Sri Lanka Tourism Development Authority

International Affairs

Tourism in Challenging Times

Known as the Pearl of the Indian Ocean, Sri Lanka was historically, a convenient spot for those travelling on the Silk Route. Today, however, tourist arrival numbers are on the decline. During the last three years, the Sri Lankan rupee has depreciated, and globally, fuel prices and airfares have increased. As a result, Sri Lanka's appeal has declined. Today, Sri Lanka tourism faces a significantly more competitive marketing environment that continues to be more challenging due to new competitor destinations, emerging source markets (China and India), challenging distribution channels (ecommerce), broadening media options and global recession.

In 2008, economies worldwide particularly in the US and Europe have witnessed economic volatility and a decline in overall confidence levels. This is largely due to the backdrop of unprecedented growth in inflation and uncertainty in the mortgage crises, economic prospects and stock markets. Most economies have not been receptive to government initiatives and bail out packages, thus setting the stage for a global recession.

The global recession will affect not only the numbers but also the long haul travel and type of destination the traveller selects. Tourism may turn towards middle distant travel due to long haul fuel surcharges. The tourist segmentation will be more skewed towards the wealthier segment of society, although they too would look for more discounts, value added products and holiday packages.

Another influencing factor is Sri Lanka's decade old war, which has unfortunately tarnished its reputation of being the Pearl of the Indian Ocean. Since the war started in 1983, tourists have been repeated warned of the dangers of visiting the country. Many travel adversaries have been issued. However, while the war is prevalent, it is largely confined to the North and North East section. In its history, no tourist hotel or attraction has been targeted. Due to the recent political developments and negative media projections, Sri Lanka has also earned a negative reputation with regards to human rights. Allegations of human right violations have been reported overseas.
Increasing Sri Lanka's International Investor Appeal: Combating influencing factors
  1. Tourism Marketing
  2. High investments are required in order to boost Sri Lanka's tourism marketing. E.g. To receive one tourist under the normal circumstances if the spending cost is approximately $1, under the prevailing situation, the cost would rise by at least 4-5x. Hence, organizations are reluctant to invest or provide additional investment to combat the situation. In order to provide attractive incentives to draw investment, the government has placed a 5-year tax holiday along with another 15-years 50% tax holiday to investors.

  3. Climate Change
  4. Due to global warming the weather patterns have changed significantly. Sri Lanka has as a result experienced varied fluctuations in temperature, rain and sea levels.

  5. Natural disasters
  6. Sri Lanka was affected by Tsunami in December 2004. Approximately 40,000 lives were lost and much damage was done to properties along the coastal area. Sri Lanka took nearly two years to recover fully from this disaster. The country has a Tsunami warning system in place and has revised its crisis management plan.

The Government of Sri Lanka, its commitment to development and implementation The government is committed to supporting the Tourism Industry. Tourism is a sector which depends on other sectors of the economy and therefore, it needs the cooperation and commitment from other sectors of the economy for an efficient implementation of tourism policy. Attractive incentives are offered for overseas investors. The government together with the BOI is committed to the development of Sri Lanka Tourism.