Driven by the country’s growing appeal as a low-cost tourist destination, following the steep depreciation of the rupee, Sri Lanka’s tourism industry is expected to make a swift and steady recovery in this winter season, with tourist arrivals surpassing pre-crisis levels in 2024.
“Considering the near-term arrival growth, a swift recovery in the tourism industry operations is expected during the winter season (from December 2022), as the steep currency depreciation has better positioned Sri Lanka as a low-cost tourist destination, respectively,” CT CLSA Securities said in its latest research report on the country’s tourism industry.
“Also, we believe that a steady recovery can be sustained over the course of 2023E and 2024E, which would support the business segment to remain consistently profitable as seen before 2019,” it added.
Accordingly, the projected tourist arrivals are expected to double to 0.7 million arrivals this year and to 1.8 million arrivals next year while reaching the pre-crisis level of 2.4 million arrivals in 2024.
Correspondingly, the leading stockbroking firm projected the country’s tourism earnings to double to US $ 1.3 billion at the end of this year, with earnings to double to US $ 3.5 billion and US $ 4.6 billion in 2023 and 2024, respectively.
It highlighted that the recent depreciation of the rupee is enabling the country to attract tourists from new source markets along with increased numbers from the existing ones while the country continues to remain attractive as a tourist destination, given the unique and distinctive set of offerings.
With the easing of social unrest and lifting of travel advisories by the key source markets, a moderate improvement in tourist arrivals was witnessed in the last few months. This was further fuelled by the resumption of operations to Sri Lanka by major airlines such as Aeroflot, Azur Air and Air France. Further, CT CLSA expects the anticipated lifting of outbound travel restrictions in China to contribute significantly to tourism demand in the long term. Prior to the pandemic, China was among the top three source markets for Sri Lanka tourism.
According to the Sri Lanka Tourism Development Authority (SLTDA), the tourist arrivals reached 644,186, as of December 7. At the same time, tourism earnings surpassed the US $ 1 billion mark for the first time by the end of November since 2019.
Meanwhile, the annual room occupancy levels are estimated to have reached over 30 percent this year, after falling below 20 percent in the past two years. Despite the adverse events, the average duration of stay of tourists reached 15 days (nights) last year, from 10 days in 2019. Similarly, the daily receipts from individual tourists have grown at 10-year CAGR of 6 percent during the 2011-2021 period to US $ 173 in 2021.
As at end-2021, Sri Lanka had a 47,337 official listed room inventory while US $ 3.9 billion worth of hospitality sector projects secured the SLTDA’s approval.
In 2018, Sri Lanka’s tourist arrivals and earnings peaked to 2.3 million and US $ 4.4 billion, respectively, before the sector was hit by multiple crises.