India now sends the highest percentage of tourists to Sri Lanka. According to the 2015 figures released by Sri Lanka Tourism Development Authority (SLTDA), the island’s main source markets for tourists – India and China – recorded growth of 30.3% and 67.6% respectively. In fact, China has now overtaken the United Kingdom to become the second largest source market for tourists to Sri Lanka.

Interestingly, this has been a gradual shift in the source markets for the country’s tourism sector, with arrivals from the traditional source markets of Western Europe declining as a percentage of total arrivals and Asian countries increasing their market share, led by China and India.

While the slowdown in some of the key European source markets will continue, increased destination marketing initiatives, improved connectivity and focus on driving demand from emerging markets can be expected to drive future tourism growth.

What makes Sri Lanka so attractive?
Forbes magazine ranked Sri Lanka among the “top ten coolest countries” in the world to be visited in 2015. Growth prospects for the country’s tourism sector remain encouraging, with the government now targeting 2.2 million tourist arrivals in 2016.
There has been an increased focus on targeting key markets through promotional campaigns with a strong presence at major travel marts and exhibitions – the country ranked fourth among 83 countries in 2015 at ITB Berlin, the world’s biggest travel and tourism convention.

While Sri Lanka’s tourist arrivals are comparable to countries such as Myanmar, Vietnam and the Philippines, the country has clear advantages over these countries with a strong and varied tourism offering, fine beach stretches, superior infrastructure and a highly literate workforce, and tourism growth in Sri Lanka can easily outpace that of these countries.

As per a recent JLL report Charting an Upward Momentum – A Review of Sri Lanka’s Hospitality Industry, Sri Lanka will bridge this gap, with the country now moving towards a more focused and defined marketing strategy and with improving connectivity to existing and emerging source markets.

By analysing the nationality composition of Sri Lanka’s neighbouring countries, it is clear that there is tremendous potential for Sri Lanka to target alternative source markets. Sri Lanka’s cultural triangle is of great significance to the Buddhist population, with the country having a repository of some 6,000 Buddhist monasteries.

Approximately 72% of the Buddhist tourists in Asia Pacific reside between China, Japan and Thailand; however, South East Asia is a largely untapped market for Sri Lanka. In addition, the Americas and Australia are new markets for Sri Lanka and marketing efforts must be widened from the traditional European and Indian markets.

Hotel occupancy rises
Supported by the surge in tourist arrivals, occupancy rates at graded hotel establishments increased to 74.3% during 2015, with total guest nights increasing by 38.0% in 2014. While this growth is impressive, this surge in demand was largely beneficial to the informal segment, with small boutique hotels and independent villas posing a strong threat to the formal hotel sector.

In addition, hotel markets in the north-west and south-west regions of the country have over the past years seen strong demand due to their proximity to Colombo, excellent road connectivity and strong existing infrastructure, while markets in the east and north regions of Sri Lanka saw more muted growth, with connectivity to these markets remaining a huge challenge.
Growth in average room rates has been largely contained due to the increased hotel supply additions – the country saw an overall increase in rates of just 3% in the past financial year, while the past four-year period has seen a 7.5% increase in rates.

 Going forward
From 2016, entry of internationally branded hotels will be seen on a large scale, beginning with the south-west coast, followed by Colombo and eventually covering other parts of the country. With the introduction of international hotel brands, it is expected that average rates will increase in line with the new hotel product offering and the changing supply composition.

Indians throng Sri Lanka in 2015 (2) Indians throng Sri Lanka in 2015 (3)