Sri Lankan tourism model could benefit local industry and exposure

While Maldives niche market continues to draw elite dollars, Sri Lanka’s tourism industry earned more money in 2011 than its island neighbor, statistics suggest. However, the Maldives’ move into the mid-market sector could expand horizons for budget travelers and Maldivians alike.

On January 6, Reuters reported that Sri Lanka’s tourist arrivals hit a record high in 2011 with a 30.8 percent jump to 855, 975; in 2010, the country experienced a 64.8 percent jump. Sri Lanka’s state revenue from tourism also rose by 46.7 percent to US$735.7 million in the first 11 months of last year.

Meanwhile, the Maldives has seen its own tourist arrivals jump to a record high of 1 million in 2011 – triple the country’s population.

The elite level of a Maldives vacation would suggest an elite revenue; use of the airport alone costs the 1 millions tourists approximately US$18 apiece, bringing US$21 million to the State last year. Yet in spite of the higher arrival rate, Maldives Inland Revenue Authority (MIRA) statistics estimate state revenue from tourism in 2011 at US$374 million–half its neighbor’s intake.

MIRA’s statistics are subject to two wild cards–the newly implemented Goods and Services Tax (GST) which left many items undeclared, and the possibility that some yachts aren’t declaring their total profits. Corruption is also a concern across the region, in which many countries have developing government infrastructure. “In the old days, there was no tax or GST,” said Managing Director of Maldives Marketing and PR Corporation (MMPRC) Simon Hawkins. “But now we have an accounts footprint from the GST, which will be available by 2013, so we will have a better idea of how money is being spent and where it’s going,” he added.

In addition, Sri Lankan nationals have more options for travel within their own country than the average Maldivian does among the islands. Even for Maldivians who could afford a resort trip, the un-Islamic stigma of the resorts is socially prohibitive and limits domestic tourism.

While Finance Ministry officials have been unable to clarify the discrepancy, Sri Lankan officials have pointed to the grassroots nature of their own tourism industry.

Listing the variety of vacations available in Sri Lanka, one official noted that the tourism industry is integrated into the local culture, and money paid to guest houses, restaurants and cultural and entertainment services goes directly into the economy.

By contrast, a Maldivian vacation typically happens on an island isolated from local culture and economy, feeding chunks of revenue to the expatriate workers and foreign investors who dominate resort operations.

While both countries compliment each other, Maldives is hard to beat, said Hawkins.

“Most people who go to Sri Lanka are backpackers. The beaches are okay, but people go for the cultural experience,” he said. “The most common package is the honeymooners who want to spend a week in Sri Lanka and a week in the Maldives. The general consensus is its more expensive in the Maldives but its worth it.”

According to State Minister of Tourism Thoyyib Waheed, the Maldives elite niche is a product of high-stakes bidding.

“In the last five years the government has given away many islands to the highest bidder. Because of that process, the winning bidder cannot develop a resort for the mid-market. To earn a return on the investment, the bidder has to aim for the high-end market,” he said.

Pointing to the dwindling arrivals from Europe, Waheed explained that during the global recession tourism operators have more Europeans requesting budget vacations.

“They’re looking for those rooms, especially the UK market, but we don’t have them. We need to provide for that charter market.”

While Sri Lanka may attract more budget backpackers, statistics suggest it is also pulling more of the Maldives’ main markets – flush Europeans and curious, recession-proof Asians.

In 2011, Western European arrivals jumped 22.7 percent, accounting for over ⅓ of tourist arrivals that year. South Asian arrivals jumped 35.3 percent, rivaling their Western European counterparts, government data suggests.

As a result, “the government is targeting annual revenue of $2.75 billion by 2016 from 2.5 million expected visitors attracted by Sri Lanka’s beaches, hills and religious and historic sites, while aiming for $3 billion in foreign direct investment,” Reuters reports.

Looking ahead to 2012, Sri Lanka is expecting a revenue in excess of US$1 billion – a 20 percent increase from 2011.

Deeper in the Indian Ocean, the Maldives appears to be edging into the mid-market sector.

According to State Minister Waheed, land lease rates have dropped from previous levels to encourage more mid-market tourism projects–and benefit the local economy. “The President’s view is, why can’t tourists come and stay in an empty room of a local home? There are so many empty rooms on the islands, everyone shouldn’t come and stay in a resort. In Germany tourists can stay in bed & breakfasts. In Maldives, it doesn’t have to be five-star.”

According to MMPRC, 88 percent of Maldives hotels are four star and above, giving it the highest propensity of hotels in terms of the high-end market anywhere in world. It also enjoys the highest occupancy rate (75 percent) world-wide.

While Maldives will maintain its one island, one resort image, it is aiming for more variety. Two projects in Laamu Atoll Gan are actively moving in that direction.

J Hotels and Resorts is expected to bring two 300-bed hotels and 69 guest houses to the 25 hectare area along with recreation activities, water sports and restaurants. Tourism Minister Dr Maryam Zulfa has said the Ministry is keen to see the Asseyri Project succeed.

“Right now we can’t cater to the mid-market tourists who want to have options when they make a trip to or within the Maldives,” Zulfa explained. “This will give them that opportunity. And the basis of the project will be the natural beauty – the beach, lagoon and reef are absolutely fantastic.”

She added that commercial components of the area would be rented out to different parties, thus involving more local entrepreneurs in the Maldives tourism-based economy.

In February, Reveries Boutique will become the first resort to open on a local island. Offering rooms available for under US$200 and the option of strolling into town for fish curry or mashuni, management aims to “explore the idea that parts of the Maldives are open for people of all types.”

Locals stand to gain in both income and experience.

Allowing guest houses in local islands would bring more jobs and new businesses to those areas while raising the rate of interaction between locals and tourists. Waheed added that the government is taking steps to help tourists navigate the country, rather than remain stationary on resort islands.

The same rule applies to Maldivians.

While Maldivians don’t normally go for vacation in the Maldives, they do spend high amounts abroad, “although vacations are often combined with medical treatments”, Waheed pointed out. High domestic costs also make international travel an attractive alternative–a return flight to Addu can cost more than the airfare to Colombo and back.

Although inter-island transport has improved in recent years, “locals don’t really know where to go or where to stay,” said Waheed. “The steps we are taking now will give locals more opportunities to travel around the Maldives.”

In August 2011, Sri Lanka’s “The Sunday Times” advised the nation to follow the Maldives’ lead.

“Resorts in the Maldives charge rates from US$200-300 upwards to over $1000 per night, and the authorities are now looking to attract the mid-market clientele which is also Sri Lanka’s market – though the two markets have different attractions”, read the article.

While Sri Lanka’s product is less luxe its method appears to bring more to the government, and theoretically the people working in the tourism industry. Moving into the mid-market sector could open opportunities for Maldivians seeking to gain a slice of the nation’s highest-earning industry, as well as offer them more exposure to their own country.


8 thoughts on “Sri Lankan tourism model could benefit local industry and exposure”

  1. "In the last five years the government has given away many islands to the highest bidder. Because of that process, the winning bidder cannot develop a resort for the mid-market. To earn a return on the investment, the bidder has to aim for the high-end market," he said.

    This is factually wrong since the government has changed the lease system from a per-bed to a per-sqm land lease quite a while ago.

  2. Maldives needs to prepare for the mid-market industry and do it fast. Otherwise, the niche up-market sector will gradually dwindle. Sri Lanka can and will capitalise on its growing mid-market and will complement that with its own up-market sector. When that happens, Maldives will have even a smaller share of the pie.

    Just don't claim that the unique tropical paradise nature of the Maldives will not let that happen. Global economic trends will not save the Maldives from this scenario.

    This kind of scenario has played across many industries in many parts of the world. A company or country totally reliant on a niche product may get the rug pulled from under their feet by more aggressive parties. After all, we don't hold a patent on luxury tourism. There are numerous places that can model after us and they will.

  3. we definitely have to move towards mid market beds. i saw an article where sun travel shiyam stated that we are loosing the european tourists. did he realise all of his and the other main resorts who did cate for them have slowly upgraded to a high end resort? only few are there now. but still uk charters are looking for this kinda mid market beds...u cant expect millionaires to fill all these resorts and give us a 100 percent occupancy

  4. The reason why the Chinese are flocking to Maldives despite their aversion to sun tan and disinterest in diving or underwater life is because of the established brand. "Mid-market" is not a good idea. Besides if one can afford $5,000 for tickets, one can spend another 5,000 for accommodation.

    There is a reason why Ferrari does not mass produce cars. There is a reason why Apple "overcharges" for its products.

    In relation to our population, a million tourists is already enough. It's time to concentrate on our services, especially public services to tourists in Male.

    It is also high time to remove some eggs from the tourism basket and develop other industries, besides religion that is.

  5. When Sri Lankans start teaching eskimos about snow, next they can start teaching Maldivains about tourism.

    But Sri Lankans could do just that. They are already teaching lessons in human rights to EU countries.

  6. Sri lanka has been benefiting since long from the Maldives in several areas and has been a complementary market as the Maldives cannot give, so far, culture oriented holidays. The national carrier of Sri Lanka has been doing a huge business with Maldives tourist and local transportation. When a few years ago I created the project of an airline for the Maldives (Wings of Maldives) that would able to fly internationally and long distance ( I even talked with Emirates Airlines President) , I found nothing but obstacles. Naturally Emirates and Sri Lanka are the same group and loosing the big business Maldives give to both was not in their agenda. Maldives needs to learn on how to profit from the proximity of Sri lanka, the other way around it is already happening.

  7. Sri Lanka have a home stay program and the tourism revenues are also shared with local average people. If Maldives are full with 4 -5 stars resorts then I doubt the average citizen will enjoy the fruit of tourism.

    It is totally wrong to think that tourists who visiting Sri Lanka are backpacker - many hotels and resorts are charging US$200 - 350 a night and there were fully booked last month.

    You can look at almost every country around the world that opening up a mid-market sector will not hurt the country tourism sector but rather it will enhance it.


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