Hard Road Ahead for Lankan Tourism after Blasts and Riots
Hard Road Ahead for Lankan Tourism after Blasts and Riots
COLOMBO: The Sri Lankan tourism industry is on the hard road to recovery from the devastation caused by two very violent episodes in April and May and the political crisis which these triggered.
The April 21 multiple suicide blasts, allegedly carried out by local affiliates of the Islamic State (IS), had killed 250 persons including 47 foreigners. In mid-May, there were anti-Muslim riots not far from the tourist hub and capital city of Colombo.
Both episodes led to political turmoil which, in mid-June, appears to be building up rather than subsiding.
All these have put a question mark over the speedy recovery of the tourism industry which is Sri Lanka’s second biggest foreign exchange earner after workers’ remittances from the Middle East.
While the government is sanguine about an early revival,trade has a dim view of the immediate prospects. Trade says that the funds and concessions offered to lift the crippled industry do not match the need, and that the political fallout of the blasts do not help change the perception abroad that Sri Lanka is still unsafe.
Government says that the industry is likely to recover faster than expected thanks to the relaxation of travel advisories by the developed nations which account for most of the high spending tourists, says Kishu Gomes, Chairman of the Sri Lanka Tourism Development Authority (SLTDA).
“The relaxation of travel advisories by the developed countries will help the sector recover in less than the world average of 13 months,” Gomes told The Citizen.
The SLTDA chairman admitted that tourist arrivals had come down by 70% in May (37,000) as compared to the same month in 2018. Arrivals from major contributor, India, which were 34,167 in May 2018, had plummeted to 9,288 this May.
“We expect the fall to be 50% in June as compared to June 2018, given the steady improvement in the situation in the country,” he said.
The tourism industry accounted for 4.9 percent of Sri Lanka’s GDP in 2018. That year, 2.3 million tourists had visited the island, bringing in about US$ 4.4 billion. That was an increase of nearly 12% from the earnings in 2017.
Before the blasts, the government’s aim was to increase the annual arrivals to 2.5 million in 2019 from 2.3 million in 2018, and increase earnings to from US$ 4.4 billion to US$ 5 billion.
But reaching the target this year appears to be difficult given the impact of the blasts.
In the government’s view, the aid package offered to the devastated industry is adequate, “though industry will also want more,” as Gomes put it.
The initial estimate of the loss to the tourism industry was US$ 1.5 billion (as stated by Finance Minister Mangala Samaraweera). But recently, the Economic Reforms Minister Dr.Harsha de Silva put it at Rs.62 billion or about US$ 351 million. It is reported that the State banks have got more than 1000 applications of loans from the tourist industry to the tune of Rs.8 billion.
The brunt of the terror strikes was taken by the biggest luxury hotels – Cinnamon Grand, Shangri-La and Kingsbury. It is the big hotels which rake in the moolah for the country.
“And it has been government’s policy to develop the high earning sector to the maximum as this sector earns the maximum for the country, though the commitment to encourage the budget and homestay sectors stays,” Gomes pointed out.
According to Gomes, Sri Lanka has 90,000 rooms out of which 40,000 are in the small, budget and homestay sector. It is estimated that about 500,000 people are connected to tourism in some way or the other, as shop keepers, owners of restaurants, and householders who offer home stays and transporters. Taking their families into account, the total number of dependents is one million in a total Lankan population of 21 million.
According to the World Bank, the blasts have brought down the Lankan GDP growth rate from 4.5% to 3.5 %.
The government has given a one-year moratorium on capital loans; VAT had been reduced from 15% to 7%; and soft loans have been made available from the Enterprise Lanka Fund, Gomes pointed out.
The government has set aside Rs.1.5 billion for the small hotel and informal sector, under which come restaurants, shops selling curios and home stay facilities. These could get loans up to Rs.5 lakhs at zero percent interest to be repaid in three years and with a facility for an year’s extension. But these loans can be taken only from the Regional Development Banks.
“The industry itself is pulling itself by the bootstraps. We are confident about a quick recovery because of the built-in strengths of the Lankan hospitality industry. We have renowned homegrown hotel companies like Cinnamon Grand, Jetwing, Amaya and Dilmah, which have heightened their marketing overseas,” Gomes pointed out.
Cinnamon Grand, Kingsbury and Shangri-La have re-opened.
“The small scale sector, as a whole, had not been doing well. But it is encouraging to note that there is a surge in applications for authorized homestay facilities,” Gomes pointed out.
The SLTDA chairman drew attention to the fact that the tourism industry has not cancelled any of its programs lined up for this year.
"Sri Lanka will not be beaten by terror. We will take this opportunity to demonstrate to the global media, tour operators, airlines and the world that Sri Lanka is committed to security," Gomes said.
It is pointed out that even established tourist destinations have taken more than 13 months to recover. Indonesia took one year to recover from the Bali bombings in 2002. Kenya took two years perhaps because it faced two major incidents in almost two consecutive years in 2013 and 2015. Turkey had taken approximately a year and a half.
“Therefore it will redound to our credit if Lanka recovers within 13 months,” Gomes said.
The tourism industry, as such, has a dimmer view. It raises the issue of the adequacy of the aid package and of security, or more precisely, “perceptions of security” in the minds of the foreign traveler, especially those wanting to come on a holiday.
The Tourist Hotel Association of Sri Lanka (THASL) President Sanath Ukwatte, has asked the government to underwrite the working capital loans amounting to Rs.12 billion for a year, to meet monthly salaries, employees’ benefits, and utilities.
THASL complains banks have been reluctant to lend to the small scale sector.
Ukwatte quotes Central Bank of Sri Lanka figures to show that it is crucial to bring tourism back to health as it is the second highest foreign exchange earner after inward remittances.
The President of the Colombo City Tourist Hotel Association President M.Shanthikumar has pointed out that in the lean season (ie: the present season), hotels normally have only 40 to 50% occupancy. But presently, due to the blasts, it is 5 to 10%. Saliya Dayananda of the Cultural Triangle Hoteliers’ Association said that the average earnings had come down from Rs.250,000 per day to Rs.135, 000 for three days.
Hashim Mohammad, an inter-city van driver said that he had lost 80% of his custom as he had specialized as a tourist driver.
Chandra Mohotti, Senior Vice President of Galle Face Hotels said that the immediate announcement of the involvement of Islamic State (ISIS) in the blasts had heightened the threat perception globally. “Tourists press the panic button when the ISIS mentioned,” he commented.
According to Mohotti, more than the actual threat, the popular perception of the threat is more important in determining tourists’ behavior.
The anti-Muslim riots after the blasts, and the political instability that intensified as a result of blasts, also created a feeling of insecurity in the minds of tour operators, who could come up alternative destinations, the experience hotelier pointed out.
Arun Tambimuttu, who owns resorts in Batticaloa, said security is the main concern.
“For us, tourism is a question of livelihood. But for the tourist, it is a question of life itself. In the absence of government guarantees, hotels and resorts will themselves have to put in place security arrangements. We in Batticalao are working on this. If all goes well, security will be provided from the time of arrival to departure,” Tambimuttu said.
M.Shanthikumar said that bringing down room rates will not bring in custom unless security is guaranteed.
Adding another dimension, Chandra Mohotti said that up to date facilities at the airport and domestic air services should be provided. And the industry should come up with innovative products such as circuits for special interest groups.
“Destinations don’t remain the same. They keep changing and can be created too,” the veteran hotelier said.