Stock Broking firm Capital Alliance suggests that the 2.6 million tourist arrivals target isn’t a pipedream but achievable though it will be only by 2020, which is 4 years later than the Government and industry set timeline of 2016.
“The Government projects 2.5m arrivals in 2016, but the industry will lack the rooms and trained staff to hit that goal,” Capital Alliance said in a research report released yesterday.
On its part the broking firm said a 15%+ arrivals on a Compound Annual Growth Rate (CAGR) basis through 2020 would result in 2.6 million visitors.
“This is possible but not easy,” it added. Even the 2.6 million forecast by 2020 is only possible if the country can address shortage of rooms and workers.
“Sri Lanka’s many attractions suggest it can generate a 15%+ arrivals Cagr, thereby driving arrivals from c.650k to 2.6m from 2011 -2020 similar to Cambodia’s arrivals growth from 2001 -2010,” Capital Alliance said in its report titled “20/20 Vision: Coming into Focus.”
It said shortages in graded rooms and qualified workers are two of the greatest challenges the industry will have to overcome. The report also said India may become the single most important source market and China remains a dark horse with enormous potential, while arrivals from Western Europe may taper off from current high levels.With regard to investment opportunities, Capital Alliance report said 4-5 star hotels on the south coast are more attractively positioned than 3 stars and below.
Central Bank 2010 Annual Report refers to the target of 2.5 million by 2016 whilst Dr. P.B. Jayasundera, Secretary to Ministry of Economic Development under which tourism comes, recently spoke of the same during his address at the Tourist Hotels Association Annual General Meeting.
He said Sri Lanka and the industry must aspire to a fivefold increase in tourist arrivals to 2.5 million in 2016 and eightfold increase from the present level to 4 million by 2020.
He also said the Government’s vision was to transform the present US$ 600 million tourism industry to $ 3 billion industry by 2016 and US$ 8 billion by 2020. Furthermore it is envisaged to raise the present accommodation capacity from 22,000 rooms to 40,000 by 2016 and to 75,000 by 2020.
With regard to hotel rooms, the report said that for a 15% CAGR in arrivals, over 9,000 additional graded rooms would be needed above the current pipeline of 7,000. With most new room applications currently being processed, construction is unlikely to have started for most of the pipeline, the report added.
With regard to human resources, the need is over 9,000 direct employees per annum for the hotel sector versus the current 1,500 yearly output of industry graduates.
“On the other hand, airport capacity constraints are not likely to be binding given the option to add larger capacity planes to Colombo routes, plus the pending opening of the Hambantota International Airport in 2012,” Capital Alliance said.
Though pushing the 2.6 million tourist target to 2020, the research report said at the current rate, total tourist arrivals may reach a record 900,000 by end 2011. As per Sri Lanka Tourism data, in the first seven months of this year, arrivals have grown by 36% to 465,324. In the first half arrivals grew by 47%.
The report said inbound arrivals are likely to remain strong, and India may become the single most important tourist source market. “India arrivals may grow 6 times by 2020 to 750,000 provided overall costs remain competitive and more direct daytime flights are added,” Capital Alliances said adding India arrivals in 2011 may grow 47% to 187,000, representing just 1.4% of a 13 million outbound market. The report also revealed that 17 times more Indian visitors trip to Goa than to Sri Lanka.
“A 2.4% India outbound tourist share should be easily achievable given a 10-25% cost advantage over Goa if 1-3 stars are priced more competitively and more direct daytime flights are added from India’s major cities to Sri Lanka,” Capital Alliance Research said.
It identified China has the potential to become a major source market but may require Mandarin language tour guiding, bigger tour buses and larger-scale shopping options
“The introduction of large-scale casino gambling would likely provide a substantial boost to India and China tourists, but was not considered in this report,” Capital Alliance report said.
Noting that Sri Lanka has the natural attractions to rival better-known and well-developed destinations such as Bali, the report said South Asia receives fewer tourists from China compared to Phuket and Bali.
“Typically two-thirds of the 57 million China outbound market head to Hong Kong and Macau, illustrating a significant preference for gambling and shopping,” the report pointed out.
It also said the appeal to China tourists of 4-5 star beach resorts in the Maldives illustrates the potential opportunity for Sri Lanka.
Another facet revealed in the report is that at a CAGR of 11% (2005-09), tourist arrivals to Bali from the UK, Germany and France appeared unaffected by the Global Financial Crisis of 2008-2009.
With regard to Sri Lanka’s traditionally strong Western Europe market, the report said it represented 42% of incremental arrivals in 2010. Western Europe arrivals may continue to grow the report predicted but at a more subdued rate.
The report also said improved accessibility via new highways and conversion of military to domestic airports may make high-end hotels in the Deep South and the East of Sri Lanka viable alternatives to the Galle area. “Increased domestic and international accessibility may make higher-end hotels more viable, particularly in the south and the east,” it added.
Capital Alliance also noted that the Government’s objective is to move tourism up market and has implemented measures such as minimum room rates for city hotels in furtherance of the same. “Sri Lanka’s high-end is still in its infancy, but Thailand and Bali have shown what is feasible,” the report added.