Lanka to net USD 1.3 bn. from tourism in 2023
Earnings from Sri Lanka tourism are expected to generate US$ 1.3 billion in 2022 and rise to US$ 3.5 billion in 2023, according to the Sri Lanka Leisure Sector Update report by CT CLSA Holdings Limited (CT CLSA), a leading service provider in Sri Lanka’s capital market. They predict earnings from the leisure sector to jump to US$ 4.6 billion in 2024.
“Overall, we anticipate tourism earnings for 2022 end to record around US$ 900 million whilst expecting tourist arrivals to rise to 1.8 million in 2023 and further increase by 30 per cent to 2.4 million in 2024. Although a notable pick up in foreign tourist arrivals was recorded during 4Q 2021 and 1Q 2022, primarily due to the removal of C-19 travel restrictions and lockdowns (i.e. 1 October 2021), Lanka’s leisure segment operations faced a major setback towards 2Q 2022 due to economic and political crises (protests) as well as shortages of basic necessities due to the economic crisis.
“However, the appointment of the new President (Ranil Wickremesinghe) by Parliament coupled with the reduction of queues for essentials (fuel and LPG) have resulted in a moderate level of macro-economic stability within the country, which in turn attracted more tourists in the months of October and November 2022.
“Considering the near-term arrival growth, a swift recovery in tourism industry operations is expected during the Winter season (from December 2022), as the steep currency depreciation has better positioned Sri Lanka as a low-cost tourist destination.”
“The expected lifting of outbound travel restrictions in China would contribute significantly to tourism demand in Sri Lanka. Therefore, we believe that a steady recovery can be sustained over the course of 2023 end and 2024 end which would support the business segment to remain consistently profitable as seen before 2019.”
With the resurgence in SL’s tourism industry-related operations, annual room occupancy levels rose from under 50 per cent (Prior to 2009) to 70-75 per cent in 2018. However, following the pandemic and other adverse events coupled with socio-economic crises, occupancy levels declined below 20 per cent during 2020 and 2021.
“Considering the near-term revival in tourist arrivals, annual room occupancy levels in Sri Lanka are expected to have increased to 30 per cent plus.”
There are 36 Hotels and Travel Sector companies listed in Colombo Stock Exchange (CSE) and their contribution to the total CSE market capitalization is around 4 per cent.
From an investors’ point of view, the listed Hotel Sector (HT) players have suffered from rising competition, both from new international hotel brands and informal unlisted smaller properties.
“Also, the removal of travel barriers from key source markets and resumption of operations of major airlines to Sri Lanka are expected to aid Lanka’s listed hotel segment ARRs (Average Room Rates) and occupancy levels via the gradual increase in tourist arrivals.”
(SS)