Tourism – the engine of growth of the Sri Lankan economy?

Read us | Listen to us | Watch us | Join Subscribe to our YOUTUBE |

Afrikaans Afrikaans Albanian Albanian Amharic Amharic Arabic Arabic Armenian Armenian Azerbaijani Azerbaijani Basque Basque Belarusian Belarusian Bengali Bengali Bosnian Bosnian Bulgarian Bulgarian Cebuano Cebuano Chichewa Chichewa Chinese (Simplified) Chinese (Simplified) Corsican Corsican Croatian Croatian Czech Czech Dutch Dutch English English Esperanto Esperanto Estonian Estonian Filipino Filipino Finnish Finnish French French Frisian Frisian Galician Galician Georgian Georgian German German Greek Greek Gujarati Gujarati Haitian Creole Haitian Creole Hausa Hausa Hawaiian Hawaiian Hebrew Hebrew Hindi Hindi Hmong Hmong Hungarian Hungarian Icelandic Icelandic Igbo Igbo Indonesian Indonesian Italian Italian Japanese Japanese Javanese Javanese Kannada Kannada Kazakh Kazakh Khmer Khmer Korean Korean Kurdish (Kurmanji) Kurdish (Kurmanji) Kyrgyz Kyrgyz Lao Lao Latin Latin Latvian Latvian Lithuanian Lithuanian Luxembourgish Luxembourgish Macedonian Macedonian Malagasy Malagasy Malay Malay Malayalam Malayalam Maltese Maltese Maori Maori Marathi Marathi Mongolian Mongolian Myanmar (Burmese) Myanmar (Burmese) Nepali Nepali Norwegian Norwegian Pashto Pashto Persian Persian Polish Polish Portuguese Portuguese Punjabi Punjabi Romanian Romanian Russian Russian Samoan Samoan Scottish Gaelic Scottish Gaelic Serbian Serbian Sesotho Sesotho Shona Shona Sindhi Sindhi Sinhala Sinhala Slovak Slovak Slovenian Slovenian Somali Somali Spanish Spanish Sudanese Sudanese Swahili Swahili Swedish Swedish Tajik Tajik Tamil Tamil Thai Thai Turkish Turkish Ukrainian Ukrainian Urdu Urdu Uzbek Uzbek Vietnamese Vietnamese Xhosa Xhosa Yiddish Yiddish Zulu Zulu

(eTN) – Delivering the keynote address of this year’s Research Symposium-2010, “Value Addition to the National Resource Base,” was Srilal Miththapala, project manager of Switch Asia/Greening Sri Lanka

Print Friendly, PDF & Email

(eTN) – Delivering the keynote address of this year’s Research Symposium-2010, “Value Addition to the National Resource Base,” was Srilal Miththapala, project manager of Switch Asia/Greening Sri Lanka Hotels Project, CCC Solutions (Pvt) Ltd. The symposium took place on September 16 and 17, 2010 at the Uva Wellassa University in Sri Lanka. Here, his keynote address is presented:

1.0 Introduction
I am very honored to be invited toady to deliver the keynote address on the 2nd day of the Research Symposium 2010, organized by the Uwa-Wellassa University, and I hope to talk to you this morning on the Topic “Tourism – The Engine of Growth of the Sri Lanka Economy?”

From time immemorial, Sri Lanka has been well known for its hospitality, and we have on record many accolades from visitors in the annals of Sri Lankan history including Far Hein, Mark Twain, and Marco Polo to name a few. Tourism was formerly recognized as an important industry in the 1960s and was formalized through the Sri Lanka Tourist Board (SLTB) Act No. 10 of 1966 to promote tourism in Sri Lanka and subsequently augmented by the Tourist Development Act No.14 of 1968.

Today most of the sectors of the economy are rebounding rapidly after the eradication of terrorism a little over an year ago. Sri Lanka is the cynosure of most of the business world; due to its exciting growth potential ,ompanies are returning very healthy growth figures and the stock market is booming. Tourism appears to be rebounding back much more strongly than any of the other sectors of the economy, and it is in this context that it may be worthwhile to analyze whether Sri Lanka Tourism can really become the engine of growth for the economy.

2.0 The current status of the tourism industry
Before looking at the future prospects, it is important to assess the current status, and, therefore, it is prudent to pause a while to study the current situation of the tourism industry.

Having being buffeted around by both internal and external impacts for over two and a half decades, suddenly Sri Lanka Tourism is enjoying the bright light at the end of a long dark tunnel. Arrivals to the country started increasing immediately after the war during the latter half of last year, and the trend continues during this year as well.

For the last eight months [that] ended August 2010, arrivals are up almost 47 percent YOY (397,887), with earnings also keeping pace at 69 percent growth (Q2) (US$244.5 million). Although the Hotel and Travel CSE index increased by 199 percent for 2009, annual earnings from tourism still amount to only about US$326.3 million annually (2009 CBSL), having slipped down to the sixth position among Sri Lanka’s foreign exchange earning sectors. Due to the depressed and difficult period that tourism went through, today it accounts for only about 0.5 percent GDP of the country.

2.1 Potential for Sri Lanka tourism
There is no doubt that Sri Lanka is blessed with an abundance of natural beauty and attractions. This small 65,000-square-kilometer island can boast of pristine beaches, over 100 kilomters of coast line, verdant tea plantations, salubrious hill country and arid landscapes, 8 UNESCO World Heritage sites, one of the 34 bio-diversity hot spots of the world, one of the few virgin rain forests, and the list goes on and on. So there is no shortage of natural attractions and sites compacted into such a small area, perhaps anywhere else in the world. With today’s tourists looking for more un-spoilt environments, Sri Lanka is, therefore, well placed to be able to attract large number of tourists, provided that the destination is properly developed, positioned and marketed.

2.2 A word about marketing
There seems to be mode of thinking today, that since the war has ended, we do not need to do anything to promote tourism and that we only need to improve our infrastructure and tourists will flock to Sri Lanka. Certainly the decisive ending of the long drawn-out conflict is something unprecedented, which we all have to be thankful for. However, one must not forget that during all the time we were having our internal strife, other Asian countries were moving rapidly forward, devoid of any shackles. So in reality, what has happened now is that we have regained a clean slate only.

We cannot run away from the fact that in today’s world, marketing place [is] a vital role in everything. There is stiff competition from the Asian region. With the global financial crisis now petering out, very soon our Asian neighbors, such as Thailand (who had their own series of problems), Malaysia, Singapore, Bali, etc. will “get their act together” with strong promotional campaigns, strengthening there already solid, differentiated brands and positions as prime tourism destinations. Singapore is already “re-branding” from it’s “squeaky clean” image to a relatively more exciting destination with casinos opening up. July this year saw their highest ever arrivals for a single month at 1 million visitors. The product offering of these countries is also far superior than what Sri Lanka can offer, on a one-to-one comparison.

2.3 Employment and livelihood
A little-known factor regarding tourism is the impact it has on the livelihoods on common people. Although the industry has only close upon 60,500 directly employed staff, there is large indirect work force engaged in the informal sector. This includes suppliers of vegetable/fish/meat/dry food, chemicals and additives for pools and laundry equipment, stationary, food and beverage and kitchen consumables, etc. Then there are the bands, entertainers, sellers of tourist souvenirs, such as wood crafts, silverware, batiks, beach vendors, and beach operators, transport providers including those who hire busses, cars, vans, and three wheelers – all who also depend on tourism.

It is estimated that this informal sector could be as much as three times the formal sector. Thus, it can be safely concluded that some 240,000 people are directly and indirectly involved with the tourism industry. If one were to assume four persons to a family, the number of dependents on tourism would then be close upon 1 million persons or some 5 percent of the current population of Sri Lanka.

It is evident, therefore, that tourism in Sri Lanka has a profound effect on the large informal sector of the economy. There is always some controversy and heartburn that tourism only benefits the “big” players. As indicated earlier, there is a very large informal sector, which does not get caught in the mainstream economic reporting. No foreign tourist is going to book a flight to Sri Lanka to come and buy masks at Ambalangoda. But when he books a holiday to the south and stays at the Heritance Ahungalle or Lighthouse Hotel he will in all probability, go shopping for wood carvings and masks.

Hence we are unable to clearly identify the economic benefits that filter down to the “smaller” informal players in the industry. But the trickle down and multiplier effect is quite considerable in the tourism sector, especially in the Asian region. In a study done recently and quoted by Air Asia, it was revealed that while tourism earnings of Malaysia and Thailand amounted to some 6-8 percent of their respective GDPs, when the multiplier effect, which is about 12 times, is applied, the impact on GDP shoots up to close to 25 percent!

2.4 Tourism and poverty alleviation
The tourism industry is most often viewed as an industry which promotes opulence and wastage. At first glance, when one sees the external glamour and glitz, this could be considered to be somewhat of a fair collusion. However, it is a less-known fact that tourism does in many ways help the reduction of poverty and improves the wellbeing of people.

The trickle down and multiplier effect just mentioned provides for a wide range of employment opportunities accessible by the less affluent, creating opportunities for micro-, small-, and medium-size enterprises, in which poor people can participate.

Tourism stimulates economic growth at both national and local levels and promotes the growth of other allied and peripheral industries, such as agriculture, telecommunication, banking, transport, and other service sectors. Tourism also spreads developments to remote and rural areas of the country, which may have not benefited from other types of economic developments. The development of tourism infrastructure can benefit the livelihood of the poor, through improvement in tourism linked sectors, such as transport, communication, water supply, health services, and power.

2.5 Tourism as an export industry and value addition
Tourism, although not classified as an export industry, earns substantial foreign exchange with it’s high value-added component. Unlike some of the other foreign exchange earning sectors, most of the inputs and raw material for the operation of tourist hotels are local, yielding a high-value addition.

In the tourism industry, goods and services are consumed at the point of production, where tourists would come to the resort, possibly in a remote location of the country, resulting in greater benefit and impact to the rural economy.

Currently, although not categorized as an export industry, tourism accounts for the 6th place among the foreign exchange earning sectors of the economy, down from its position as no. 4 a few years ago.

So in this light, one can perhaps begin to understand the excitement and emphasis that is being placed on tourism as sector that can drive quick economic prosperity in the country.

3.0 Future prospects and aoals

3.1 Targets
Sri Lanka tourism was suddenly put into somewhat of a spin about an year ago, when the HE, the President, came out with a target of 2.5 million tourists by the year 2016. We certainly do not know how this number was arrived at, and even now no one has really questioned it. There is certainly no harm in setting out big, hairy, audacious goals (“BHAG”… to borrow from management parlance ref. James Collins & Jerry Porras).

There are two schools of management theory in goal setting and planning. One is the conservative method of taking stock of where you are, what your resources are, what opportunities there are, etc. (SWOT analysis) and then deciding on your goal. The other school of thought is where the analytical assessments are enhanced with, and “tweaked” with an element of emotion and “gut feel,” where the leader, using his in-depth experience, plants a much bigger and more ambitious (audacious) goal. Subsequently, the planners and operational experts somehow try to muster up sufficient resources and work out strategy and plans to achieve this goal.

So for Sri Lanka, it is the latter that has taken place, and for better or worse, a 2.5 million target of tourists (or something very close to that) by 2016 is now an accepted fact among everyone in the industry.

To meet this growth target, the private sector has researched and produced a document entitled “Sri Lanka Way Forward” where it is estimated that we will require some 28,000 odd rooms to meet the demand, which then calls for the development of a further 13,000 new rooms in the next 6 years. Sri Lanka currently has about 14,700 rooms with another 5,300 supplementary establishments.

If Sri Lanka tourism moves forward on a strategically-planned basis in meeting these growth targets, there is a good chance that in six years’ time, tourism can generate close upon US$2.4 billion as earnings per annum. Per tourist night spend will rise dramatically from the current US$81 to around US$170. If the overall economy keeps to its 7 percent growth targets YOY, then in 6 years’ time, Sri Lanka’s GDP would be in the order of US$65.0 billion from the current US$43.3 billion (2010 estimate), and then tourism would account for as much as 3.7 percent of the economy.

To service this growth, total employment, direct and indirect, would rise to around 1.4 million, which will then translate to around 25 percent of the population (2016 estimates) being one way or the other dependent on tourism (assuming 4 persons to the family).

Therefore the numbers are very exciting without doubt.

3.2 Environmental issues
We are an island nation with only 65,000 square kilometers of land area, rich with cultural heritage and diverse bio-diversity not found in too many places elsewhere in the world.

Even though our forests have diminished by some 40 percent over the past century, Sri Lanka still remains relatively a green country. We were ranked no. 36 in the “living green” rankings of the Readers Digest Magazine a few years ago, and no. 22 in the 2009 Happy Planet index published by the New Economics Foundation. Sri Lanka has a very low carbon footprint of less than 0.6 metric tons per person. Compare this with some of the larger more developed countries such as USA where the emission per person is about 20 metric tons per year!

Sri Lanka should not exceed its carrying capacity of tourists, and we should carefully manage the enhanced throughput. Entry to archaeological sites must be regulated to prevent over visitation, mega developments must be confined to selected areas only with strict environment rules, and a better transportation network with more environmental friendly modes of transport should be implemented. We must at all costs, protect and nurture our valuable natural assets we have inherited over the years.

In reaching for these large arrival numbers, there has to be careful thought given to environmental sustainability issues. If some 13,000 extra rooms are to be built in the country (which will translate into 100 or more new hotels) with over 2 million tourists “unleashed” annually in the country, without proper planning, there is bound to be serious environmental and sustainability issues. Such large scale and fast-track growth has to be carefully planned and managed within specific tourism zones to prevent environmental and cultural degradation. This is the reason that the private sector has suggested large scale zonal development of tourism in building these additional 13,000 of rooms on the fast track.

This will require large-scale resort developments on a planned basis in at least 4-5 designated zones in Sri Lanka. Individual hotel developments will not suffice. Such well-planned, large-scale tourist resorts can be designed to encompass sound sustainable environmental practices (eg., common self-contained sewerage disposal facilities with recycling of water, solar lighting for resort public areas, no-build green belts within resorts, etc.).

Such organized and well-managed, large-scale developments contained in several designated zones, will help mitigate most of the possible negative fall out of the socio-cultural and environmental aspects. Building and subsequent maintenance should be under strict environmentally-sustainable guidelines. Large numbers of small scale development strewn all over will not be a viable proposition to maintain Sri Lanka’s environmental sustainability nor will it be sufficient to drive the exponential growth required.

3.3 Promotion and branding the destination
Reaching towards large ambitious goals is certainly quite good and commendable. But at the same time, we must know exactly what Sri Lanka Tourism “stands for” if we are to succeed in attracting tourists to visit Sri Lanka. What do we as a nation want Sri Lanka to be seen and portrayed as a tourism destination? Without deciding what our competitive advantage is and planning out our strategic position, we will not be able to sustain exponential growth targets.

At a recent public forum on tourism, the leading local exponent of positioning, Dr. Uditha Liyanage of the Post Graduate Institute of Management, who was very closely associated in the now defunct branding exercise for Sri Lanka Tourism, very clearly brought out the need for Sri Lanka to decide what it “stands for” as a tourist destination or even that for that matter as a nation.

Unless and until we have a clear idea of what Sri Lanka’s strategic position is in the market, no amount of infrastructure development, marketing, and promotions will be successful in the long term. We need to figure out “who we want to be” and “what our competitive position is.”

Our deliberations a few years back revealed that the ideal positioning for Sri Lanka Tourism was “Asia’s authentic and compact island providing a diverse array of natural and other attractions and experience.”

From this stemmed the vital brand architecture of:

• diversity
• unique
• un spoilt
• traditional
• compact
• authentic
• indigenous
• exotic

Therefore, even if the “small miracle” has fallen by the way side, it is important that we retain this brand architecture in all our proposed developments to ensure environment sustainability.

4.0 Conclusion
There is no doubt, that Sri Lanka tourism today is poised to reap rich benefits after 25 years of strife with definite hope and bright prospects on the horizon. It is the one industry that can bounce back fast after a downturn. We are also seeing that all long-term forecasts indicate that Asia will be the “theatre of action.” Growth in tourism, as we have seen, will have a great positive impact on a large number of peoples’ livelihoods.
Most importantly, tourism is an industry of PEACE. It brings people together and helps create harmony and understanding of another’s culture and lifestyle.

If properly nurtured and developed, tourism can, therefore, become the most important and pivotal industry of this country, in this post war, nation building scenario, having a great socio-economic impact on our people, while at the same time nurturing, protecting, and celebrating the wonders mother nature has endowed us with.

Print Friendly, PDF & Email