Sri Lanka’s progress and fluctuating market fortunes

4 February 2013 06:30 pm - 0 - {{hitsCtrl.values.hits}}

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TOURISM INDUSTRY:

By Shafeek Wahab
The United Nations World Tourism Organisation (UNWTO), reports that there were 1.035 billion tourist arrivals in 2012 - a rise of 39 million travelers and a growth of 4.0% on 2011, where 996 million people criss-crossed the globe. Asia enjoyed the sharpest rise in tourist arrivals – up 7% on 2011, with 233 million international tourists in total; of which Sri Lanka received 1 million tourists.

Sri Lanka’s story on Tourism in 2012 had a happy ending unlike that of the Maldives. But do all happy endings create a remarkable story? Not necessarily. Even a script with a less than happy ending can tell an intriguing tale.

Renton De Alwis, a former Chairman of the Sri Lanka Tourist Board, when interviewed during the compilation of the special country report on Sri Lanka, published in the October 25th 2001 Issue of Far Eastern Economic Review , said, “Sri Lanka’s Tourism started in the 1960s. It was in the 1950’s that the steamboats began coming into Sri Lanka. Thereafter, the Sri Lanka Tourism Board was set up in 1966. The first tourism master plan was in 1967. In the early master plan it was stipulated that no resort or hotel should be higher than a coconut tree. This helped us develop a good scale for beach resorts. As a result you don’t find any high-rise buildings on our beaches. In 1967 we also had the planned resorts of Bentota, Koggala and also the recommendations for Trincomalee but the latter didn’t come about. We did have a planned approach at the very early stages”.

Change after 2nd World War
Soon after the end of the 2nd World War, and, by the 1950’s, there was a rapid growth of international tourism (23.5 Million in 1950). This was largely due to the rapid development of jet aircraft for civilian transport. Consequently, several countries scrambled to build new airports with wider and longer runways and parking bays.

Larger terminal buildings with modern facilities were constructed to attract the growing number of International travelers. However, in the post-war early days when most countries were hurriedly preparing to accommodate the new jet aircraft by investing on the expansion of their airports, Sri Lanka kept relying on the bulk of its visitors to arrive via ships. It was only in 1965 that work on upgrading the Katunayake airport was undertaken and a new terminal building opened three years later in 1968. We failed even at that time to anticipate the rapid changes that were taking place in transportation and lost out on the opportunity to establish the island as the main gateway between the West and the East. Sri Lanka missed a golden opportunity as Singapore gained that advantage.

Notwithstanding this, by 1982 we had a very healthy industry with 407,000 tourists coming: but in 1983 the conflict began. Between 1983 and 2009, the annual arrivals figures were similar to a roller coaster ride – most years’ figures plummeting downhill. Despite the massive setback, the industry demonstrated great resilience by staying alive during that 26 year period of turbulence and lost opportunities.

Nearly 50 years after the setting up the Ceylon Tourist Board (now known as the Sri Lanka Tourism Board), 2012 December’s historic 122,252 arrivals enabled Sri Lanka tourism to not only surpass its target for 2012 but also achieve the milestone of attracting over one million visitors in a year.

On the other hand, our tiny neighbor – The Maldives fell agonizingly short of the magic million. Tourism in the Maldives started on 3rd October 1972, with only 60 beds, with the opening of its first resort, Kurumba Village in Vihamanaafushi Island, now known as Kurumba Maldives. With its unique ‘One-Island-One-Resort’ development concept, resorts have become the traditional and most popular form of tourist accommodation in the Maldives.

The Maldives received only 1,097 tourists in 1972, the first year of tourism in the Maldives. Since then tourist arrivals had been increasing rapidly from year to year. By 1985, arrival numbers reached 100,000 for the first time. In 2003, Maldives welcomed half a million tourists in a year. 2013 could very well be the year that the Maldives achieves the one million visitors’ goal.

Interestingly, during the past few years, both Sri Lanka and the Maldives have a non-European country as the top leading market - India to Sri Lanka and China to the Maldives.

The preliminary figure released by the two countries on the respective ‘arrivals’ is interesting – for the similarities and the different strategic approaches adopted by each country towards realizing its’ 2012 goals.

The Indian invasion
176,340 Indian visitors to Sri Lanka during 2012 topped the list, whilst contributing 17.5% of total arrivals to the country during the same year. However, the increase in Indian visitors in 2012 over 2011 was 2.9% and far below the annual increases of 50.1% and 35.8% achieved in 2010 and 2011 (over the previous year), respectively.

So, what really caused the sharp decline where the number of Indian visitors in 2012 was a mere 4,996 more than that in 2011? This too, despite the large contingent of Indians who travelled to Sri Lanka to support their team during the ICC T20 World Cup Cricket tourney held in September 2012. The Sri Lanka Convention Bureau chief believes (20th January, Sunday Times), that, “the reduction in arrivals was due to Sri Lanka having to drop a few conferences emanating from India as there were insufficient hotels to provide accommodation in large numbers owing to refurbishment being carried out in Colombo, Negombo and Bentota hotels.” Can this really be the reason? Let us assume that had there been sufficient accommodation during 2012 and the targeted increase in Indian visitors for 2012 over 2011 was 20%, Sri Lanka may very well have received a total 205,649 Indians in this scenario. If what the SLCB chief says is true, the loss of ‘potential’ MICE business due to refurbishment in 2012 translates to a likely 29, 279 Indian visitors. This is a significant chunk of arrivals to be shrugged off on refurbishment and the resultant non-availability of hotel rooms. A more plausible cause would be the possible fall-out from the visa requirement that was introduced in 2012. Previously, it was possible for Indians to catch a flight to Sri Lanka at short notice and without the need to apply for a visa - be it for a convenient weekend getaway or a sudden unplanned vacation. No longer is this possible and the levy of a visa fee does burden the Indian visitor an additional cost impact – especially moreso for family travel. Despite all this, for every Indian who travelled to the Maldives, Sri Lanka welcomed seven Indian visitors during 2012. The Maldives however, did see a spike in Indian visitors during December’12, (a 34% increase over December’11), inspite of the government’s acrimonious cancellation of the Ibrahim Nasir International airport contract with GMR of India and proving wrong the claims of anti-Indian sentiments within the country.

The Chinese connection
Visitors from China to Sri Lanka, in 2012 totaled only 25,781. Not so exciting figures for a country with a 1.3 billion population. True, it is a staggering 58% increase from the 2011 arrivals from China but is still a mere drop in the ocean. This year’s promotions, it is stated, kicked off in China – considered to be a difficult market. This may be true when one calculates that during the four year period between 2005 and 2008, Sri Lanka attracted a total 47,703 visitors from China. Arrivals during the post-war period, i.e. from 2009 to 2012 totaled just 61,069. Have we made any headway after over eight years of pursuing this market? Are we properly and aggressively promoting Sri Lanka to the Chinese people? Is targeting only the Pilgrim traffic and the heritage/cultural visitors from China the solution? In an attempt to tap the Chinese tourism discussions with 14 top Chinese Tourism Agents were held last year at the Ministry of Economic Development. The Ministry, expecting to increase the number of arrivals from China to 60,000 by 2013, has launched several promotional campaigns to create awareness about Sri Lanka’s tourism attractions among the Chinese travelers.

The Maldives, on the other hand, reverting to its earlier brand slogan ‘The Sunny Side of Life’, attracted 229,551 Chinese visitors in 2012, which is a sharp increase from the 60,666 Chinese who visited the Maldives in 2009. A former Secretary General of the Maldives Association of Tourism (MAT) remarked, “The Chinese do not come for the sun and the beach, they come because the Maldives is a novelty, a safe destination, and because of their new-found freedom to travel. Chinese tourists however, tended to spend less than their European counterparts”. The ratio of Chinese visitors to Sri Lanka and the Maldives during 2012, stood at 1:9

European entry
Europe, labeled as a ‘traditional’ market by both countries, continued to contribute a strong presence in 2012, accounting for 44.3% of arrivals to Sri Lanka and 54% in the Maldives. Europeans, with their diverse vacation agendas are still somewhat seen as the Golden Egg for Sri Lankan tourism. In this context, the SLCB chief’s assertion carried in the article on 20th January that “The traditional markets however would also be safeguarded” adding that “the economic downturn in European destinations has impacted on their own outbound travel”, leaves one mystified when he goes on to point out that “since these countries were well aware of Sri Lanka no special promotions were required there”. On the contrary, the Chairman of John Keells Holdings says (Daily mirror of 30th January), that during the 9-month period ending December 2012, the group’s Sri Lankan Resorts “was impacted by lesser than expected occupancies as a result of a drop in our traditional markets, combined with aggressive marketing by competing destinations” He goes on to say “We continue to reiterate the importance of creating awareness as a travel destination”. Could one thus conclude that there is a serious polarization of the term ‘awareness’ between key stakeholders on promoting the Country to the European market? If so, looking ahead, it portends confusion and uncertainty for the industry.

Visitor numbers from Europe (and including Australia) to Sri Lanka feature a high proportion of the ‘Diaspora’. Srilal Miththapala in his article (Daily Mirror of 21st January) headlined ‘One Million tourist arrivals – The story behind the numbers” opines that “there is definitely a diaspora leakage element in the arrival figures- as much as 15-20%”. He goes on to further state that “quite possibly the actual foreign leisure tourist arrivals could well be in the order only of 800,000 for 2012”. The diaspora like all other European visitors have a price bar. Once that is reached, they will seek alternative value-for-money option vacations. So, how can we keep more of them coming back and those who have come, to come back for more? Has this already started to happen? Why then are certain resort hotels in Sri Lanka advertising special promotions during the height of the season? A leading hotel group is offering between 12th January and 27th February 2012, a ‘’pay for a Single and get a Double at’ seven of their brand of resort properties. Another recently re-branded hotel chain is providing upto 30% discounts for credit card holders. A Villa type resort on the south coast that models itself as upscale has slashed its hotel rates by Rs. 10,000 per room type, during 1st – 6th February 2012.

The Maldives spent US$ 4.5 Million on Marketing and Promotional activities in 2012.This included a US$ 250,000 advertising deal to promote the country’s tourism by sponsoring BBC’s weather services report. How much did the Sri Lanka Tourism Board spend on marketing Sri Lanka in 2012? How much is it planning to spend in 2013?

Emerging markets
The Sri Lanka Tourist Board Chairman, recently stated “We will promote the identified emerging markets – India, China, Japan, Korea, Ukraine and Kazakhstan during the year”. No mention is made of the Middle East market which was previously targeted as an emerging market. Visitors from the Middle East totaled 56,169 during 2012. At the beginning, visitors from the Middle East arrived to Sri Lanka between a window spanning 20-25 days. Latterly, they expanded their traffic to stretch between two months, especially during June and July. This Middle Eastern market helped bridge occupancy, particularly in June – recognized as a low occupancy month (along with April, May and September). Middle Eastern visitors particularly are more likely to seek out branded or star-class accommodation and their impact is felt mostly in Colombo. One fervently hopes that efforts to increase if not sustain the Middle East market will not wane or be abandoned.

International outbound tourism
Everyone wants a Chinese tourist in 2013. In terms of outbound tourism growth in 2012, China led the rest of the world followed by Russia. Annually, the Russians undertake 1.3 times as many trips as the Chinese. It is a little known fact that only 15% of the 142 million Russians have ever travelled abroad. South East Asia welcomed over a million Russians in 2012, with Cambodia seeing over 100,000 visitors from Russia. Sri Lanka attracted only 28,402 Russians last year.
Prognosis

Sri Lanka tourism grew phenomenally, recording ‘Year-On-Year’ (YOY) growth of 46% in 2010, 30% in 2011 and 17% in 2012. The 2013 target of 1.25 Million visitors if it is to be achieved- will need to buck-the-trend. The projected YOY growth of 24% in 2013 in order to receive 1.25 million visitors will be challenging and may prove difficult to achieve unless there is tremendous cohesion in what all key stakeholders say, do and deliver. No longer can our game plan rely on pent up demand and the luck of past years to rack up the numbers. To conclude given below is an extract of an article titled ‘Sri Lanka Tourism: Resilience and courage on the rocky up road’ written in 2008, by Geoff Wijesinghe for the Ceylon Daily Mirror in 1962. “According to reports, tourism, which is the country’s fourth largest foreign exchange earner, has targeted one million arrivals in 2008. This is almost double that of the total for 2007, which 494,000 was. There has been a steady increase this year with the Middle East, India, Japan, China and several other markets becoming more active, but whether we will reach the desired one million mark is as yet somewhat of a question. At the same time, the traditional traffic from Western Europe with Germany being the largest segment, and the UK, continues despite all sorts of doomsday predictions…”

(Shafeek Wahab has a background in Hospitality Management spanning over 30 years. He has held key managerial
responsibilities in internationally renowned hotel chains, both locally and abroad)

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Sri Lanka’s progress and fluctuating market fortunes

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