Preparing for a downturn?

Tourism is Sri Lanka’s phoenix. After rising from the ashes of war, it has spread its fiery wings and taken off to bring hope to many and bolster the overall economy. Yet, despite positive statistics, there is fear that the light could dim if policies do not become more aggressive and comprehensive.

On Wednesday, the latest data released by the Sri Lanka Tourism Development Authority shows that tourist arrivals rose 9% to 69,591 in April from a year earlier, continuing the growth momentum established in 2010. The largest arrivals from a single country came from neighbouring India, which recorded an arrival base of 15,432 in April, a 4.9% increase from February 2011.

However, the UK, which is the second biggest market, recorded a decrease of 11.3% with just 8,019 tourists coming into the country. The UK recorded a negative mark in January and February as well. Taking up the positions as third, fourth and fifth, Germany, France and Australia fell into line respectively with arrivals of 4,645 (12.9%), 4,533 (9.5%) and 3,554% (6.4%). Regionally, Western Europe recorded the largest number of arrivals, 25,018, a 7.8% increase from the same month of the previous year. Arrivals from South Asia were 20,532 (4.9%), East Asia 8,950, Eastern Europe 3,583 and North America 3,238.

The Pathfinder Organisation in a recent report pointed out that despite the positive sentiment surrounding the tourism sector, current trends have become a source of concern. Historically, hotels have made their money during the peak seasons in European winters and summers. They have sought to break-even in the intervening relatively fallow periods.

The think tank insists that, in recent months, occupancy rates have been disturbingly low and the forward bookings are also not as encouraging as they should be to meet the Government target of $ 1.2 billion for earnings from tourism in 2012. The current trajectory also raises serious doubts about the attainment of the medium-term target of 2.5 million arrivals by 2016.

This poses some important questions. What is likely to be the impact on the tourism sector of the prolonged recession in Europe? The downturn in Sri Lanka’s main tourism market will be a major drag on long-haul tourism for many years. What more can be done to promote Sri Lanka as a tourism destination in new markets, in Asia, Australia and East/Central Europe?

The belief in some quarters that post-war Sri Lanka is so attractive a destination that it does not have to be promoted has proved to be ill-judged at a time when even well-established competitors have been aggressive in their marketing. Have room rates been increased too much and too quickly before Sri Lanka has established a sufficiently robust track record?

The report also opines that establishing a floor rate for hotels was an unsound decision as it would make it harder for companies to deal with a sudden downturn. Hopefully, these dire forecasts will not come to pass but there is an undeniable need to have more consistent and aggressive policies to govern the industry. There is also need for more good governance and transparency in the process as well.

Sri Lanka needs to move away from the habit of classifying every foreign traveller as a tourist and instead concentrate on what their requirements are so that services and revenue streams can be expanded. This would also be necessary to target high-earning tourists and concentrate on markets in Asia. More environmentally-sound development projects that are transparent and promote local labour are among a host of actions that could be taken. As far as promotions are concerned, there is a need to concentrate on emerging markets as well.