Sri Lanka Tourism Report 2009

Core Forecasts Tourist arrivals for 2008 showed a year on year (y-o-y) decline of 11.2%, culminating in to 438,475 arrivals to the country. Q108 gave a particularly poor performance, with July seeing a 25.3% decline in visitor arrival numbers, August seeing a 31.4% decline and September a 20.4% fall in comparison to the previous years. Tourism revenues for the January-November 2008 period showed a 10% fall, to US$304mn.

2008 arguably saw an improvement in the country’s civil and political situation, as government forces made strong advances against the rebel Liberation Tigers of Tamil Eelam (LTTE, Tamil Tigers).

However, while the civil situation improved, the global economic situation has deteriorated. This latter circumstance is probably the main determinant of the fall in the number of visitors arriving, as tourists cut back on spending across the globe.

Moving forward, we believe that the global economic situation will continue to limit the amount of Western tourists travelling to Sri Lanka. However, this shortfall could be partially offset by an increase in visitors from India and the Middle East region. For 2008 and 2009, we are forecasting declines in visitor arrival numbers y-o-y, with 2010 likely to mark the low point over the short-term. Beyond this point, we are cautiously optimistic that Sri Lankan tourist arrivals can slowly bounce back, provided that the country’s improved civil and political situation does not deteriorate once again.

New promotions to be derailed by economic crisis? At the start of 2009, Sri Lanka announced a spate of new tourism initiatives to help the industry weather the current global economic slowdown. These include: the promotion of domestic tourism via an initiative known as ‘Narambamu Sri Lanka,’ targeted international promotions, focused on the UK, France, Germany, Russia and India, with other marketing efforts concentrated on Japan and China, as well as making improvements to existing tourist infrastructure.

At the same time, the Sri Lanka Tourism Development Authority (SLTDA) is looking to set up a LKR400mn national fund to help support the tourism industry over the coming five years.

Although BMI broadly welcomes these new initiatives, it remains to be seen how effective they will prove at a time when global tourism demand is forecast to remain flat at best by leading industry bodies.

In particular, it is hard to see how demand can be boosted from countries such as the UK, France and Japan, all of which are experiencing a particularly hard economic slowdown.

Civil situation still a concern In an important strategic and symbolic victory for the government of Sri Lanka, the military confirmed on January 2 2009 that it had seized Kilinochchi, the de facto capital of the rebel Liberation Tigers of Tamil Eelam (LTTE, Tamil Tigers). The capture of the LTTE's administrative capital marks a new phase in the long-running civil war between the Tamil Tigers and the Sinhalese-dominated government of Sri Lanka; one that will likely see the rebels return to more traditional guerrilla tactics.

BMI’s core scenario is for the government’s ability to exercise greater authority over the north in 2009, however this will be accompanied by an ongoing insurgency campaign on the part of the Tamil Tigers for at least the next year. Moreover, we do not see the government managing to curtail the LTTE through military means alone. This suggests that it will be forced to pursue a diplomatic resolution later in our forecast period.

With regard to Sri Lanka’s tourism industry, the greatest threat is posed by any renewed wave of suicide bombings or other attacks on tourist destinations by LTTE fighters. Any spread of violence into the south and west of the country would have devastating consequences for the tourism industry.

SLTB split in two In October 2008, the Sri Lanka Tourist Board (SLTB) was split into two entities: the Sri Lanka Tourism Development Authority (SLTDA) and the Sri Lanka Tourism Promotion Bureau (SLTPB). The SLTDA will focus on development and classification, with the SLTPB to focus on promotional activities.