Many say tourism is the only bright spot in Sri Lanka’s economy. Given the abysmal performance of the country’s exports and dwindling workers’ remittances, this statement is not an exaggeration. But is the tourism industry living to its potential? Are the authorities creating the right policy environment for the industry to thrive? With these questions in mind, Mirror Business met with Nalin Jayasundera, Managing Director of Aitken Spence Travels, who counts over 31 years of experience in the industry, to gain some insights into the current status of Sri Lanka’s tourism landscape.
Let’s start with the most pertinent issue that could affect the country’s tourism industry—the partial closure of the airport. What kind of impact could this have on tourist arrivals?
Of course certain flights might get cancelled but overall, the number of flights will not get reduced drastically. It might have a certain impact but not a major impact. That’s what I feel. But during the time when the airport is open, there will be a lot of congestion because all the flights will take off and land during that time period. So we can expect some congestion. The waiting areas, lobbies will be full and even it’ll be difficult to find a porter. Instead of taking a visitor three hours prior to the departure, we may have to take him or her half an hour earlier. Then of course you can expect longer queues at check-in counters and immigration because everybody will try to arrive and depart within that time window.
But don’t you think that it could discourage a potential tourist coming to Sri Lanka or delay a planned trip or in the worst-case scenario change the destination of the holiday?
Not really. They might not cancel or postpone a travel due to this reason. Having said that, the airport is the first and last impression of any traveller. If the whole experience is smooth, it will help us to create a better impression on the country as a tourist destination.
In your opinion, has the tourism industry enough to capitalize on the peace dividend? I mean in terms of quality and quantity?
Yes, year-on-year Sri Lanka has experienced a growth. If you take it percentage wise, it’s better than any other country in the region. Even last year we had almost a 19 percent growth in arrivals. So, if you take the region, percentage wise we’ve done well. But if you take other countries—for instance India—it has attracted more tourists. So I’d say Sri Lanka has done well but we could of course do better.
If you look at the local industry, the capacity has increased. Sri Lankan hoteliers have made new investments and international hoteliers have also come into the scene. So, if we can do a proper marketing campaign, definitely we fill these hotels. The occupancies will definitely go up. We have to focus on the marketing aspects more. Definitely we have a good product. That is the feedback we get from our customers, tour operators and principles. Specially the hotel product has improved since the war ended.
And also some good international hospitality brand names have come. As I earlier mentioned, the local hoteliers have also invested heavily. As the Aitken Spence group, we have invested and built a hotel like Heritance Negombo. It has added a lot of value to the entire Negombo area. It’s an international five-star hotel. Then of course we have invested in RIU in Ahungalle with an international chain, where we have the majority stake.
If you look at the numbers of Aitken Spence Travels, year-on-year we have grown. If you take the last financial year, we handled about 130,000 packs. This year, if things remain as it is, we are quite confident doing over 150,000 packs. So, overall the capacity increase has helped the tourism industry and the destination management companies.
But the question is, are we attracting the right kind of tourists from whom the country’s economy can benefit?
Of course there are different segments. We cannot only target the five-stars. Then what happens is, the three-star hoteliers will have to close shop. If we are looking at numbers, then we have to cater to different segments starting from tourists who will stay at two-star hotels to five-star hotels. So, what we can do is, by doing a proper marketing campaign we can create demand for all these market segments. Ideally if we can all have five-star clients and fill up all the five-star hotels, it’s good. But we should also not forget there are investors and hoteliers who have invested in two to three-star properties. Sri Lanka has always attracted tourists from different segments with diverse interests. Tourists visit Sri Lanka for culture, beaches, surfing, wildlife, shopping, MICE, etc.
So how best are we to position Sri Lanka as a prime tourist destination?
Interestingly, the diversity has sometimes made it little difficult for us to position the country as a unique tourist destination. The Maldives for example positions itself as a beach destination. But since Sri Lanka has so much of variety to offer, positioning hasn’t been easy.
Let me interrupt. If we are to initiate a marketing campaign, we must position, so?
I think we should project our diversity. I think we can score a lot with that. We have the diversity available at the right price. So as a destination, which offers a variety at the right price. In my opinion that should be our key message in any prospective marketing or positioning campaigns.
Since you talked about the right price, there is this impression that Sri Lankan hotels are pricey compared to other destinations, which offer similar or even better products. What’s your comment?
Sri Lanka is a peaceful country now. If you compare Sri Lanka with countries which have some sort of problem, then may be Sri Lanka is pricey. As at now, as a peaceful country, I don’t think our tourism product is pricey. And I think the price issue will not come if the demand is created by carrying out a proper marketing campaign, not an ad hoc one. Everything will depend on how you market the destination and create that demand. If we can create that demand, price will not be an issue.
Initially, soon after the war was over, with limited capacity we had, there was an issue. The tour operators were concerned about our prices. Pricing if you take for certain segments like MICE for example, having this minimum rate is not going to help the destination. There is an issue. But if you take Sri Lanka as an overall destination, which is peaceful, the price is not the main issue here.
But if you only take Colombo and look at only a certain segment of tourists, then there is an issue. There I think we are pricey compared to other destinations like Malaysia and Thailand in the region. So I think to attract that segment, we have to abolish this minimum rate in the city. Then we can get more numbers into the destination. But if you take the overall situation—all the segments—I don’t think Sri Lanka is too expensive.
But for a certain period, having a minimum rate helped…
That’s right. But to be honest, since the inception, I was not for it. There shouldn’t be a minimum rate on a year-around basis. It doesn’t make sense for me. The hotelier who markets his or her hotel property should have the liberty to change the price and to get a better occupancy. Fundamentally, the idea is flawed to have all the hotels the same rate when they offer different levels of comfort, services and ambience.
I think some of those hoteliers who propagated this idea initially now have changed their minds. Besides, why have a minimum rate for hotels, which are only in Colombo? Having a minimum rate will be detrimental to the interest of the destination. For instance, when a MICE client comes, he or she may stay only in a city hotel. But there are other clients who will do round tours. Then in one hotel the price is very high. So then you take the total package price Sri Lanka, as a destination, does not become competitive. Then what will happen is all the stakeholders, the hoteliers in other cities, the drivers, the guides, the vendors, the suppliers, etc., will get affected. That’s why I’m against the minimum rate. You have to let the demand and supply to play.
Are we giving the value for money to the tourists?
From the feedback we get from our clients, the overwhelming majority of them are either happy or extremely happy about the destination. We have a way of capturing this as we give questionnaires to our clients to be filled out by them. Based on such feedback, I’m quite confident Sri Lanka offers value for money.
Here I’m not only talking about Aitken Spence, but the industry as a whole?
No no, even the Tourist Board had a way of capturing that information. They had like an exit interview with the tourists and they did it at the airport. Even if you look at the feedback there, I think the overall satisfaction level is quite high.
Since you talked about the MICE market, what is the potential Sri Lanka has in this regard?
Sri Lanka is just next-door top India. And what I feel is with SriLankan Airlines pulling out from some of the European destinations, they will increase the frequency to India and the subcontinent. If the accessibility is not the problem, Sri Lanka will become attractive to a lot of source markets, specially India. Then we can attract that MICE business from India. Otherwise what will happen is they will go to Thailand or Malaysia. So why do we give them that opportunity without creating an opportunity for ourselves.
What’s your response to having gaming facilities to boost tourism?
Well it’s a very controversial subject. Personally I’m against casinos. But as a stakeholder of the country’s tourism industry, I believe having casinos would help. That’s a different segment we can attract. Instead of Indians going to Nepal to gamble or to Macau or Genting in Malaysia or to Singapore, they will come to Sri Lanka.
But having said that, whether such activities are in sync with our culture, religion, will be an issue.
The previous administration focused more getting Chinese and Indian tourists. But the new administration said the industry should focus more on high-spending European tourists. Your views?
I think we need to have a balanced approach to this. Of course India and China can give us the numbers. But if you look at their duration of stay, compared to Europeans, it’s less. Europeans on average stay about 10 nights. So we need to attract tourists from different markets.
And also if you take the seasons, the Chinese will travel mainly during the Chinese New Year from January-February, the Labour Day in May and their national day in October. The May-October period is the traditional off-season in Sri Lanka. So, we need the Chinese market. Then the Indians, their travel period is again April to June. We need them because that period is also off-season for us. From October to November Indians travel a lot. There again that period is not our peak-season.
We need to have different source markets for another reason. Because if let’s say, if Europe gets affected due to some financial problem, what will happen to the industry? So we should not put all our eggs into one basket. I think we must have a diverse portfolio of clients from different sources markets.
Another key question I want to ask you is about the official tourism data. How credible and reliable do you find them in strategizing future courses of action and arriving at conclusions?
I think there is room to improve. For example, we capture the number of arrivals. But if we can capture it by the purpose of travel, then I think it will help us. Say from the Indian market, we have about 300,000 people coming. But all of them are not coming for leisure. A large percentage of them are coming for business, visiting friends and relations, etc. So, I think this is an area where there is room for improvement.
And also if the authorities can commission a capable party, for instance Ernst & Young, to do a study on the industry by going into nitty-gritty like capturing the information like for what purpose they are visiting, duration of the tourist stays in terms of nationality wise, places of interest they visit and their nationalities, etc., would be very helpful to develop the tourism product and strategize.
With that we could even develop new markets. For example, the cruise market. The number of cruises that have come to Sri Lanka year-on-year we can see an increase. Recently there was a person from Crystal Cruises, one of the up-market cruise operators in the world, who came to Sri Lanka. What he said was the depth we have in the Colombo port is a definite advantage for use to get more cruise ships to come to Sri Lanka.
But there were experts saying it’s not the time for Sir Lanka to have a cruise terminal?
Well, the cruise terminal is not the priority. We can have a cruise terminal when the numbers increase to significant levels. So, at the moment, if can add a coat of paint and make that area nicer and cleaner, then we can manage for the moment. At the moment there must be around 60 cruise ships calling at Colombo port a year during the cruise season. But if the number goes over 100 ships per year and there are more turn-around ships, meaning people coming and boarding the ship, people disembarking and doing tours and taking a flight back, then we need to have a cruise terminal. But at the moment we can manage with what we have provided we upgrade them.
Moving forward, how satisfied are you with the current policy framework put in place by the country’s tourism authorities? What needs to be done?
I think the human resource issue should be addressed immediately with more and more hotels coming up and the demand for the destination year-on-year growing.
Then of course the other key thing is marketing the destination. And the other important thing is regulating. Now there is this informal sector, which has to be regulated. That sector should be there, no doubt about it. But it should be regulated. Standards should be brought in and they should also pay certain taxes. So that regulation is not happening the way it should be happening in my opinion. Whatever the revenue that is due to the government, the government should get that. There are lots of parties who are operating without adhering to the proper standards and I wonder they pay the proper taxes to the government of Sri Lanka. When things like this happen, it’s not a level playing field for those who abide by the rules and pay taxes.
Is this happening mainly because of Internet-based bookings?
Well I wouldn’t say that. Even the number of Internet-based inquiries and bookings we, at Aitken Spence, are receiving has gone up drastically. The Internet is not to be blamed. But systems should be put in place to get this informal sector within a proper framework and have standards and pay taxes.
OK. Let’s get into Aitken Spence. What’s new?
Well, this winter we are reviving the Scandinavian market after a lapse of many years. As I mentioned we now have a joint venture hotel property with RIU in Ahungalla. They operate over 130 hotels worldwide and that is the biggest hotel outside Colombo with 501 rooms. This winter there will be several charter flights operated by TUI. We will also have a weekly charter operated out of Gatwick, UK by TUI and another charter operated out of Italy by the largest tour operator in Italy. We will also have a charter from Russia. So we’ll have four charters and I don’t know whether any other company operates so many charters from different source markets.
This boost, is it because of the RIU hotel?
Of course the RIU hotel has helped to look at Sri Lanka positively. But I must also say the majority of the allocations are for other hotels. So RIU hotel is one of the hotels that they will use. But I must say that we are using more outside hotels. If you take the Scandinavian operation, if we have contracted 200 rooms, more than 50 percent of the rooms are contracted in other hotels.
Is it because of the special relationship Aitken Spence has with TUI?
RUI is one of the hotel arms of TUI. But having said that, we are not restricting our business to RUI Hotel as the majority of the business will go to other hotels. So in that sense, we are giving business to other hotels as well including Aitken Spence Hotels. RIU is managed by the RIU hotel chain despite Aitken Spence having the majority shareholding. This is the first time where Aitken Spence has invested not managing a hotel. So we are giving business to Aitken Spence-managed hotels and in addition to that other third party hotels as TUI have contracted with them as well.
As the MD of the travel arm of Aitken Spence, don’t you miss a hotel in Colombo?
It would have been good to have a city hotel. But of course there is enough capacity in the city at the moment. So, not that we have given up the idea but it is not a very important thing to have.
Aitken Spence is among the first companies to start operations in the Maldives. Since of late we have seen a number of Sri Lankan companies joining the bandwagon. But when we look at the numbers, the Maldivian tourism market is kind of slowing. Your thoughts?
For different reasons demand for the Maldives has dropped. But what I hear is, for the winter the bookings are coming up again and are looking quite good, specially for our hotels. In fact, better than what we expected. In fact, we are expanding in the Maldives and we are currently building a hotel in an island called Aarah. I think I’m not the most suitable person to talk about our resorts as they operate under a separate managing director.
Pic by Pradeep Pathirana