Jan 20 (ETN) There has been great publicity in the press celebrating the arrival of the 1 millionth foreign tourist to Sri Lanka for the year 2012 during late December 2012.
While certainly this is a great milestone that Sri Lanka tourism has reached, what does this really mean strategically for Sri Lanka tourism?
The Magical 1 Million Milestone
Certainly arrival statistics are one of the most important tourism data that is tracked the world over. The maximum arrivals that Sri Lanka ever achieved, during the past hey-days of tourism was around 550,000. Subsequently, it dipped to around 450,000 during the past few years of the conflict. Hence, there is no question, that there has been a spectacular increase of arrivals in the past 3 years, returning double-digit increases year-on-year, to reach the magical 1 million figure.
It is interestingly coincident that world tourism figures are also following a similar trend and timing as that of Sri Lanka, where world tourist arrivals reached a record of 1 billion around the same time that Sri Lanka reached 1 million.
Is this Growth Sustainable?
In the post-war era, as already mentioned, Sri Lanka tourism grew spectacularly, recording YOY growth of 46% in 2010, 30% in 2011, and 17% in 2012.
These double-digit growth figures are much higher than the norm, and it is attributable, quite clearly to the cessation of hostilities, which ravaged the country for more than two decades, stiffening tourism growth. This pent-up tourism demand is typical of a destination which has had strife, and been in the news (most often for the wrong reasons), and being inaccessible for a long period, suddenly opening up to the world. A similar trend has been recorded in Cambodia and Vietnam, where, when the war in those countries was stopped, tourism grew dramatically.
Hence, it is quite obvious, therefore, that this pent-up demand will naturally, slowly reduce overtime, leaving the destination to grow in the normal organic fashion – unless, of course, there is a strong destination branding and promotional campaign to take advantage of this situation and stimulate demand further.
Sri Lanka’s monthly growth in the post-war era already is beginning to show this typical declining trend, and serious promotional and destination branding interventions will urgently be required to sustain this growth in the long term.
Beyond the Numbers
There has also been controversy about whether the arrival numbers reflected, are actual foreign tourists. The writer has on a previous occasion, analyzed this phenomena and concluded that there is definitely a “diaspora leakage element” in the arrival figures. The writer’s research, utilizing published tourist arrival figures and comparing it to foreign guest nights, as recorded by registered tourist hotels, indicate that there could be an error margin of 15-20%.
These “tourists,” as recorded by the Department of Emigration, are foreign passport holders, but are actually Sri Lankan expatriates returning to visit friends and relatives (VFRs) who would normally not patronize hotels, but stay with “friends and relatives.” In these “leakage” figures there is also a component of Maldivian visitors coming across for short business trips, who, though counted as tourists, are not really the conventional leisure tourist.
However, the important factor is that this error margin has been inherently prevalent over the years, and, therefore, the variance has been fairly consistent.
Therefore, quite possibly the actual foreign leisure tourist arrivals could well be in the order only of 800,000 for 2013.
Any tourism professional knows that numbers alone do not make any business sense. We can have 1 million tourists paying US$50 for a room, while 500,000 tourists paying US$100 will also bring in the same revenue. Hence, while tourist arrival numbers are important, it must always be backed up and compared with the revenue that has been achieved.
On this count, Sri Lanka is doing pretty well, because the overall corresponding revenue figures have also shown strong growth, increasing from about US$400 million a few years ago, to close upon US$1 billion 2012. This is also borne out from the per night tourist spend which has also increased from around US$80 per tourist per night, to around US$100 per tourist per night. This is indeed a very healthy trend, where both arrivals and revenues have kept pace.
However, one must guard against being complacent, since there has been a dramatic hotel rate increase in the post war years, which is probably accounting for this high growth in revenue. The devaluation of the rupee also would have had an effect. Certainly a price correction was needed in the post-war period, given that for decades Sri Lanka was an undersold, cheap destination. There are some indications, however, beginning to emerge that perhaps there has been an over-correction, resulting in Sri Lankan hotel rates becoming uncompetitive in the region.