Overview
Tourism has traditionally been the third largest foreign exchange earner in the country and an important income generator for Sri Lanka. However, the effects of the COVID-19 pandemic and ongoing economic crisis crippled the sector in 2020 onward. Sri Lanka’s tourism receipts peaked in 2018 at $5.61 billion on a recorded 2.5 million tourist arrivals. In contrast, approximately 194,500 tourists arrived in 2021, a 92 percent reduction, but the government’s 2022 estimates are more promising at 496,400 arrivals as of August. There is optimism that the sector can emerge strong in 2022-2023 subject to political stability, economic recovery, and no further major pandemic outbreaks. It is estimated that the sector earned around $633 million3.5 billion in 2021. Sri Lanka offers a mix of attractions including beaches, wildlife parks, rainforests, tea plantations, ancient ruins, Buddhist cultural sites, and festivals. Sri Lanka ranked 74th out of 141 countries in the Travel & Tourism Competitiveness Report 2021 of the World Economic Forum. Investment in the tourism sector was estimated at $134 million in 2021, . The government wishes to attract investment to the sector and the Sri Lanka Tourism Development Authority (SLTDA) is seeking foreign investors in local hotels to reduce the approximately $1.3 billion in outstanding debt owed by the hotel sector. Several international and regional hotel chains are building or operating hotels in Sri Lanka, including Hilton, Marriott, Shangri-La, Six Senses, and Movenpick. Shangri-La and Movenpick commenced operations in 2017, while Hilton took over management of DoubleTree by Hilton Weerawila Rajawarna Resort in 2020. Others such as Sheraton and ITC Hotels are in the process of completing projects. A few local conglomerates control most of the luxury resort hotels in Sri Lanka. In addition, the boutique hotel concept is rapidly catching on. During Sri Lanka’s lengthy civil war (which ended in 2009), international hotel companies were absent from the country. Hilton had been the only global player in Sri Lanka, managing a luxury hotel (which is government owned) and an apartment complex in Colombo for many years.
Tourism offers both investment and trade opportunities. The government currently offers beach land and islets for tourism development. Eastern Sri Lanka is an area that offers significant potential due to the quality of beaches in this area. Locations such as Pasekudah and Arugam Bay are premier destinations, especially for surfing enthusiasts. The country has several parks and forests that are home to a multitude of wildlife and unique flora species and is considered a biodiversity hotspot by several international environmental groups. A prohibition on sales of land to foreigners may complicate development of new properties. Eco-friendly resorts are also gaining popularity with many developers opting to establish “green” hotels to attract a growing ecotourism market segment. Increased tourism drove significant growth in the restaurant industry until the global pandemic.
Leading Sub-Sectors
- Casual Dining Restaurants
- Hotel Equipment
- Hotel Franchise
Opportunities
The tourism sector offers considerable long-term opportunities for U.S. suppliers in a range of areas such as infrastructure, technology and consultancy services, hotel equipment, furniture, water purification systems, electrical systems, energy efficient equipment, restaurant and kitchen equipment, food and beverage, bathroom accessories, spa and fitness equipment, and water sports equipment.
The increased expansion of the hotel sector, upgrading of current properties, and construction of international hotel chains requiring high-end inputs and technology, provide significant prospects for U.S. companies.
The number of casual dining, fine dining, and quick service restaurant outlets have significantly increased in Sri Lanka during recent years. International and domestic restaurants are expanding their operations. Various new-to-market restaurant companies continue to explore opportunities and make investments. U.S. suppliers with an interest in Sri Lanka have increasing options to introduce U.S. products to the growing culinary and hospitality sectors.
Resources
The Hotels Association of Sri Lanka