BMI View: The Sri Lanka tourism report examines a range of key indicators in the emerging tourism market in the Asia Pacific region. Healthy domestic economic growth is boosting outbound tourism figures, while improving regional and global travel connections are facilitating growth in inbound arrivals. With visitor numbers increasing we are forecasting healthy growth in tourism related expenditure and industry value, and expect to see a range of developments in the market moving forward.
Maintaining the current stability is vital to the future of the Sri Lankan tourism industry, as any recurrence of civil conflict will likely deter visitors and undermine the recent gains made in terms of infrastructure development. At present however, President Mahinda Rajapaksa and his ruling coalition (the United People's Freedom Alliance) appear stable and able to formulate, enact and enforce their policy agenda. While there are ongoing concerns regarding income inequality and ethnic divisions between the Sinhalese majority and Tamil minority, at present the risk appears to be subdued - though it remains to be seen what impact the snap election in January 2015 will have.
Provided that domestic security will be maintained, we expect to see steady growth in arrivals to Sri Lanka. While arrivals are generally dominated by countries in the Asia Pacific region, Sri Lanka also sees healthy arrivals from European markets such as the UK and Germany. As air travel connections are expanded and Sri Lanka improves its presence on the global tourism stage, we expect to see annual growth of 10% a year in terms of arrivals.
Robust domestic economic growth, boosted by strengthening ties with China and Japan, will lead to steady gains in outbound travel, as Sri Lanka's middle class expands and private financial consumption increases. We expect to see growth of around 6% to 7% per year in tourism departures. This will result in a slight increase in average tourism departures per 1000 of the population, from 0.04 in 2015 to 0.05 at the end of the forecast period.
Overall we expect to see very positive growth in Sri Lanka's tourism industry. However, future growth would benefit further from investment in the expansion and modernisation of the country's transport network, particularly domestic road and rail connections, in order to introduce tourism to more remote areas. Similarly, the hotel sector would benefit from expansion, and with Sri Lanka increasingly open to foreign investment we expect to see a range of new hotel developments entering the market during our forecast period.
Key Developments and Forecasts Include:
Best Western becomes the latest global hotel group to enter the market, with the opening of the 60-room Best Western Elyon Colombo in mid-2014.
Thai-based hotel group Centara has opened a new hotel on the Bentota Peninsula; the Centara Ceysands Resort & Spa Sri Lanka has 165 rooms.
The number of outbound departures will see strong increases over the next few years, of more than 6% year-on-year to reach 968,610 in 2015 and just under 1.2mn in 2018.
Arrivals are expected to increase by 10% a year to reach 1.5mn in 2015 and just under 2mn in 2018.
Overall, Sri Lanka receives a score of 55.91 out of 100 in BMI's Tourism Risk/Reward Index, placing the country in 14th position out of 23 countries in the Asia Pacific region, Between the Maldives and the Philippines.