Several foreign investors have shown interest in the Sri Lankan tourism sector although high entry barriers such as land acquisition costs and red tape from project approval bureaucracies may be preventing any firm plans so far.
President of the Tourist Hotels’ Association of Sri Lanka (THASL) Srilal Miththapala told the Business Times that despite the interest from foreign parties, the THASL is not aware of any concrete ventures. “Possibly, there is still a wait and see attitude.”
There is pent up demand for Sri Lanka given the fact that it has been selling as a lower end, cheaper destination explained Mr. Miththapala. “With price revisions coming into play and the novelty wearing off in the future, growth will settle down to a more organic level. If Sri Lanka Tourism is therefore going to grab the opportunity and drive for exponential growth, it is imperative that the government put in place various initiatives urgently such as making tourism a strategic development sector.”
In addition, he said the government should undertake zoned large scale tourism development in select areas under strict environmentally sustainable guidelines. The government should also establish a presidential task force to drive the industry forward on the fast track, provide attractive incentives including preferential interest bearing loans, investment relief for hotel development. Another priority for the government should be to embark on rapid tourism infrastructure development including roadways, international air traffic and railways.
So far, Mr. Miththapala said tourism policy has been reasonable consistent but that it is necessary to have strong continuity to drive home action plans at the ground level. Frequent changes of Ministers and heads of institutes do not provide a conducive atmosphere to drive tourism in Sri Lanka forward.
He feels that Sri Lanka has lost out on product development due to the ‘survival’ attitude that prevailed over the last decade which did not lead to improvement of facilities. “Hence, there is a need to urgently upgrade the hotel product, especially regarding price revisions that are being affected which will bring the Sri Lanka tourism product on to a more even playing field in the international markets.”
Several of the larger hotels will be undertaking upgrading and refurbishing programs. A survey conducted by THASL amongst its members indicates that close upon 1,000 rooms will be undergoing refurbishing during May to October 2010. The investment for this exercise is estimated at around Rs.3 billion. The local leisure sector companies are also planning expansion.
Mr. Miththapala said there has been a significant increase in occupancy levels at hotels after the end of the war in May 2009 but he cautioned that occupancy and arrivals should not be pursued alone. “This is always tied to yield and Sri Lanka is now poised for the first time after over a decade to look at management of yields rather than arrivals alone.” He explained that hotels are actively taking action to adjust or correct their rates to fall in line with a post-war scenario. “Due to the protracted war, hotel rates could not be increased over the years in keeping with world trends and therefore, there will be a price correction during the next winter season.”
Mr. Miththapala added that the next winter season is expected to be quite strong, riding on a pent up demand for the destination which will drive healthy occupancy levels. “Hence, one expects that while occupancy will grow, there will also be a strong improvement in earnings from tourism.” |
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