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Is there a strong growth in ‘Non-Conventional’ informal tourism sector?

21 Jul 2015 - {{hitsCtrl.values.hits}}

It is interesting to analyze the tourist arrivals to Sri Lanka over the past few years, which seems to give an indication that the informal hotel sector could be growing faster than the formal sector.

It is important firstly to clarify the proper nomenclature involved in this analysis.

The SLTDA classifies all conventional star class hotels as ‘graded establishments’.
On the other hand, all the non classified accommodation establishments, including guest houses, homestays and boutique hotels are classified as ‘supplementary establishments’.
There is also a large component of unregistered supplementary or informal establishments, which do not get captured into the statistics of the SLTDA, due to the fact that they are unregistered. There is no proper data available of this sector and many believe that the number of rooms in this sector could be as high as 4,000 – 5,000.
Foreign Guest Nights (FGN) are the actual nights spent in registered accommodation establishments by foreign passport holding ‘real’ tourists, and recorded by the individual establishments.

On this basis, the tourist arrivals to graded and supplementary accommodation units is analyzed for the past 4 years and given below;

Foreign Guest Nights (FGN)
FGN in graded establishments (conventional hotels) has risen by 12.75 percent from 2013-2014, yielding 7,786,119 guest nights. On the other hand, the FGNs in supplementary establishments have increased by 23.4 percent to 3,792,539 from the same period.

Considering the overall increase from 2010 to 2014, FGNs in graded establishments has gone up from 4,126,544 to 7,786,119, which is an overall 89 percent increase. FGN in supplementary establishments on the other hand, has gone up from 1,249,146 to 3,792,539 indicating a massive 204 percent increase.

Hence, it is evident that the supplementary / informal sector is growing much faster than the graded (formal) sector.

This further confirmed in the recently published report by Bartleet Religare Securities ref page 8 – “the growth in supplementary accommodation increased at a faster pace between 2011-2013, in contrast to graded accommodation units”.

Average stay
The average stay of tourists in Sri Lanka has been around 10 days, and only in 2013, it has gone down to 8.6. If the tourist mix changes from the longer staying European tourists, to more short staying Asian tourists, the overall average stay will come down.

Number of tourists
By multiplying the FGN’s by average stay, it is quite easy to establish the ‘real’ number of foreigners, who stayed in hotels. For 2014, the ‘real’ foreign tourists in graded establishments thus works out to 786,477, while the real foreign tourists in supplementary establishments is 383,085.

This totals to 1,169,561 (786,477 + 383,085) ‘real’ foreign tourists staying in all types of registered establishments. When compared with the overall arrivals to the country on 2014 of 1,527,153, this works out to only a 77 percent.

This means that of the overall arrivals, some 23 percent foreigners are staying in unregistered establishments and are thus not accounted for in the overall FGN’s. There could be also a ‘diaspora component’ in this percentage, where Sri Lankans with foreign passports, are accounted as tourists at the immigration, but do not patronize hotels and therefore, do not get caught up in the foreign guest nights statistics. This segment is referred to a Visiting Friends and Relations (VFR) category.

This is the so called ‘leakage factor’ that is prevalent, which has been increasing from about 18 percent to 26 percent over the last five years.

Rooms
In 2014, graded star class hotel rooms have increased by 11.4 percent from 16,022 rooms in 2013, to 18,078 rooms.

Correspondingly, the number of hotels has gone up from 279 to 310 rooms in supplementary level has gone up by 7.9 percent from 7,373 in 2013 to 7,959, with the number of establishments going up from 688 to 755 on an overall basis, therefore, Sri Lanka has a total room stock of 26,037 in 2014, which is an increase of 19.5 percent from the previous year. These are important aspects and trends in the tourism industry currently prevailing, which should be taken into consideration by all practitioners and strategists.

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Is there a strong growth in ‘Non-Conventional’ informal tourism sector?

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