SL likely to miss 2016 tourism target by 800m, predicts TKS report
Amidst growing debate on whether or not Sri Lanka should allow the functioning of casinos due to both cultural and religious reasons, a recent report by a local brokerage firm has predicted that casinos could, in fact, help boost tourism arrivals into the country by around 40%, if a minimum of three global giants land in Sri Lanka.
“With the addition of possibly three international casinos, we anticipate 2020 end tourist arrivals to reach a 3.3m. With this development, we expect earnings per tourist to increase from the current US$1,000 to US$ 2,000 per stay (an average of 10 days) with high casino related spending and thus we expect the leisure industry to increase its contribution to 4%-5% of the country’s GDP by 2020 end,” a report by the research team of TKS Securities (Pvt) Ltd on the Sri Lanka Tourism Sector stated.
The report pointed out that to grow the tourism industry and make a significant contribution to the national economy, Sri Lanka has to focus on increasing the average spend per tourist per day in addition to boosting the arrivals.
“A fresh approach has been to develop the casino and gaming industry which could boost annual arrivals by around 40% given three large international operators commence operations though a 4-5 year wait is required to benefit from such initiatives,” the report said.
It added that in the time being, focus could be to concentrate on the share of wallet and market the country as a Value for Money (VFM) destination without falling into either extremes of becoming a cheap or expensive holiday destination.
“Apart from the dominating pleasure tourism, the other opportunities for growth lie in making Sri Lanka a shopping destination, a venue for MICE tourism and a center for casino where we expect a large Indian traffic. Albeit current constraints in capacity, the developments in the pipeline for the next 5-7 years would address these issues in attracting an incremental growth in tourist arrivals of one million by 2018. This would be mainly driven by international operators eyeing Sri Lanka in the entertainment and gaming industry,” the report highlighted.
Focusing on the next 3-4 years, the TKS report said that the government’s ambitious target of attracting 2.5 million is possible by year 2016, though a target arrival of 1.7 million tourists is more realistic given that the challenges faced by the industry could take 2-3 years to overcome.
“Sri Lanka is becoming expensive when compared to its peers given the high energy costs, higher import duties on food, etc. Further, the higher taxation on branded apparel, accessories, cosmetics, electronics, etc. makes the efforts by the authorities to promote Sri Lanka as a shopping destination a, stillborn exercise. Furthermore, there is a void in 2-3 star accommodation in line with expected international standards and pricing. Meanwhile large number of fragmented hotel developments has hampered the effect of economies of scale in the industry and increasing the cost base of the established large private hotel operators in the island. However, with only 15,510 rooms in total (SLTDA statistics 2012) next 2-3 years may see an addition of only around 2,000 rooms. It is noteworthy that by end 2012 there were only 5,000 4-5 star hotel rooms in the island. Therefore, we do not foresee an over-supply in room capacity though an industry shakeout could materialize with the smaller hotels being acquired and/or having to drastically reduce their pricing.”