the Ceylon Hotel School, the Ceylon Chamber of Commerce, the Technical and Vocational Education Commission and the US Agency for International Development. 

Sri Lanka’s tourism sector is growing rapidly, with the tourism authority estimating that 20,720 rooms will be added to Sri Lanka’s inventory by 2020. 

By end 2017, 35,986 rooms were officially registered with the tourism authority in graded hotels and supplementary units such as guest houses. There are also hundreds of unregistered hotels and guest houses 

A quarter of the tourists visiting the country stayed at unregistered properties, the SLTDA said.

The 5-year plan developed by the skills committee, will revamp curricula in hotel schools and start more three and six month courses to churn out workers faster. 

Additional modules can then be taken while working creating an environment of flexible carreer development and training. 

A train-the-trainers programme on the new curricula will train 200 instructors in vocational training institutes. 

A 4-6 week internship program will be introduced. 

Fernando said that the plan will also increase training on niche areas such as naturalists and wellness professionals, who are increasingly in demand. 

Secondary school teachers will also be trained to provide tourism and hospitality training in such schools under the roadmap. 

Fernando says some young people are not joining the industry due to negative perceptions and some parents oppose female children in particular from joining the industry, which will be adressed by increasing awareness. 

“We want to reach out to the youth, parents and the community,” he said. 

There is also a potential pool of workers in the military who may want to leave and join the hospitality industry, officials said. 

A research unit will also be set up to get up to date information on local and international trends to help better decision-making.

“A lot of our statistics are guesstimates and many of them are plain wrong,” Fernando said. “The data is simply not available and speculative.” (Colombo/July02/2018) 

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