Asia Securities’ take on tourism industry outlook for 2011

Friday, 21 January 2011 00:01 -     - {{hitsCtrl.values.hits}}

THE outlook for Sri Lanka’s tourism industry has been transformed dramatically since the ending of ethnic war In May 2009. The ‘Peace Dividend’ gradually boosted tourism which reached new heights in the year 2010.

Sri Lanka has since experienced several strong months of data, with November arrival figures standing at 72,251, a 63.1% increase y-o-y. The most recent data (January-November 2010) revealed arrivals of 569,849 up by 45.7% y-o-y.

Despite sluggish global economic recovery, Sri Lanka marked a milestone in successfully receiving its 600,000th tourist for 2010 in December, ending the year on a resilient note.

Arrivals from India led the way for the period January-November 2010 standing at a staggering 111,129 up by 51.8%, while Asia accounted for 30% of total arrivals for the year.

UK continued to be a country contributing to a significant tourist influx accounting for the second highest tourist arrivals for the year, amounting to 95,320 up by 30.8% y-o-y. Germany’s arrivals also witnessed significant growth amounting to 41,529 up by 58.4% y-o-y.

Europe accounted for the biggest portion of total arrivals for the year accounting for 45%. The Middle East accounted to 34,106 tourists recording a y-o-y growth of 59.8 % emerging as an important tourist arrival source. Australia showed positive growth as well recording 25,833 tourists up by 51.8 y-o-y. Arrivals from North America improved considerably by 65.5% standing at 34,761 at the end of November 2010.

The total hotel room occupancy rates were at satisfactory levels within the year. The room occupancy at the beginning of 2010 (Jan-March) averaged at 81.5% while the figure for the same period of 2009 averaged around 42.5%. Furthermore, levels of occupancy at the end of the year 2010 were expected to be approximately 80% - 85% despite the unfavourable weather conditions which stalled the European tourist influx in December 2010.

The total earnings from tourism for the period Jan-Nov 2010 amounted to US$ 501.5 m achieving a y-o-y growth of 64.3%. The average tourist spending per person at the end of the first 11 months of 2010 was US$ 880 while the figure for the same period of 2009 amounted to US$ 780 indicating a gradual shift to a higher market segment.

Furthermore, there is significant improvement in room occupancy rates of the higher star category hotels, both indicators of an emerging high end market segment. Currently Sri Lanka has approximately 110 star grade hotels while the total hotels and resorts amounts to approximately 249.

The favourable macroeconomic fundamentals which prevailed in 2010 strengthened by the removal of travel advisory restrictions and the favourable international tourism ratings received have paved the way for a thriving tourism industry. Such positive developments would increase the number of arrivals to reach 700,000 by end of 2011, boosting the income generated by tourism as well as hotel occupancy rates.

Moreover it would trickle in to other sectors such as agriculture and transportation creating linkages and reinforcing Sri Lanka’s economic growth. The Government has taken several steps in developing tourism facilities.

The 2010 budgetary proposals have identified the need of tourism sector infrastructure needs indicating that industry’s current capacity would be tripled from its current levels of around 15,000 rooms over the next few years. The Kuchchaveli Resort Project and the Kalpitiya Integrated Tourism Resort Project are such projects which are aimed towards achieving the above mentioned goal.

Moreover, the Government proposed to reduce tax income earnings from tourism and related business from 15% to 12% and reduce duties and taxes on passenger transportation vehicles by 25% in its budgetary proposals. Other initiatives include upgrading the zoological gardens; the wildlife parks. Sri Lanka expects tourism to be a key driver of economic growth in the future.

(Source: Asia Securities)