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Refocusing From Terrorism To Tourism

Sri Lanka tourism – where are you going?

Srilal Miththapala  Jul 12, 2009

With the ending of the war against terrorism and Sri Lanka’s ground security situation rapidly returning to normalcy, there is certainly considerable focus and interest on the tourism sector, which is expected to bounce back very soon. In this context, it could be worthwhile perhaps to reflect upon the Sri Lanka tourism industry - its past, present, and future.


Historical Perspectives

Sri Lanka has had a reputation for being a traveler’s paradise. There are records of ancient travelers having set foot on our island way back into the history and being overwhelmed by what they saw.

"This country is an oasis, prosperous and happy; its people are well-to-do; they all have received the faith, and find their amusement in religious music. – Fa Hien (414A.D)

"This, for its actual size, is better circumstanced than any other island in the world ... the island produces more beautiful and valuable rubies than found in any other place in the world… In this island there is a very high mountain where the tomb of Adam, our first parent, is supposed to be found." – Marco Polo (1293 A.D)

“Dear me! It is beautiful.” – Mark Twain (1890)

The Sri Lankan people themselves have had a reputation for hospitality and warmth, where even a stranger is often welcomed into their homes, without too much suspicion.

Tourism was recognized as an important industry in the early 1960s, and it was formalized through the Ceylon Tourist Board Act No. 10 of 1966, which was set up to promote and develop tourism in Sri Lanka, subsequently augmented by the Tourist Development Act No of 1968. It was the late Mr. J. R. Jayawardena, then the Minister of State, who laid the foundations for the development of Sri Lanka tourism along with Dr. Anandatissa de Alwis. Since then, tourism has become a very important sector in the Sri Lanka’s economy. Successive governments have given tourism reasonable focus and emphasis and often it has been called the “thrust industry” of the economy.

Due to the serious security problems that Sri Lanka has faced due to its internal terrorism for the past two-and-half decades, tourism has certainly had a rough, roller coaster ride.

World Tourism

Maybe it is worthwhile at this point to dwell briefly on the world tourism scenario. Tourism is the world’s largest and fastest-growing industry, growing at a rate of over 6 percent and generating about 924 M international travelers in 2008. Worldwide earnings from tourism amounted to around US$856 B for 2008, which is to about 10 percent of the world’s GDP.

The most interesting fact is that major growth is seen and forecast for the Asian region at almost twice the rate of growth in industrialized countries. It is also important to note that tourism is a crucial contributor to the GDP of Asian countries.

Arrivals to Asian countries have dramatically increased during the past 20 years with Malaysia (2000 in 10.0 M / 2007 in 21.0 M), Thailand (2000 in 10.0 M / 2007 in 14.5 M), and Singapore (2000 in 7.0 M / 2007 in 10.0 M) showing phenomenal growth. During the same period, Sri Lanka, once the envy of the South Asian countries, lagged far behind, due to its internal strife (2000 in 0.4M / 2007 in 0.5M).

International tourism receipts also grew exponentially in these countries with Thailand, Malaysia and Singapore recording over US$10 B earnings p.a., while Sri Lanka languishes at around US$400,000 p.a.

The same pattern is reflected in the long-term forecasts of the Pacific Asia Travel Association (PATA), where all Asian countries are expected to show over 6 percent growth, except Sri Lanka, which will show a negative growth.

Of course, all these forecasts were made prior to the 2008 world economic crisis and also before the terrorist war in Sri Lanka come to an end. The long-term forecasts for Sri Lanka, post war, will definitely show a dramatic upward trend.

World Economic Crisis

The impact of the world economic crisis on world tourism was felt towards the latter part of 2008, which saw forecast growth of 6 percent plummet down to a year end of 2 percent. The forecast for 2009 is 0percent at best, with a possible negative growth of 1-2 percent. The economic crisis is having somewhat of a different impact on the tourism sector, since it is not the desire to travel that has been stifled, but it is whether one can afford to spend on travel. This is in line with the grassroots behavioral theory of Maslow's hierarchy of needs, where a person would postpone discretionary and recreational expenditure in a situation like this, where basic security needs (such as employment) are in jeopardy.

The emerging trends are that closer destinations, including domestic travel, are being favored to long haul. Segments such as honeymoons, weddings, visiting friends and relatives (VFR), repeat visitors, special interest, and independent travelers, are expected to be more resilient. Average stay is expected to decline and destinations offering value for money with favorable exchange rates will have an advantage as price becomes a key issue.


Occupancy and Forex earnings

Sri Lanka tourism has, therefore, been buffeted by internal and external crisis, and the fact that it still continues to be buoyant, speaks volumes for the resilience of the industry. For the past three years, there has been a year-on-year drop in arrivals of 11.7 percent and 11.2 percent, respectively. All major generating markets have shown steep declines, including Germany, UK, India, and Benelux.

In spite of all these tremendous odds, the industry has still continued to maintain its position as Sri Lanka’s fourth-largest, foreign-exchange earner, next to textile and garments, tea, and worker remittances. In this context, it should be highlighted that, unlike other foreign exchange earning sectors, tourism is almost a 100 percent value-added industry.

Impact on Livelihoods

Another little-known factor regarding tourism is the impact it has on the livelihoods of common people. Although the industry has only nearly 60,500 directly-employed staff, there is large indirect work force engaged in the informal sector. This includes:

- Suppliers of vegetables, fish, meat, and dry food, etc.
- Suppliers of chemicals and additives for pools and laundry equipment
- Suppliers of stationary
- Suppliers of miscellaneous food and beverage and kitchen consumables
- Suppliers of maintenance, equipment, and spare parts, etc.
- Bands, entertainers, and magic shows, etc.
- Suppliers of tourism souvenirs, such as wood crafts, silverware, and batiks, etc.
- Beach vendors and beach operators
- Transport providers including hire of busses, cars, vans, and three wheelers

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 them be close to 1M persons.

It is evident, therefore, that tourism in Sri Lanka has a profound effect on the large informal sector. It is pertinent to note that this indirect sector will flourish and thrive, only when the direct sector (large hotels) successfully attracts larger number of tourists.

Tourism Plant and Investment

Today, the tourism hotel plant in Sri Lanka has close to 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 percent; the value of the investment in the hotel plant today is approximately estimated to be in the order of Rs.95 billion (US$834 M) at the very minimum (without considering the value of land) (Ref. Tourist Hotels Association of Sri Lanka)

Tourism Associations

There are several associations representing different segments of the tourism industry. The largest and the most important is the Tourist Hotels Association (THASL), which had its inception way back in 1965, the oldest tourism association in Sri Lanka. THASL is a very important member on all forums affiliated to the Ceylon Chamber of Commerce and has regular dialogue with the government ministers and Sri Lanka Tourism regarding the establishment of policies and formulating development plans. Currently its membership stands at 159 hotels, close to 65 percent of all registered hotels in Sri Lanka. Almost all Sri Lanka tourism stalwarts, such as George Ondaatje, Prof. M.T.A. Furkhan, the late Gilbert Jayasuriya, Prema Cooray, and Herbert Cooray, have held the post of president of the association.

In addition to THASL, Sri Lanka Inbound Tour Operators (SLAITO) is the other major organization involved in providing all the ground handling and logistics for the tourists. They play an important role in the delivery chain.

Apart from THASL and SLAITO, there is also the Ceylon Hotel School Graduates Association (CHSGA), Travel Agents Association of Sri Lanka (TAASL), Association of Small and Medium Enterprises in Tourism Sri Lanka ( ASMET), and the Institute of Hospitality (IH). There are plans underway to create a central body, under which all these associations will be affiliated under one umbrella.

Tourism Reforms

Almost 100 percent private-sector owned and operated, the tourism sector of Sri Lanka has no doubt been one of the most resilient of all sectors of Sri Lanka’s economy. It is primarily due to the efforts of the private sector that the industry has managed to face up to all adversities, both internal and external, and has been buffeted for the past 25 years. Several years ago, an idea was mooted to incorporate the private sector more in the decision making for development and promotion of Sri Lanka Tourism. The private sector was quite convinced that they should be a part of the decision-making system in marketing and promotion of the destination, since they were the professionals who understand the business better than career administrative government officers. This is the concept followed in many Asian destinations.

In this backdrop, almost a decade ago, the private sector initiated the idea of a separate Tourism Authority, which will be vested with the power to manage, promote, and develop tourism in Sri Lanka, where the private sector will play a lead role, in partnership with the government. Successive governments discussed this proposal with all stakeholders, and after a long and arduous process, a final draft of a new tourism act was agreed upon by all stakeholders in the Parliament. Consequently, this draft was gazetted on September 16, 2005 and the new Tourism Act No. 38 was presented to Parliament in November 2005. This legislature was unanimously approved in parliament, and the speaker signed the notification thereafter. However, there were some delays in the act becoming law, and it was only in October 2007 that it finally became a reality.

Since the private sector did not expect the government to allocate large budgets for tourism promotions in the country, they also came up with the idea of the collection of a CESS, amounting to 1 percent of the turnover from all registered tourism establishments. This, together with 1/3 of all embarkation levies, was to be provided directly to the new Tourism Authority for the funding and operations of the new entities and related bodies. This was legislated by the Finance Act No.25, which together with the new Tourism Act No. 38 of 2005, provided for the establishment of separate independent bodies having their own board of directors comprising private sector and public sector members to manage different aspects of the Sri Lanka tourism industry.

This is turning out to be one of the most successful public-private sector partnerships that has been implemented and is working reasonably well. There are certainly some frustrations and learning for both the public sector and private sector individuals in understating each other’s viewpoints. However, under the current leadership of the Minister of Tourism, the Hon. Milinda Moragoda, and Deputy Minister, the Hon. Faizer Musthapa, the entire process is moving positively forward.


New Sri Lanka Tourism Brand

One of the first tasks that the new Sri Lanka Tourism Promotion Bureau (SLTPB) undertook was revisiting the entire branding of the country. A very comprehensive process of redeveloping the brand was undertaken with the guidance of a foreign facilitator and with the participation of all stakeholders supported by some market research. From these deliberations, it transpired that the existing “Land like no other” positioning did not quite capture the mystique of an island destination, which the research indicated would be a more unique aspect to highlight. From this, it was concluded that the unique selling proposition and the emotional aspect of Sri Lanka would be “Asia’s most treasured island.” The desired consumer perception is, “Its friendly people truly combine these rich and diverse treasures so amazingly concentrated [on] this small island to provide the most pleasant and diverse holiday experience [like] no other Asian destination could so conveniently offer.” The thinking was that this positioning would stand out from the competition and that we will be able to create a unique differentiation for Sri Lanka.

The two central attributes of the brand would be “seeing” (visual, diversity) and “being” (the experiential factor). The brand foundations are “traditional,” “natural,” “simple,” “unspoiled,” “rooted,” “inimitable,” “ethical,” “sustainable,” and “unique.” The final branding was tested among a sample set of prospective travelers by a reputed international research company.

On this basis, the new logo and tag line developed was “Sri Lanka – Small Miracle.”

Very coincidently, all this preparatory work had been done and the new brand was originally scheduled to be launched around May or June. The dramatic conclusion of the war and the change in the country’s perception to the outside world in May has given Sri Lanka Tourism a wonderful and unique opportunity to now unveil the new branding at an extremely opportune moment to portray a new and reawakened Sri Lanka.


Currently, there is tremendous euphoria in tourism, and many believe that tourism will be one of the important beneficiaries of the post-war scenario.

This is certainly true, and already there is tremendous goodwill from foreign tourism partners and pledges of support. There are inquiries beginning to trickle in from new operators and requests from existing operators to secure allotments early. All these are very positive indicative signs. However, there are several aspects that one must carefully consider and take into account to establish the ground reality of the revival.


Airline capacity to Sri Lanka is limited, with many of the regular international carriers having suspended their operations to Sri Lanka many years ago due to the prevailing security situation and subsequent low traffic. With the change in climate, certainly the equation of supply and demand will come into play (seat capacity), and certainly more carriers will look at Sri Lanka more favorably. Group tour operators will also consider restarting charter services, many of which had been also suspended. However, all such arrangements cannot happen overnight. Airline agreements and schedules and availability of aircraft has to be planned and arranged in advance, which would take at least 6-8 months lead time, after there is very definite increase in demand.

Hence, although Sri Lanka will be seen as a safe, value-for-money destination, and even if there are tourists who want to visit Sri Lanka in larger numbers, initially there will be a shortage of flight capacity, which will hinder growth in the short term. A more liberal air policy and improved facilities at the International Airport will help hasten this growth.


The Sri Lankan market, for the past 20 years, has been a buyers market, predominantly dominated by group-traffic oriented tour operators, who procure rooms well in advance (6-8 months) at bulk prices (which obviously would be at heavy discounts). Hence a good proportion of the tourism plant was already sold at war rates (heavily discounted) for the next 6-9 months. Since these are contracted foreign sales, which cannot be now changed, one cannot see a dramatic increase in the rate structure in the short term.

However, in 2010, when the next round of contracting begins, one can expect hotel rates to begin rising after several years of stagnation. However, hoteliers must act with caution and implement increases in a gradual manner without being too greedy and getting out priced in the world market.


It is a known fact that although Sri Lanka Tourism continued to be resilient and kept its head above water, our Asian neighbors have continued to prosper and develop. Therefore, the quality of the Sri Lanka Tourism product has lagged far behind its competitors, and it can be a safe bet to conclude that Sri Lanka has lost out on at least 10 years to its competition.

Therefore, there is much catching up to do – rooms have to be refurbished and upgraded, facilities need to be improved, and systems must be modernized. The aging transport facilities need to be completely revamped. All these will require further investments. The THASL has already commenced discussion with the Ministry to lobby the government in the short term - bound incentives to improve the hotel and tourism infrastructure.

External Influences

While Sri Lanka is basking in its new freedom from terrorism and euphoria prevails, one must not forget that the global financial crisis still prevails out there.

Although this is having a great impact on tourism in general, the sudden opening up of a value-for-money, exotic destination, now very well known (albeit sometimes for different reasons) around the world, could still draw in the smaller segment of die-hard travelers out there.

Market Mix

As indicated earlier, Sri Lanka has had to depend primarily on the group traffic segment in the past (approximately 70 percent of all leisure travelers). This has resulted in pricing being kept at the lower end, with the hope of driving volume. Certainly, there will be an initial spurt of pent-up demand, which will drive arrival figures up in the next 12 months.

However, in the long term, careful adjustment of the market mix will have to take place. The more up-market larger hotels and boutique hotels will have to re-adjust their prices upward and attract the more discerning independent traveler so that Sri Lanka can move into a better mix of high spending, discerning individual travelers, and volume-driven group travelers.


As indicated, in the short term, tourism numbers will increase due to the pent-up demand for the destination. However, in the long term, for Sri Lanka Tourism to mature and blossom out, there are several challenges that have to be faced.

a) The east will have to be opened out and developed as a proper tourist destination and not allowed to grow in a haphazard way as earlier. Areas will have to be zoned and proper development of different tourism facilities must be undertaken on the fast track. Tourism is a peace industry and can play a major role to build confidence and the social well being of the people in the conflict areas.

b) Internal air transportation facilities will have to be re-established and developed to provide a faster and convenient method of movement.

c) The deteriorated rail services will have to be revamped and expanded with tourism in mind. High-speed rail service from the airport to at least the major cities must be provided.

d) Due to the years of strife, tourism has not been seen as a lucrative career for young people. This certainly will begin to change and decentralized facilities must be provided to train and develop tourism professionals, ranging from skilled level to management level to meet the future demands.

e) Despite the external economic crisis, there will be interest in investing for tourism in the time to come. The environment for investment must be stimulated with incentives, and the approval process must be sped up and streamlined.


There is no doubt that Sri Lanka tourism today is poised to reap the benefits after 25 years of strife with definite hope and bright prospects on the horizon. It is time for all tourism professionals to energize themselves, unite, and work towards the development of this very exciting industry, which many believe is destined to be the next Bali.

About the author

Srilal Miththapala is the current president of Tourist Hotels Association of Sri Lanka (THASL). He also is the chief executive officer of Serendib Leisure Management Ltd.

He has been associated with the tourism industry for over two decades and has represented the industry and his company at various international and national forums.

Sri Lanka tourism – where are you going?
Srilal Miththapala - Image via

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