The review period witnessed an escalating violence between the Sri Lankan army and Liberation Tigers of Tamil Eelaam (LTTE) in the north and eastern region of the country. This drove away visitors in the second year running as inflated security concerns overwhelmed plans of tourists wanting to visit Sri Lanka. Traditionally high tourist inbound countries such as the UK, the US and Canada declined at a sharp rate in 2008. Consistent negative travel advisories regarding visiting Sri Lanka did not help the situation.

Though the tourist inflow from India also declined sharply in 2008, the country remained the biggest tourist exporter to Sri Lanka due to its proximity and historical attachment with the country. The continued effort of Sri Lanka tourism board to promote its tourism in India helped the negative growth of flow of tourists from India to remain in manageable proportions. Increasingly the reputed travel operators are customising tourism offerings to Indian tourists to include the sites of mythological significance located in Sri Lanka.

Propelled by the commitment made to international community and led by the necessities of changing tourism scenario which is witnessing a slump in demand for its tourist services, Sri Lanka showed increasing signs of adopting eco tourism. Review period witnessed rise of eco lodges and seminars on best practices for eco conscious tourism. The initiatives were led by the Sri Lankan government in association with bodies such as Sri Lanka tourism board and Sri Lanka Eco Tourism Foundation (SLEF).

As the number of tourists from western countries declined, Sri Lanka increasingly inclined towards its neighbouring countries such as India, Pakistan and China for the growth of tourist inflow. It effectively promoted mythological tourism in India, made further agreements with China and signed pacts with Pakistan to increase tourist flows in each others’ countries. The closeness of these countries made sense for Sri Lanka to promote tourism to its neighbours, particularly those who are getting richer due to their economic development.

Sri Lankan tourism industry had a distinct advantage over its neighbours in terms of cost of tourism services. The cost of tourism related services such as travel accommodation, transportation and car rental remained one of the cheapest in the region due to depressed demand for tourism activities in the country. Provided security is not an issue, the lower cost will attract tourists from price conscious countries such as India and Pakistan.

 

The global economic crisis weighed on tourist arrivals to Sri Lanka in the first five months of 2009, which all showed double-digit declines year-on-year (y-o-y). However, there have since been several strong months of data, with August arrival figures of 41,207 actually marking a 34.3% increase y-o-y. The most recent data (for January-September 2009) show arrivals of 309,142, down by 2.6% y-o-y. The reason for the dramatic improvement in Sri Lanka’s tourism data is the May 2009 declaration of victory by Sri Lankan President Mahinda Rajapaksa.over the rebel Liberation Tigers of Tamil Eelam (LTTE or the Tamil Tigers).

 

Against this backdrop of slowly recovering demand, we believe there is a chance that 2009 tourist arrivals could well be largely unchanged y-o-y, or maybe even slightly higher. This would be an impressive result when compared with other regional tourism destinations. The stage would then be set for moderate-tostrong recovery over the rest of our forecast period to 2014.

The outlook for Sri Lanka’s tourism industry has been transformed by the military victory of government forces over rebel Tamil Tiger forces in May 2009. With much of the Tamil leadership having been killed, there is reason for cautious optimism that the social situation in Sri Lanka can improve rapidly. Sri Lankan Airlines chair Nishantha Wickremasinghe said he hopes the company can take advantage of the ‘peace dividend’ by increasing the number of destinations the airline serves. BMI is basing its tourism sector forecasts on continued peace across our forecast period through to 2014.