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Sustaining and increasing tourist earnings
View(s):Tourist earnings are expected to make a significant contribution towards bridging the large trade gap this year. The tourist industry has faced severe setbacks and reversals in the past. This must not be allowed to happen again.
It is important to ensure that conditions in the country are conducive to increasing earnings from tourism. Security conditions, law and order and competitive prices are important in ensuring the growth of tourism that is making an increasingly significant contribution to the balance of payments.
In recent years, worker remittances have been a significant means of offsetting the persistent trade deficits. If not for worker remittances, the country’s balance of payments would have been in serious difficulties. Remittances have continued to grow year-in-year out. Unfortunately in 2011, although remittances grew by a further 25 per cent over the high growth of the previous year, it could offset only a little over half the deficit owing to the huge increase in the trade deficit. In contrast, in the previous year (2010) as much as 84 per cent of the trade deficit was offset by remittances.
Now with increased tourist traffic, earnings from tourism too could make a significant contribution to the balance of payments. With the revival of tourism since the war ended, there is an expectation that tourist earnings would be an important contributor to the balance of payments. The recent increases in tourist arrivals and earnings from tourism lend hope that this expectation would be realised. However, the optimism of the industry’s future must be tempered with providing the conditions conducive to the improvement of the industry.
Tourist earnings
The increased flow of tourists to the country has been one of the encouraging developments for the economy in the last two years. There is a continuing increase in tourists from many destinations. Apart from the increase in the total number of tourists the increased flow of tourists from Asian and East European countries have been a positive development, as it diversifies tourist earnings and adds stability to the industry.
There have been significant increases in tourists from India, China, Malaysia and other Eastern countries. Tourist, arrivals reached a record 855,975 in 2011. Tourist arrivals exceeded the 1 million mark last year. Tourist arrivals are expected to reach about 1.25 million this year and contribute about US$ 1.2 billion this year. Tourist arrivals have increased by nearly 20 per cent in the first four months of this year compared to that of last year. It is therefore likely that in 2013 tourist earnings may reach over US$ 1.2 billion. If this increasing trend continues there is likelihood that the number of tourists could reach the Government’s target of 1.5 million tourists by 2015.
The expansion of tourism contributes to several other economic activities as well. It has backward linkages to transport, agriculture, arts and crafts and the gem and jewellery industry. Increased tourism will provide an impetus to these industries as well as the construction as a large number of hotels of various sizes and in varied locations are being constructed. The biggest hotel construction projects are in Colombo.
Supportive environment
The current trend of increasing tourist arrivals should not be taken for granted as there are several possible pitfalls. Several factors could result in a reversal of the tourist trends. Deterioration in the security situation due to ethnic or religious conflicts can deter tourists. Violence targeted against tourists could be a serious drawback to the industry. There are already travel advisories regarding travel to Sri Lanka. There are also press reports on the deteriorating law and order situation.
There have been setbacks to tourism several times since 1978 when there was an initial boom in tourism. The July 1983 violence was a major setback to tourism. It never regained the hopes and expectations that the initial years in the liberalised economy generated. There was a short spell of revival during the Ceasefire Agreement but this was not a significant upturn and soon with the deterioration of the security situation the industry slumped. It is not difficult to foresee, as has happened to the tourist industry before, a reversal of the growth in tourist earnings, if such disasters were to occur. Countries such as Indonesia and Egypt have had severe setbacks due to security conditions.
Security conditions are vital for tourism. There are conditions in the country that are not helpful to tourism. The incessant protests and social unrest in the country could deter some tourists. Violence in the country and a lack of law and order could discourage tourists especially from some countries. Violence against tourists gets wide publicity abroad and discourages people to travel to Sri Lanka.
Violence directed specifically at tourists such as the murder of a British tourist and the alleged rape of his girlfriend by a gang in a Southern resort could harm tourism badly. The significance of this has been brought out by the fact that there has been a decline in British tourists. There has been other similar violence against tourists.
These instances of violence reduce the country’s rating as a safe place for tourism. If the country is to achieve its ambitious targets in tourist earnings it is imperative that the law and order situation is improved. Tourists in particular should have protection and violence against tourists must be prevented at any cost.
Competitive pricing
The other concern is the pricing of tourist accommodation. Tourism is a highly competitive industry. Just because there has been a flow of tourists into the country recently hotel rates should not be increased enormously. The policy of stipulating minimum rates for accommodation could be counterproductive, as these rates are much higher than in many other similar travel locations. It is best for the hotel industry itself to determine rates lest we price ourselves out of the market. The pricing policy of the hospitality trade should be done with the long term development of tourism in mind.
The quality of service has deteriorated partly due to the expansion and partly due to the exodus of trained staff to more remunerative tourist hotels abroad. It is important to improve service quality to ensure the viability of the industry.
Summing up
Tourism provides a useful means of increasing the country’s foreign exchange earnings and in supporting several other economic enterprises with which it has backward linkages. It is therefore important that law and order is maintained in the country. It is especially important that the safety of tourists is guaranteed. Instances like that of a British tourist being murdered could affect the progress of tourism.
It is also important to ensure that hotel prices are internationally competitive. Several new hotels being built would boost the industry by increasing room capacity. The electronic travel authorisation process should be an easy way to obtain visas to enter the country. The ease with which travellers could make their travel arrangements, the availability of convenient flight connections and hotel costs would influence the influx of tourists.
It is important to see that these conditions are in place to sustain the tourist industry and not kill the goose that lays golden eggs.
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