Tourist arrivals to reach all-time high: CT Smith Securities 

• But Sri Lanka to miss US$ 1 bn in earnings

By Nishel Fernando

Sri Lanka’s tourism industry is on track for a landmark year, with projections indicating a record 2.4 million tourist arrivals in 2025, according to a new report from CT Smith Securities. 

This figure would eclipse the previous peak of 2.3 million visitors recorded in 2018.

However, the celebratory mood around arrival numbers is tempered by a more complex financial picture. The report, titled “Winter is Coming: Tourism Sector Sri Lanka,” forecasts that these record arrivals will generate US$ 3.4 billion in earnings, a figure that, while substantial, falls significantly short of the US$ 4.4 billion peak achieved in 2018.

Further, the forecast is also below government’s initial target of 3 million arrivals with earnings of US$ 5 billion.

This discrepancy highlights a challenge for the nation’s fourth-largest foreign exchange earner: a fundamental shift in its tourist demographic towards more budget-conscious travellers, which is diluting the average spending per visitor.

The forecast is underpinned by a robust performance in the current year. As of mid-September 2025, Sri Lanka has already welcomed approximately 1.64 million tourists, surpassing arrival numbers for the same period in the benchmark year of 2018. 

According to the report, this momentum has been fueled by a strong recovery from key source markets, including India, Russia, Germany, France, and Australia, which have all returned to or exceeded their pre-pandemic levels. The report also notes significant growth potential from China, which has only recovered to 50 percent of its historical peak, suggesting a future upside.

However, when analyzing the earnings, the report urges caution. It includes a critical note on the data’s reliability, stating that the methodologies used by the Sri Lanka Tourism Development Authority (SLTDA) to calculate tourism earnings appear to have changed post-2022, making comparisons with prior years “less reliable”. 

Furthermore, it highlights that the accuracy of the total revenue figures “remains debatable, as they are primarily based on exit surveys conducted at the airport”.

A primary driver behind the surge in arrivals is Sri Lanka’s increased affordability. The Sri Lankan Rupee (LKR) has depreciated by approximately 89 percent against the US dollar since August 2018, the highest among its regional peers. This has made the island a highly cost-effective destination, particularly for travelers from its top source market India who are often more price-sensitive.

This “affordability advantage” has led to a noticeable increase in low-cost accommodation options such as bungalows and homestays, catering to the rising number of “budget travellers and backpackers”. While this trend boosts arrival numbers, it simultaneously puts pressure on the sector’s overall profitability and the ability of star-class hotels to sustain premium pricing.

Despite the yield challenge, the outlook remains positive. CT Smith Securities projects that the growth trajectory will continue, forecasting 3 million arrivals and US$ 4.3 billion in earnings by 2026. 

The government has approved a plan to offer visa-free entry for tourists from 40 countries, a move expected to significantly boost interest and arrivals. Enhanced air connectivity, with an increase in flight frequencies and the resumption of services by international airlines, is making Sri Lanka more accessible. A long-awaited global marketing campaign is expected to launch towards early next year.

For Sri Lanka to fully capitalise on its growing popularity, it suggests a concerted effort is required to attract higher-spending tourists to translate record-breaking arrival figures into record-breaking revenue.