Tourism being one of the top foreign exchange earners for Sri Lanka, there is an expectation that tourist arrivals would increase sharply over the next few years.
Now the international ratings agency Fitch expects Sri Lanka’s tourist arrivals to grow by a compound annual growth rate (CAGR) of 15% over the next four years (2016: 14%), driven primarily by the rapid increase in the inflow from Indian and Chinese markets. Fitch expects tourist arrivals to reach 3.6 million in 2020, which is actually bigger than most other estimates and expectations.
The reason for this optimism seems to be that aggregate tourist arrivals from India and China have trebled over the past five years, and accounted for more than 30% of the total tourist population in 2016. “We expect the Government’s destination-promotion campaigns, which are directed primarily at Asian markets to boost arrivals from Indian and Chinese regions, to outpace European traffic over the medium term,” the report said.
This is good news indeed. The figure of 3.6 million seems to be big, but many countries in our region get millions more tourists every year. We will never match the likes of France and USA (in the range of 70 million arrivals per year) due to size and logistical differences, but countries such as Malaysia and Thailand get more than 20 million tourists a year and Singapore gets around 11 million.
One reason for this disparity in numbers is better accessibility by air. For example, the Singapore Changi Airport (IATA code SIN) has attracted more than 100 airlines that fly to 380 cities around the world. The Bandaranaike International Airport (BIA, IATA Code CMB) on the other hand is served by only 30 scheduled and charter airlines, though more airlines are coming in.
Air connectivity
A prominent Sri Lankan investor told a recent forum that “better air connectivity is needed to bring more tourists”. We agree with him 100 percent. Fortunately, things are moving in this direction. Just this month, China Southern started flying to Colombo three times a week, adding to the existing services by China Eastern, Air China, Cathay Pacific and SriLankan Airlines. The authorities should try to get more Chinese airlines, including, Hainan Airlines and Hong Kong Airlines to fly to Colombo from different cities. As for India, SriLankan is already the biggest foreign airline operator, with over 100 flights a week to and from 11 Indian cities. Several Indian airlines, including, Air India and Jet Airways are already operating to Colombo, but more Indian airlines should be allowed to fly between the two countries.
Better airline connections often lead to new country markets for tourism. A case in point is SriLankan’s impending new service to Melbourne, which will enable more Australian and New Zealand tourists to come to Colombo directly, without going through Singapore. In some regions, connectivity is already superb, but more must be done to promote Sri Lanka. The Gulf region is an example, where Sri Lanka will soon be holding a promotional event. Connectivity seems to be a very big issue. We simply need more airline seats into Colombo to allow more travellers to get here. For years, the tourism industry has been clamouring for an “open skies” policy that would allow more airlines to fly to Colombo, as opposed to the more rigid bilateral air services agreements. Some of Sri Lanka’s tourism competitors, such as Vietnam, have attracted more top airlines from around the world, a fact that must not be lost on our tourism planners. Our BIA airport officials must make a pitch for the airport at the various “route fairs” held around the world, where airlines scout for potentially profitable new routes. Only such a proactive campaign will enable us to win over more airlines, outside the rigid framework of bilateral agreements. Airlines that already serve Colombo must be encouraged to increase their frequencies, either on their own or through their subsidiaries, which is what Singapore Airlines has done by adding Silk Air flights to Colombo.
Tourism dollars
Another factor is the amount of money actually spent by tourists per day. Such “tourism dollars” are vital for developing the economy. Fitch said it does not expect a considerable rise in earnings per tourist over the medium term despite the widely anticipated growth in tourist arrivals. “We expect daily tourist spending to record a CAGR of around 5% over the next four years, and to fall marginally short of the government’s target of US$ 210 per day by 2020. Consequently, we believe Sri Lanka will continue to lag most of the developed tourism markets which generate over US$ 500 in daily earnings per tourist,” it said. We need to attract more high spending tourists to realize the increased targets for tourist spending.
Another area of concern is that Sri Lanka’s earnings from tourism could be hampered by the limited exposure to lucrative niche markets, such as, meetings, incentives, conferencing and exhibitions/events (“MICE”), and the rapidly growing influence of short-stay and low-spend tourists from emerging-Asian regions. Unfortunately, MICE remains significantly under-exploited in Sri Lanka, accounting for less than 1% of tourist arrivals in 2016.”
This picture should change as more facilities become available for MICE events. These should however be heavily promoted among conference organisers. For example, Colombo’s newest five-star hotels, Shangri La and Grand Hyatt will have state-of-the-art facilities for meetings and conferences. Most MICE events invariably have a tourism/sightseeing component, which compels participants to stay on for a few more days. Another possibility is that most delegates become repeat visitors, having fallen for the beauty of the land and the friendliness of the people.
The new hotels now being opened countrywide will complement efforts to bring in more tourists, since the country needs more hotel rooms to accommodate the extra influx of tourists. The proposed abolition of the minimum room rate will help by increasing the competition. More tourists are seeking intimate “boutique” hotels as opposed to big chain hotels, which should be turned to our advantage. Such hotels have also boosted domestic tourism, a vital part of the tourism industry.
Sri Lanka is now getting rave reviews in the foreign press for its stunning beauty, ancient culture and the possibility for endless adventures. These good words of independent writers and travellers are worth much more than paid for advertising in the crowded tourism market, where tourist boards around the world vie to capture the attention of savvy travellers. Sri Lanka is in an enviable position to attract more well-heeled travellers, but a combination of factors such as increased connectivity, more hotel rooms and better tourism infrastructure is essential to drive this growth in the next few years.