Sri Lankan tourism seen collapsing in '98

[TamilNet, Monday, 20 October 1997, 23:59 GMT]
Sri Lanka's tourism industry which was hoping to recover from a very bad year in 1996, might hit an all time low in 1998, according to financial analysts in Colombo.

The industry which suffered a major setback after the central bank bomb blast in January '96 was expected to slowly recover towards the end of this year. The Sri Lankan government was hoping that the winter season arrivals, mainly from western Europe, would start going up from this November.

Tourist arrivals dropped by twenty five percent in 1996 - i.e. from 403,101 in 1995 to 302,265 in 1996. Consequently the annual earnings also dropped by three billion rupees -from Rs.11,569 million to Rs. 9,195 million (US $ 192.8 million to US $ 152.1 million)

In real terms the drop might be higher, considering the rising inflation and the devaluation of the Sri Lankan rupee.

Hotel occupancy rates also fell significantly in 1996 to an all time low. In 1995 the occupancy rate was 53 percent and came down to 40 percent. Owners of tourist hotels were raising doubts even as early as this year whether occupancy rates could reach the 1994-95 level to compensate for the losses incurred in 1996.

Sources in the industry said that some concern had been expressed in industry circles that the occupancy rate might not pick up and rise to 1995 levels. This was based on the 96-97 winter season bookings in hotels.

This drop was compensated to a minor extent by a slight rise in the local guest nights in hotels due to several sections of the industry introducing attractive cheap packages tailored for upper middle class Sri Lankan purses.

However this hardly compensated for the loss in foreign tourist revenue. Layoffs are expected to sharply increase next year. In 1996 the loss of employment in the tourist sector was 4500, mainly in the Sinhala southern coastal belt.

The Galadari blast is hence expected to effect a steep decline in hotel occupancy rates and tourism revenue. The government has tried to manage the crisis in the industry by offering immediate soft loans to the ruined hotels.

The damage to the industry is also expected to be hard to repair in view of the fact that the 1996 trend has been greatly compounded by the Galadari blast.