Sri Lanka needs to improve the quality of its tourism product and infrastructure to further increase room rates after a post-war rise in rates made the island look expensive, an equities research report said.
The country also needs to improve entertainment and shopping in order to break the seasonality of the industry and lure visitors during the ‘off-season’ to fill hotel rooms year-round, the report by NDB Stockbrokers said.
The report cited as a concern the rise in room rates after the end of the island’s 30-year ethnic war in 2009 which led to a boom in tourist arrivals.
More than 650,000 tourists visited the island in 2010, up 46 percent from the year before, and the country plans to attract 2.5 million visitors by 2015, NDB Stockbrokers said.
“We feel that Sri Lanka is increasingly becoming an expensive destination. Therefore, in order to further increase rates it is necessary to improve the quality in terms of entertainment and infrastructure.”
Room rates have increased by over 25 percent from the 2009 levels, mainly in hotels in Colombo and the south coast, according to industry experts.
Five-star room rates in Sri Lanka were around 110-450 US dollars a night compared with 125-850 dollars in Malaysia and 200-3,000 dollars in Bali.
“In comparison to Malaysia and Bali (Indonesia), Sri Lanka lags behind in terms of the quality of hotels available in the country,” the report said.
Malaysia, Thailand and Indonesia all have international hotel brands such as Sheraton Resorts, Westin Hotels, Marriot Hotels, Six Senses Resorts and Four Seasons, which attract high-spending tourists, it noted.
Although, Sri Lanka itself has attracted two international brands, Shangri La and Six Senses, the brokers said more needs to be done.
The anticipated increase in tourist arrivals will require an increase in the rooms available to about 35,000 – 40,000 from about 15,000 at present.
“This would necessitate an investment of about 3-4 billion US dollars over the next five years, which may prove to be challenging unless a number of global brands invest in Sri Lanka,” NDB Stockbrokers said.
“Sri Lanka needs to focus on improving the quality of the product offered in terms of luxury hotels, ease of transport, and entertainment in order to further increase the rates,” they said.
“Sri Lanka also should focus on expanding its product offering, with a view to taking the tourism experience beyond traditional borders of nature and culture.
“Entertainment in the form of theme parks, shopping sprees, high-end restaurants and pubs need to be added to the stock of Sri Lanka’s tourist attractions.”
This would also help the island reduce its reliance on visitors during the peak season, which coincides with winter in the northern hemisphere and improve annual room occupancy rates.
“In order to achieve an average annual occupancy rate of about 85 percent and fully utilize the limited supply of rooms, it is important to promote tourism in the off season,” the report said.
“Therefore, special events and entertainment activities need to be organized during the off season.”