Unregistered foreign-owned businesses crippling Kalpitiya’s tourism, warns industry pioneer

By Nishel Fernando

Unregistered and often foreign-owned tourism ventures in the kite-surfing hotspot of Kalpitiya are creating an unsustainable and unfair market, severely impacting legitimate businesses that comply with local regulations. 

This stark warning came from Kitesurfing Lanka  Founder and CEO Dilsiri Welikala  during a panel discussion in Colombo last week.

Speaking at the inaugural Sri Lanka German Tourism Conference organised by AHK Sri Lanka, Welikala highlighted a critical issue threatening the local tourism ecosystem. “In our association there are about 40 hotels on TripAdvisor, maybe 40 hotels and only eight of us are registered with the Tourist Board,” he stated.

Welikala explained that these unregistered entities operate without oversight, often “slashing the prices, not paying their taxes, and then dictating to us how to run our businesses.” He expressed deep frustration that legitimate operators face more operational hurdles than their illegal counterparts.

“We have more troubles running our business as a legitimate business than an illegitimate business,” Welikala lamented during the panel discussion titled “Sri Lanka - the new sustainable Bali? - Sri Lanka’s future in regenerative tourism.”

He pointed out that this isn’t just a local problem, but one driven by foreign entities operating under the radar. Despite repeated appeals to the Sri Lanka Tourism Development Authority (SLTDA), little to no action has been taken. “When we question why you are not doing it, they say, ‘No, it might have a bad image on us,’” he revealed. Welikala warned that this inaction could lead to Kalpitiya suffering the same fate as other over-commercialised destinations such as Ahangama and Arugam Bay.

Adding to the industry’s woes, Welikala shared his personal, draining experience with government bureaucracy, which ultimately forced him to abandon a new hotel project in Talaimannar. He recounted a grueling seven-year legal battle with the Department of Wildlife over baseless accusations of kite-surfing in a national park.

“These laws, these bureaucratic things just drain my energy, and it’s really difficult,” he said. The ordeal led him to sell his shares in the Talaimannar venture, deciding he had “no energy to start new hotels.”

Welikala’s experience underscores the significant challenges facing investors. 

“As a local with all my connections in Colombo, everywhere, it was difficult for me and I can imagine how difficult it could be for someone from the outside,” he concluded, highlighting that while Sri Lanka’s tourism potential is immense, crippling red tape and a failure to regulate the informal sector remain major barriers to sustainable investment.