Sri Lanka tourism now needs to look beyond 2016

1 October 2013 05:30 am - 0     - {{hitsCtrl.values.hits}}

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The Sri Lanka Tourism Strategy for the period 2011 to 2016, launched in November 2011, aims to welcome 2.5 million arrivals by 2016. Not much is known on how the goal of reaching 2.5 million arrivals is to be achieved.

However, the Economic Development Ministry and the Tourist Board claim that the strategy had inputs from the industry although the substance doesn’t explicitly convey such a contribution from stakeholders. On 16th May 2012, at the ‘Tourism Awards 2011’ media briefing, the then President of the Tourists Hotel’s Association of Sri Lanka announced that “with the increase in room rates the country gets better spending tourists”.

A month later, the then Chairman of the Sri Lanka Tourism Development Authority, addressing a public lecture on the growth strategies and future prospects of the local tourism industry, lamented, “Sri Lanka’s tourism industry lacks innovation and creativity to attract and benefit from visiting tourists, relying only on conventional methods to do so”. According to him, “the tourists are coming, the hotels are full, everyone is happy and complacency has set in”.

In March 2013, soon after the opening of Mattala Airport, the Chairman of Sri Lankan Airlines stated “Sri Lanka is capable of attracting a million more than the original number of 2.5 million tourists by 2016. He went on to add, “I believe this to be a realistic figure, given that the island now has a 2nd international airport”.
A news article datelined 19th July 2013 reported the Minister of Investment Promotion’s complaint that under the prevailing conditions, achieving 2.5 million tourists even by 2020 is doubtful. The Minister, elaborating further, said, “hoteliers upped the floor rates by 200 – 300 percent, making Sri Lanka’s hotels the most expensive in the region and if not for this huge hotel room charges, we could have met the 2.5 million tourists target by 2012”.




Omni shambles, fact, fiction and terminological inexactitude
The target set for 2013 is 1.25 million arrivals. On 26th July, the Director General of the Sri Lanka Tourism Promotion Authority, whilst speaking at the opening of ‘Hotel Show 2013’ informed that we can expect over 1.1 million tourist arrivals this year – only to soon recant as been misquoted by the news report, claiming, that what he actually said was, “that up to 30 June 2013, foreign tourist arrivals amounted to 512,281 and considering using this regression analysis for the last five years, foreign tourist arrivals are forecast as 1,280,000 in 2013”.

Meanwhile, at a meeting with Sri Lanka’s President in late August 2013, The Sri Lanka Association of Inbound Tour Operators had its request for the abolition of the minimum room rate for city hotels turned down in favour of the Colombo City Hotels Association’s defense of the benefits of staying with it, with the CCHA emphatically countering, that “If the minimum rate was detrimental, it’s only the city hotels that would have to make an appeal to the authorities”.  

Interestingly, with the recent release of tourist arrivals figures for August (up 26.1 percent over Aug’12), and the YTD (Jan – Aug) total arrivals of 711,466 (up by 14.3% over the same period in 2012),  Sri Lanka Tourism’s new target of 1,1 Million arrivals for 2013 - revised from 1.25 million arrivals, has been surreptitiously included as a footnote in the said news release.

The revised target means that within the next four months (Sept – Dec), Sri Lanka has to welcome an additional 388,534 arrivals to reach the revised 1.1 million mark. During the period Sept – Dec 2012, we recorded 382,944 arrivals. Essentially, the revised task at hand, with CHOGM and the high season ahead, is to achieve a formidable 1.5 percent ‘year-on year’ increase during the balance four months in the year to comfortably reach the diluted milestone. Combining reverse regression analysis (?) and ingenuity, our tourism ‘think tanks have rolled out yet another refreshingly uncanny way of ‘getting out of jail’.

The Wonder of Asia will never cease to amaze! How the saga of the new tourism strategy unfolds, mired in omni shambles, fact, fiction and terminological inexactitude, will only be known in 2016.




Flashback to the 1970’s
Going back in time, about four decades ago, in the 1970’s and up until the late 1990’s, tour operators (intermediaries) were all-powerful. In several leisure destinations tour operators played a critical role in determining the price customers paid for products locally. This had significant implications for destinations which depended on intermediaries (tour operators) for their clientele, and in particular for destinations, which, owing to an oversupply of facilities, clung on to ‘old tourism’.

Old tourism can be characterised as ‘mass, standardised and rigidly packaged’. Hitherto, destinations have suffered because they wrongly assumed that the higher the volume of tourists, the more benefits they can achieve. Tour operators in Europe and especially the larger/mass/integrated operators, such as Airtours, Thomson, TUI, and Neckerman, exercised bargaining and coercive power because of the large volume of tourists they represented and reduced the prices of principals at destinations.

This enabled them to offer competitively priced products at their marketplace. However, as local suppliers of rooms (hotels) were not able to gain enough profit from the basic product. For the most part, tour operators made out that only they understood what their customers wanted in terms of a holiday.  Consequently, they considered it their prerogative to create the ‘package’, assemble the stock of hotel rooms, handle ground arrangements, organise charter flights and sell it at a price the market would pay.

Tourism destinations meanwhile, had only to concentrate on developing their infrastructure, accommodation, attractions and facilities and to promote these to the product managers of the tour operators in order to sell allocations.

In a nutshell, this is how it worked:
  • Travel agents sold these packages to the clients.
  • The Hoteliers had to ensure availability of the block of rooms in the destination and sell allocations to tour operators in each target market at a price determined by the tour operator. Hotels that did not comply were labeled ‘overpriced’ and ignominiously taken off the tour operator’s programme/s. (In Sri Lanka, owing to the war, tour operators and Travel Agents virtually dictated terms, especially on prices - to the extent where some tour operators even delivered a ‘body blow’ by demanding that hoteliers contribute towards the production cost of the catalogues and brochures if they wanted to be featured. Whether the hotelier made enough profit or operated in the ‘red’ was inconsequential).
  • The Tourism authority of the country promoted awareness of the destination by focusing on several market segments (e.g. leisure), a particular buyer group (e.g. MICE) or specific geographical markets (e.g. Europe) with the public, trade, press, and, in partnership with travel agents and hoteliers attended tourism related events such as travel  fairs and exhibitions.
  • The tour operators in turn were responsible for selling their contracted room allocations and linking these with transport. This involved pairing with airline charter operators (some tour operators owned charter airlines) and travel agents to provide ground handling/transport services at destination.
  • Tour operators earned healthy profits from the sale of packages; travel agents received a reasonable handling fee whilst hoteliers (who had invested millions in the product), stood at the bottom of the profit chain.
The above model worked well for the tour operators for years and still continues to work in some areas. However, due to tourism development continually evolving within the past twenty years, including the advent of electronic distribution or marketing multi- channels, the dominance of the tour operators’ role has greatly eroded. The playing field has leveled evenly for all, given the multiple new revenue building opportunities and channels made available. Destinations that have change for the better, are those that have embraced new tourism - which is ‘flexible, segmented, customised to the tourist’s needs and diagonally integrated’, and, by using today’s technology.  




Moving from ‘Commodity’ to ‘Status’
Destinations, it is argued by Gilbert, can be classified as been either a ‘Commodity’ area or a ‘Status’ area. Any destination labeled as a ‘commodity’ area is considered replaceable, very vulnerable to price and economic changes, while consumers have a low awareness of any benefits or attributes. Thus, travellers base their decision to visit the country or area merely on price, while the demand for the destination is incidental and such destinations will struggle to attract high spenders. ‘Status’ areas in contrast, achieve intentional demand as a result of the unique product attributes perceived by the tourism market.
These unique attributes may be genuine or imaginative and thus, a ‘status’ destination is regarded as irreplaceable, which increases consumers’ loyalty and willingness to pay more. ‘Status Areas’ carefully manage, protect and maintain their resources as product attributes and therefore are appreciated by tourists who are willing to pay more. On the contrary, ‘Commodity’ destinations care little for their resources which are usually unprofessionally managed. Very little of the income derived from charging visitors high entrance fees or the like is put back towards the upkeep of the assets – which over time become run down, leading to disillusioned and unhappy visitors.

Only when any large one-off event or international gathering occurs is some hurried makeover carried out. A moot point is the BMICH: built in 1973, only now is it been totally renovated or the intention to beautify around 100 bus halts in Colombo, both to look good for CHOGM in November. During the 1980’s countries such as Thailand and Malaysia were purposefully moving towards attaining their goal of migrating from a ‘commodity’ area to that of a ‘status’ destination. The thrust of their efforts were aimed at building infrastructure, attractions and facilities that provoked positive global attention.

The shift was also aimed at breaking the tight shackles of the omniscient tour operator. Looking back, both countries have a success story to relate. Thailand’s tourist industry grew from a modest 81,000 arrivals in 1960 to 2.2 million visitors by 1983 (the year Sri Lanka’s fortunes plummeted); leapfrogging to 4.8 million in 1989.Tourism became Thailand’s top foreign exchange earner for the first time in 1982. At the same time, Malaysia, which received 2.9 million visitors in 1983, focused on consolidating the tourist business component where various tourist projects were also undertaken by public sector agencies which supplemented the activities of the private sector.

In addition, a hotel and catering school for training skilled and semi-skilled manpower in hotel administration and management was established. (Interestingly, Sri Lanka had already moved towards setting up its own hotel and catering school way back in 1964 – a testimony of the unparalleled vision and foresight of Sri Lankan trailblazers who were steering our tourism industry at that time).

As in Thailand, visitors to Malaysia reached an identical 4.8 million in 1989 – sky rocketing to 7.4 million visitors in 1990. Taking a cue, Sri Lanka rather than wallow in the ‘commodity’ mud-hole, must plan now and look beyond 2016 to push towards becoming a ‘status’ destination by 2020.

(To be continued)
(Shafeek Wahab has an extensive background in Hospitality Management spanning over 30 years. He has held key managerial responsibilities in internationally renowned hotel chains, both locally and abroad, including his last held position as Head of Branding for a leading Hotel Group in Sri Lanka. Now focusing on corporate education, training, consulting and coaching he can be contacted on shafeekwahab@in2ition.biz)

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