Cablegate: The Sri Lankan Tourism Sector: A Bright Future

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UNCLAS SECTION 01 OF 02 COLOMBO 000969

SENSITIVE
SIPDIS

DEPARTMENT FOR SCA/INSB

E.O. 12958: N/A
TAGS: CE ECON EIND ETRD
SUBJECT: THE SRI LANKAN TOURISM SECTOR: A BRIGHT FUTURE
WITH CHALLENGES

1. (U) SUMMARY: With the end of Sri Lanka's long running
war with the Liberation Tigers of Tamil Eelam (LTTE) in May
2009, the Sri Lankan tourism industry has every reason to be
quite
optimistic. Tourist travel is at its highest levels since
2004. The country boasts beautiful beaches, seven UNESCO
World Heritage Sites, 14 wild-life parks, and diverse flora
and fauna. Challenges do remain, with red-tape, stressed or
non-existent
infrastructure in some areas, and brain drain all daunting
impediments to hotel and tourism development.

THE STATE OF TOURISM

2. (U) Sri Lanka had a strong tourism industry prior to the
beginning of the
conflict in 1983, and now they hope to make tourism a major
employer and
source of foreign exchange revenue. Since the LTTE's defeat
in May 2009,
and with the relaxation of some travel advisories for Sri
Lanka, the
country has seen a significant increase in tourism. Overall,
travel to
Sri Lanka has seen a 34.3% increase year on year. European
travelers comprise slightly more than 50% of the total
number of tourists visiting the country. India accounts
for about 20% of tourist arrivals, while the Middle East
and East Asia comprise another 25%. The remaining 5% of
visitors are generally from North America and Africa. The
Sri Lankan Hotel Association, which tracks arrivals by
nationality, recently told Econoff that tourists from the
United States make up a very small percentage of Sri
Lankan tourism market. Visitors from Russia are also a
growing niche, with increases in visitors each year since
2006. Sri Lanka currently has 14,800 registered hotel
rooms nationwide and aims to have more than 50,000
registered hotel rooms by 2016. The Government of Sri Lanka
(GSL) has set a target of 2.5 million visitors per year by
2016, with an
average stay of 8.5 nights per visitor.

PROSPECTS IN THE EAST

3. (SBU) The Eastern Province of Sri Lanka represents a
significant untapped region for tourism development. Over
the next 2-3 years, the Sri Lankan Ministry of Tourism
plans to focus on significant expansion in the mid-range
and high end hotel market along the eastern coast. The
GSL will need to invest heavily in infrastructure (roads,
water, sewage) if hotel and tourist expansion is to be
adequately supported. The GSL plans to also invest heavily
in extensive refurbishment of regional airports, to
facilitate
ease of tourist movement from western Sri Lanka to southern
and eastern destinations. In 2010, the GSL hopes to lure
Thailand-basedMinor Group, which owns/operates several
Four Seasons Hotels and Resorts in Southeast Asia, to the
country with an ultimate aim of obtaining long-term luxury
investment in the Eastern Province.

THE WEST AND SOUTH

4. (U) Despite stressed infrastructure and lack of an
existing plan for expansion, the Western and Southern
Provinces also factor into tourism development plans.
Plans are underway by Jetwing Hotel's to build several high
end hotels along the western and southern coasts over the
next 3-5 years. Other hoteliers such as Aiken Spense and
John Keells have existing plans to construct high end hotel
properties over the next several years. Current expansion
plans have the support of both the Sri Lankan Tourism
Development Authority and the Ministry of Tourism. Both
entities see a dearth of high-end properties in the Western
and Southern Provinces and want to see an increase in room
rates through a higher class of hotel.

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CHALLENGES REMAIN TO BUILD A WORLD CLASS INDUSTRY

5. (SBU) While the GSL desires to transition the country
into a tourist hub which rivals that of Thailand and
Malaysia, significant hurdles must be overcome. In order
to secure an international class of hotelier, the GSL will
need to develop a 'fast track' procedure to deal with
development approvals and existing bureaucracy. According
to the Tourist Hotels Association, efforts to lure foreign
hotel operators to Sri Lanka will stall if approvals are
not fast-tracked to keep up with the speed of business.
Stressed infrastructure in some areas and lack of
infrastructure in others is another significant
impediment. Water, sewage, roads, and in some cases
electricity are areas which will need to be addressed in
the west, south, and east if the GSL hopes to support
significant expansion of its tourism sector. Brain drain
is yet another issue. For nearly 30 years, the best and
brightest of the indigenous hotel industry moved on to the
Middle East or Southeast Asia in search of work. The GSL
would like to tap into this resource (more than 206,000 Sri
Lankans work in the hotel sector outside the country);
however, no plan is in place to lure this pool of talent
back to the country.

6. (SBU) Comment: Sri Lankans often characterize the
country as a five star island with three star hotels.
While the GSL has ambitious plans to become a tourist hub,
unless there is careful planning to avoid the mistakes made
with past hotel and tourism expansion along the west coast,
the country will struggle to maintain the momentum of its
post-war tourism boom. The GSL will need to address the
issue of infrastructure improvement along with hotel
expansion. Should infrastructure improvement not
materialize,
foreign interest and investment in the hotel and tourism
sector
may fail to materialize as well. Sri Lanka, 'the small
miracle,'
has tremendous potential if it goes about expansion in a
methodical and judicious manner. The GSL has precious
little time to achieve demonstrable results, with its self
declared 'Visit Sri Lanka 2011' just around the corner.
End comment.

BUTENIS

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