Issue #91 - 5 Reasons Why Sri Lanka Needs Tourists to Return
Sri Lanka enjoyed a steady tourism start to 2022, then the economy collapsed.
Welcome to Issue 91 of Asia Travel Re:Set…
The Chinese government granting permission for outbound tour group bookings will be a barometer of China’s reintegration with international travel.
And the travel world is awash with speculation.
Various rumours this week suggested package tours will head from China to Bali in September, Thailand in October and Jordan in November.
The guessing game continues.
One country where Chinese tour group travel gained strong momentum in the 2010s is Sri Lanka.
This week, I was invited onto TRT World’s NEXUS programme examining Sri Lanka’s current economic crisis, and the outlook for its vital tourism sector.
Today’s issue takes up these themes.
Thanks for being onboard.
The Sunday Itinerary
- “IN THE NEWS”
- 5 Reasons Why Sri Lanka Needs Tourists to Return
Sri Lanka enjoyed a steady tourism start to 2022, then the economy collapsed
- Assessing Asia Pacific’s Travel Recovery
Checking the regional travel pulse with Liz Ortiguera, CEO of PATA
“IN THE NEWS”
I was recently interviewed by China Daily’s Kelly Yang for this round-up piece about the trajectory of tourism in South East Asia, and the outlook for 2022 and into 2023.
5 Reasons Why Sri Lanka Needs Tourists to Return
Civil War. The Asian Tsunami. Easter 2019 Bombings. Covid-19. Economic Crisis.
The stunning, teardrop-shaped island nation of Sri Lanka endures endless hardships.
Sri Lanka is a destination close to my heart. It is painful to see the relentless suffering of its people - which is worsening daily.
The first time I visited, in December 2001, was a few months after a violent military assault on Colombo’s Bandaranaike Airport during the the Civil War. Although tourists were still visiting, the bombings and gunfight at Sri Lanka’s international gateway had scared away most visitors and weakened the currency.
During my most recent trip - in 2015 to watch the final test series (against India) of Sri Lankan batting legend Kumar Sangakkara - tourism was thriving. Sat in the small Members Stand at Galle Cricket Club, I met four young Chinese women who’d been told not to miss the match by their local guide. They said they didn’t understand cricket but enjoyed the views of Galle Fort and the Indian Ocean from their seats.
This week, TRT World’s NEXUS show analysed the political and economic factors that dragged Sri Lanka into a long-looming crisis. During the debate, I discussed the economic importance of tourism in Sri Lanka, and the prospect of travellers returning.
1) The Pandemic
The 2019 Easter Sunday church and hotel bombings in Sri Lanka, which killed more than 260 people, traumatised the nation.
After a record year for tourism arrivals and spending in 2018, terrorism catalysed mass cancellations of travel bookings. This hurt the economy deeply. Tourism is Sri Lanka’s third largest generator of foreign exchange.
The global pandemic subsequently removed hopes for a tourism revival in 2020.
Sri Lanka was among the first nations in Asia to reopen after Covid-19’s first wave. From January 2021, travellers clearing the pre-and on-arrival PCR test undertook a relaxed quarantine of 14 days at a resort. Visitors were able to use resort facilities and take managed trips to selected “bubble tourist attractions.”
The initiative saved some tourism jobs and attracted 194,495 visitors across 2021. Weak demand for travel from Asian markets meant this was a low return from the 1.91 million visitors in 2019, and - especially - the 2.33 million arrivals in 2018.
Consequently, economic gloom hung ever thicker over Sri Lanka, and public debt reached an eye-watering 119% of GDP in 2021.
2) The Economy
The period between 2019-2021 highlighted the importance of tourism to Sri Lanka’s economy. Generating income from visitors is now more urgent than ever.
Sri Lanka is in an extended State of Emergency. The currency is distressed, its economy in ruins. What little fuel the nation can afford to import will be rationed via a QR code system for the next 12 months. Inflation is rampant, power cuts frequent. Basic foodstuffs and medicine are in short supply. Reforms will be long and painful.
Last week, Sri Lanka defaulted on a USD1 billion sovereign bond. The government secured a 30-day grace period for settlement.
Funding negotiations with the World Bank and IMF are faltering on concerns about economic policy (the IMF cancelled a previous loan facility to Sri Lanka in 2020).
Hence, the urgency of Sri Lanka’s appeal to China for financial assistance, investment and debt renegotiation.
Sri Lanka’s external debt is variously estimated at between USD35-50 billion, of which China holds around 10%.
Tourism is pillar economic sector and a vital revenue generator. Visitor spend hit USD4.36 billion in 2018. That fell to USD3.6 billion in 2019, and USD682 million in 2020.
3) The Travel Sector
Sri Lanka enjoyed a steady start to 2022, attracting 411,377 visitors from January-June.
In March, monthly arrivals surpassed 100,000 for the first time in two years. The top 6 markets so far in 2022 are India, UK, Australia, Germany, Canada and France.
May brought the start of a downturn as the economic crisis and street protests intensified. Visitors slumped 52% from April. June actually saw a marginal upturn with 32,856 visitors compared to 30,207 in May.
Ordinarily, tourism is a year-round industry in Sri Lanka. In 2018, the weakest arrivals month was May (129,466) and the strongest was December (253,169).
The most popular period was December-March. The (deeply unpopular) government will want to restore political stability and a degree of economic order before the peak season starts later this year.
4) The People
Tourists love Sri Lanka, and Sri Lanka warmly welcomes visitors. The rapturous applause given to Australia’s touring cricket team last month emphasised how much Sri Lankans want to remain connected to the outside world.
But Sri Lanka’s visitor economy is disproportionately focused in the capital Colombo and the south coast, which each account for 35% of total hotel rooms on the island.
The tourism industries employed 400,000 people in 2019, up from 320,000 in 2015 - but the economic benefits have not filtered into northern and eastern regions, which account for 1% and 5% of national hotel capacity, respectively.
Economic policy needs to find ways to improve tourism access and create new opportunities for people nationwide.
5) The China Factor
China’s Belt & Road infrastructure programme is often accused of debt financing to prop up Sri Lanka’s government while delivering few benefits for the people. Entire books are written on this subject, and there isn’t enough space here to discuss.
Beyond infrastructure projects, another fast-growing source of Chinese spending arrived on the island during the 2010s: tourism.
In 2014, 128,166 visitors arrived from China. By 2018, that figure doubled to 265,965, and China was Sri Lanka’s third-largest visitor market (behind India and the UK).
The 2019 Easter bombings scared tour operators away, resulting in 167,863 Chinese visitors that year. In January 2020, Covid-19 saw China’s government shut down outbound charter tourism. It has yet to release the valve.
There are various reasons Sri Lanka’s government is approaching China for emergency support as its economy collapses. Reactivating tourism, it hopes, will be one of those.
Assessing Asia Pacific’s Travel Recovery Outlook
On this week’s The South East Asia Travel Show, we approach the travel recovery from a pan-Asia Pacific perspective with Liz Ortiguera, CEO of the Pacific Asia Travel Association (PATA). In a broad-ranging interview, we discuss PATA’s visitor forecasts through 2024, and the return of in-person events. Plus, we address key issues such as diversity and inclusion, climate change and de-plasticising the planet.
Listen to Assessing Asia Pacific’s Travel Recovery, with Liz Ortiguera, here:
🎧 Website 🎧 Spotify 🎧 Apple Podcasts
Or search for The South East Asia Travel Show on any podcast platform.
And, that’s a wrap for Issue 91.
The newsletter (which is published every 2 weeks) will return on 14 August.
Until then, find me on Twitter, LinkedIn, the Asia Travel Re:Set website and The South East Asia Travel Show.
Happy travels,
Gary