05-10-2016, 09:58 AM
1457775721-srilankatourism.pdf (Size: 1.17 MB / Downloads: 18)
Introduction
From early historical times, Sri Lanka has attracted foreign visitors. Many books,
particularly by British administrators, have been written based on the different attractions of
the Island. The first attempt to develop tourism in Sri Lanka was made by the colonial
government prior to the Second World War. The Government Tourist Bureau was set up in
1937. Although international tourism in the modern sense was unknown at the time, the
objective in setting up the Bureau was to provide facilities and services to the large volume
of passengers who sailed between the West and the East through the port of Colombo on
passenger ships.
Sri Lanka’s primary location on the world sea lanes attracted many cruise ships, freighters
and other vessels. Passengers that entered the port of Colombo disembarked and enjoyed
sightseeing in Colombo, Kandy and their surroundings. The Tourist Bureau’s primary
responsibility was to service these passengers when they came ashore by greeting them and
providing sight seeing tours. Although accurate records are unavailable, it is estimate that
approximately one hundred thousand to two hundred thousand passengers visited the
country per annum. The Tourist Bureau ceased its operations in 1940 due to the
commencement of World War II. Due to the War there was little tourist activity.
Sri Lanka gained independence in 1948 and the new government decided to revive tourist
activities by setting up the second Tourist Bureau which came to be known as the
Government Tourist Bureau. The Government Tourist Bureau which was set up in 1948
functioned under the Ministry of Commerce for some time and was brought under the
Ministry of Defenses. The functions that were assigned to the revived Tourist Bureau were
much wider than its earlier responsibilities. In addition to providing meeting and greeting
facilities it was entrusted with the functions of undertaking tourist promotional work
overseas and to develop tourist accommodation facilities. An officer designated as Director
was placed in-charge of the Bureau and separate divisions were entrusted with the tasks of
handling the new functions assigned to it.
During the 1950s there was a rapid growth of international tourism and it extended to all
parts of the world. International tourist arrivals increased at an annual average rate of 7.1%
from 23.5 million in 1950 to 561.0 million in 1995 more than a 22 fold increase over a
period of four and a half decades. During this period, the average yearly growth rate has
been as high as 10.6% which however has gradually slowed down to 4.1% in the 90s.
This was largely due to the introduction of jet aircraft for civilian transport after World War
II. Consequently it became necessary for the countries to build new airports with wider and
longer runways and parking bays, larger spaces, and terminal buildings with modern
facilities.
However, when most countries in the world were preparing themselves to accommodate the
new jet aircraft by investing on the expansion of their airports, Sri Lanka unfortunately did
not prepare itself and lost out on the opportunity to get it established as the main gateway
between the West and the East. Singapore instead gained that advantage. Improvements to
country’s airport, Katunayake, were carried out only in 1965 and the new terminal building
was opened in March 1968.
As the development of accommodation facilities is a primary requirement of the promotion of
tourism this task was also entrusted to the Government Tourist Bureau. The Bureau took
advantage of a network of accommodation establishments constructed during the British rule
not particularly for promotion of tourism but for the use of planters, the business community
and government officials whilst on duty. These accommodation establishments included the
residences of some of the colonial governors, which were later converted into hotels. These
included the Galle Face Hotel in Kandy, Grand Oriental Hotel, the Mount Lavinia Hotel,
Queens Hotel and Suisse Hotel in Kandy, Grand Hotel and St. Andrews Hotel in Nuwara
Eliya, Bandarawela Hotel and New Oriental Hotel in Galle. These hotels were renovated and
were used as prime accommodation facilities for foreign visitors. In addition facilities
developed during the British rule, were turned into Tourist Rest-houses. These
accommodation establishments were developed in places of scenic beauty such as Ella,
Belihul Oya, Horton Plains, Pussellawa, Polonnaruwa, Sigiriya, Dambulla, Tissa Wewa,
Nuwara Wewa, Kitulgala, Bentota, and Tissamaharama.
Apart from the accommodation establishments referred to above, no efforts were made to
construct accommodation facilities for foreign for tourists. It should be noted that the private
sector was neither interested nor encouraged to build modern hotels to attract foreign tourists.
It should also be mentioned that no new hotels were built for nearly a century up to 1969.
During that year the Blue Lagoon Hotel at Talahena, Negombo came into operation. Despite
the fact that during the 1950's hotels with international brand names were constructed the
world over, particularly in East Asian countries, neither the government nor the private sector
made any attempt to attract and construct, hotels of international fame in Sri Lanka.
One of the significant developments in the early 1960's was the realization of the need to
develop skilled manpower in the hotel and the catering sector. In 1964, the Prime Minister
Mrs. Sirimavo Bandaranaike set up Sri Lanka’s first Hotel School, which was created to
develop skilled manpower for existing accommodation establishments. Set up at the Colombo
Club at Galle Face Colombo, the Principal and the Lecturing Staff were expatriates and the
three year Degree programme covered all aspects of the Hotel and Catering Services. The
curriculum was subsequently changed to a modular scheme, with basic level course leading
to Intermediate and Higher Levels of Management.
The Private Sector played an important role from the very early days, by providing services
to passengers who arrived in ships and came ashore for day trips and also for foreign visitors
who stayed in the country for a minimum of one night. They were providing a range of
Travel Agency facilities such as meeting on arrival, transfers to hotels, reservation of
accommodation, arranging tours, guiding etc. The four main companies which were
providing these services at the time were, Ceylon Carriers, Ceylon Tours, Quick haws, and
Bobby Arnold a Tours. There was also a limited fleet of Cars (Jetty Hiring Cars) at the
Colombo Harbour to provide transport facilities to foreign visitors. However, for the first
time an organized taxi service was provided to both foreign visitors and local residents by
Quick haws.
It was the function of the Government Tourist Bureau to handle promotion of tourism
overseas. However, local travel agents and some of the hotels also undertook their own
promotional activities to attract the tourists. Consequently, tourists arrived in the form of
individuals and small tour groups on passenger liners as well as by air. The tourists who
arrived by air used either scheduled air services or arrived by special charters.
The Tourist Bureau did not have any tourist promotional offices overseas. Hence, they had to
carry out their promotional activities through Sri Lanka's Missions overseas. The Bureau
produced a variety of promotional material such as tourist literature to highlight the multitude
of tourist attractions and facilities available in Sri Lanka. Travel brochures, travel guides,
folders, posters and films were used as promotional material. Distribution was done by
overseas travel trade and local travel trade through Sri Lanka's Missions overseas and the
Bureau's information offices and outlets. In addition, there was also limited participation in
overseas Travel Fairs.
This is how the tourism has been grown gradually and this report provides the latest changes
in the macro environment (basically the report was prepared according to the PESTLE
analyses) of the tourism and their implications in tourism sector, Sri Lanka.
Political Environment
Tourism is the second largest growing business area after information technology in the
global economy. Many of the economies are successful in marketing their country and
destinations and generating a substantial amount of foreign exchange from tourism Sector.
Even countries with poor level of infrastructure and facilities are able to attract investors to
invest money in their country for tourism promotion.
Tourism marketing is a very complex phenomenon because the number of uncontrollable
factors is more than the number of marketing mix variables. Though the conventional
marketing wisdom says that the larger political factors affect the marketing offer in product
marketing but it is more prominent in the case of tourism. The political upspring, terrorism,
religious fundamentalism, level of crime perception by the foreign tourist affects the
prospects of a destination. Sri Lanka is also facing a down turn in the tourism business due to
the above reasons. The factors of low per capita tourist investment sustained effort for
tourism marketing by the developing countries have become secondary today.
The tourism business is largely governed by the non-marketing factors than pure business
propositions in South Asia. The geo political developments and the kind of social background
have largely affected the perception of the foreign tourists negatively for which the inbound
traffic is in a down turn. The decision to establish or maintain a direct investment position
abroad necessitates addressing the issue of risk that confronts multinational firms. In the
examination of any foreign direct or indirect investment opportunity, the environment
encompasses numerous areas of concern for the investing firm. One of the main functions of
risk analysis is to determine when and how economic and non- economic factors can affect
the foreign investment climate in a particular country, given that risk is a direct outcome of
the political and non-political realities faced by international business. Furthermore, this
activity is even more crucial in the current global marketplace, given the increasingly
complex and uncertain environmental conditions faced by international tourism promoters,
particularly to developing countries.
As illustrated in the above picture in comparison to the world situation as well as the South
Asian Regional situation the share of government expenditure for travel and tourism sector in
Sri Lanka is very high which reflects the government’s view of its promising economic
performance in the years to come.
Opportunities for Tourism Industry
Sri Lanka witnessed a strong upsurge in tourism after the end of the civil war in 2009.
Tourism, which forms 0.6% of the total GDP of the country, was one of the fastest growing
sectors in the Economy, growing by39.8% in 2010 over 2009. The data provides the tourist
arrivals from 2000to 2010, clearly showing the rise in tourist arrivals in 2010 (over the rest of
the decade) with political stability and economic resurgence of the country. With Sri Lanka
being ranked at the first position in the “31 Places to go in 2010” published by the New York
Times, co-hosting the Cricket World Cup from February to April 2011, and the year 2011
being declared as the “Visit Sri Lanka” year by the government, the country witnessed record
levels of tourist arrivals in the early months of2011; a trend that is expected to continue for
the remainder of the year.
The Board of Investments (BOI) in Sri Lanka is offering incentives for development of hotels
and other tourism facilities. According to the BOI website, the government currently offers a
five-year tax holiday on any project with a minimum investment of US$500,000. To
encourage projects in the northern and eastern provinces, the government offers additional
incentives, depending on the nature and scale of the project. It is interesting to note that all
countries forming the top ten source markets for Sri Lanka have been provided the option of a
‘Visa on Arrival’ by the Sri Lankan government. Currently, approximately 80 nationalities
are allowed the option of obtaining a visa on arrival for tourism purposes, which is valid for a
period of 30 days. This illustrates the pro-tourism stance of the government.
The government has set a target of
receiving 2.5 million tourist
arrivals by the year 2016. In order
to achieve this target, several
promotional and developmental
activities have been initiated. One
such promotional initiative is the
declaration of the year 2011 as “Visit
Sri Lanka Year”, where each month
is promoted with a special attraction
and festival. Sri Lanka received the massive opportunity to organize the common wealth
games in Hambantota. The Commonwealth Games will provide an opportunity for the
country to showcase its tourist attractions and build a better infrastructure.
A unique example of the government tourism policy is the introduction of minimum rates
by the government in the capital city of Colombo. In order to help the hotel industry, which
was suffering from very low rates owing to weak demand during the civil war, the
government introduced minimum rates for rooms and food and beverage services according
to the star classification of the hotels. The hotels in Colombo are now required to charge
above or equal to the minimum rates for each type of customer segment, as specified by the
government. Although the policy received substantial resistance from travel agents and tour
operators in the beginning, it helped bring the rates to sustainable levels. Before the
introduction of minimum rates, upscale hotel rooms were being sold in the range of USD 35-
45, as a result of which the hotels were not able to generate sufficient revenues to cover their
expenses. However, the government has announced two consecutive upward revisions in the
minimum rates in a short span of four months, which might affect the demand for hotels in
Colombo, at least in the short term.
Government also involved developing the infrastructure of the country in order to create
opportunities and support the tourism industry. Along with the development of new tourism
destinations, the government is simultaneously placing emphasis on infrastructure
development, with the construction of airports, ports, roads, and power plants.
Airports: The country currently has one major international airport, the Bandaranaike
International Airport in Colombo, with 20 operating airlines that provide 277 incoming
flights per weeks in the high season. The airport currently has the capacity to handle 7 million
passenger movements; it can handle a significant increase in passenger traffic even without
expansion. However, keeping in mind the projected increase in tourist arrivals in the coming
years, an expansion and modernization of the airport is planned. A new passenger terminal
building with segregated departure and arrival areas, new parking aprons, and additional area
with duty free retail are proposed to be added in Phase II of the airport development, which
would increase the airport capacity to 12 million passengers. The work on Phase II is
proposed to start in 2012. A second airport is also being planned in Hambantota, in the south
of Colombo. The construction of the airport is underway, and it is expected to be completed
by 2013. In the first phase, the airport is expected to have a capacity to handle 1 million
passengers.
Ports: Work is also underway for the expansion of the existing Colombo port, under the
Colombo South Port Project. Another large port facility is being developed at Hambantota,
with considerable Chinese investment.
Roads: Several road development and expansion projects such as the Southern Highway
Project, Colombo - Katunayake Expressway, National Highway Sector Project and Road
Sector Assistance Project are underway to improve the road connectivity to various cities.
Power: The government is working towards the goal of being self-sufficient in terms of
power generation. The first phase of the Norochcholai Coal Fired Power Plant was declared
operationalin 2011; work is also underway on the Upper Kotmale power plant, Trincomalee
Coal Fired Power Plant, and the Kerawalapitiya power plant.
Although efforts are underway to
preserve and maintain the existing tourist
attractions, the government is also
promoting the development of new
tourism destinations in Sri Lanka,
especially in the northland east of the
country, to encourage economic growth
in the area. The major tourism projects
that have been announced by the
government with the view of developing
the country as a major tourism destination in South Asia by 2015 are summarized below.
Dedduwa Lake Resort: Proposed development of resorts over an area of 1,800 hectares,
located to the east of Bentota. The project is in its initial planning stages.
Eastern Province Region Development: The government is encouraging the development
of areas in the Eastern province, including Passikuda, Arugam Bay, Trincomalee, Waakarai,
Verugal and Kalkudah, in order to accelerate economic development in the region. Two
notable projects in the region are Kucchaveli and Passikuda.
Kuchchaveli Resort Development: An area of approximately 500 acres has been identified
for tourism development, near the Nilaveli Beach in Trincomalee. According to the SLTDA,
this development is proposed to include more than 3,000 hotel and resort rooms, along with
theme parks and water park facilities. A conceptual zoning plan is currently being prepared
for the area by the SLTDA with the assistance of the Urban Development Authority (UDA).
The government is currently inviting applications from private investors to develop hotels
and resorts in the region.
Passikuda Resort Development: The SLTDA has finalized the conceptual design and
isundertaking the economic impact assessment for a resort development onapproximately 150
acres of land close to the beach
Kalpitiya Integrated Resort Development Project: The Kalpitiya Tourism Development
Program, as envisioned by the government, will include 17 hotels with a total capacity of
5,000 rooms and 10,000beds upon completion, along with an amusement park, golf course,
race course, and a domestic airport at Uchchamunai. The 13-kilometre-long stretch comprises
14 islands, of which nine belong entirely to the government while the rest are owned partly
by the government and partly by private investors.
Currently, the project is in the initial stages with the government inviting bids for leasing out
the islands. Two islands have been leased out to foreign investors – Vellai Islands for a sum
of SLR 3.7 million (approximately USD 34,000) for the first five years to Sun Resort
Investment Lanka Private Limited and the Ippantivu Island for SLR 14 million to Qube
Lanka Leisure Properties Private Limited.
Threats for tourism industry
As political risk introduces additional elements of uncertainty into the rules governing
tourism investment projects, the risk of capital loss is raised for longer- term projects. Hence,
overall productivity in an economy is likely to be lowered via a shift in the marginal
efficiency of investment schedule. Political risk also negatively influences the timing and
pricing of the tourism production process. We have identified that political risk, lack of
investment capital and distance from major tourist- generating markets as barriers to tourism
promotions in Sri Lanka in general. Negative images, lack of foreign exchange for tourism
development, lack of skilled manpower, weak institutional frameworks for tourism planning,
political instability caused by communal violence, civil war conflicts are inhibitors to tourism
development. However, little is known about how international tourism firms perceive
political risks and other general barriers and threats to tourism promotion in Sri Lanka.
Common political factors which affect the tourism industry are revolution, civil war, factional
conflict, ethnic violence, religious turmoil, widespread riots, terrorism, nationwide strikes/
protests/ boycotts, cross- national guerrilla warfare, world public opinion, repatriation
restrictions, leadership struggle, high inflation, bureaucratic politics, border conflicts, high
external debt service ratio and creeping
nationalization.
Last thirty years Sri Lanka also faced the civil
war and it affected the tourism industry of Sri
Lanka. Even the war has come to an end still the
government is facing the issues such as Channel
4 and human rights issues, and these factors
influence the tourism industry in negative manner
and it affects the country’s image as well.
Organizing elections frequently also create threat to the tourism industry because during the
election period in some places to control the situation cur hews are implemented.