Sri Lanka boasts over 1,000 homestay units registered with the Sri Lanka Tourism Development Authority (SLTDA) with perhaps an even larger number operating without licenses, unregulated.
Currently, there is a surge of arrivals to Sri Lanka, with all hotels and smaller accommodation units enjoying high occupancy levels. In this context, there are differing views on the importance of homestays in the Sri Lankan tourism portfolio.
While some argue that homestays are a vital component of Sri Lanka’s tourism product offering, others contend that certain homestays may damage the reputation and quality.
In an effort to provide a comprehensive perspective on this matter, this study will discuss in detail several of these issues and attempt to arrive at some conclusions.
Introduction to Homestays and its operation in the West and East
Homestays, a significant segment in the tourism industry, offer travellers an immersive experience to the local culture and lifestyle. In Sri Lanka, SLTDA defines a homestay as “a house occupied by a family with one room, up to four guest rooms, ready to accommodate tourists where the tourist and the hosting family interact with each other.” The primary aim is to provide tourists with an authentic taste of Sri Lankan cuisine and culture, infused with the hospitality of the hosting family.
The international perception of homestays, however, often revolve around a more transactional approach fundamentally looking at a long term stay than in the local context, where travellers pay for accommodation without necessarily expecting a deep interaction with the hosting family.
Thus,
- There is a vast difference between Western and Eastern region homestays
- Asian homestays are generally of a smaller nature (i.e. Number of rooms)
- Asian homestays are at the lower end of the price spectrum of tourism, compared to conventional hotels.
- International homestays however take more of a transactional nature and mostly involves international / exchange students
Basis of study
In undertaking a study such as this, there are several challenges to be faced due to the unavailability of any proper literature on the subject, and reliable data sources.
- Informality issue
As mentioned earlier, Sri Lankan homestays are smaller units, which therefore fall into the Micro and Small Enterprises (MSE) category. Most of such homestays are of an informal nature with limited formal registration with the relevant tourism authorities. There is speculation that the unregulated number may be larger than the regulated category. As such there is a paucity of data on homestays available.
- Rationale for obtaining data
For a study such as this, there is the need to use certain strategies and derive necessary data from peripheral sources with assumptions and calculations. Available information will be referred to, supported by some conservative assumptions made on the authors’ experience in working in this sector for several years.
Homestays operate extensively through OTAs and therefore OTAs would have ideally been the best source to obtaining data. However, this data is not publicly available.
Estimation of the actual size of the total Homestay category in Sri Lanka
SLTDA statistics indicate that there were 1,080 homestay units registered with a total of 3,231 rooms.
However, the challenge is to estimate the number of unregistered homestay units. There is a paucity of information regarding this and limited academic literature to go by. The few available sources indicate that there are wide ranging estimates of the unregistered (informal) sector amounting to an average of about 70% which will be used for the study[1]
Hence there will be about 1,037 x 70% = 761 in the informal sector.
Hence
Registered Homestay units with SLTDA 1,080
Unregistered Homestay units as computed above 756
Total estimated homestay units 1,836
Computation of the Earnings of the homestay market
As a first step, the total number of homestay units derived from the above calculations, has to be converted to number of rooms.
Based on the latest 2023 SLTDA statistics, a homestay unit in Sri Lanka has an average of 3 rooms per unit.
For a total of 1,836 homestay units the total number of rooms can be thus derived easily.
Hence, total number of homestay rooms available would be 1,836 x 3 = 5,508
From extensive key informant interviews, the authors’ own experience, and analysis of some of the listings on Online Tour operators (OTAs), the average homestay rate is in the range of USD 20-30 per room in Sri Lanka.
Hence, the average room rate of a homestay is taken to be about USD 25
The informal sector occupancy is estimated to be about 62%.
Hence, the average occupancy of homestays for 2023 is taken as 62%
Calculation of total earnings of the homestay units is now straightforward (5,508 rooms @USD 25 and occupancy of 62% for the year)
Hence, total estimated earnings from homestays for 2023 would be in the order of USD 31,161,510
Sri Lanka’s Total Tourism earnings for 2023 was USD 2,067,000,000[2]
Hence earnings from homestays for 2023 account only for 1.51% of the total earnings from tourism.
