Connect with us


A cut tree, a dead elephant, is a lost tourism dollar in the future



by Michel Nugawela and Pesala Karunaratna

(Continued From Last Week)

To increase occupancy rates and avoid economic losses during off-peak seasons, mass tourism suppliers also rely heavily on all-inclusive packages. By inviting tourists to leave their wallets at home and remain within the hotel (typically, the pool, bar and restaurant), they inhibit the dispersion of economic benefits to wider communities or the economically disadvantaged.

For example, mass tourists venturing out of their segregated enclaves to ‘do’ Sigiriya, Polonnaruwa, or Anuradhapura shuttle point-to-point between iconic sites and resorts in the round tour circuit. Individuals and businesses (such as the restaurants, shops, and local transportation services in the vicinity) that aren’t fortunate enough to be part of a package that grants access to this self-contained world receive zero to limited economic benefits. (Studies of all-inclusive packages internationally show that only about 10% of tourism spending directly benefits the local economy.)

Most – if not all – mass tourism suppliers in Sri Lanka also acquire the majority of their business through foreign operators, whose tactics of choice include pitting hotels and resorts against each other to secure the cheapest room rates. It’s much the same with destinations. For example, Lonely Planet’s ‘Best In Travel’ listing ranks its top destinations, regions and cities to visit each year. Sri Lanka took the top spot in 2019 – much to the sectors elation – and yet bear in mind that no single destination is featured in any two consecutive years. Countries are elevated one year, only to be tactically removed in the next. Foreign tour operators also promote destinations to prospective customers – once again, a different destination (or list of destinations) each year – ensuring bargaining power against suppliers/destinations remain stacked in their favour (and with it a high dependency on their global brands, markets, and channels).

Even as the tourism sector languishes through the Covid crisis – which, if anything, should motivate a meaningful search to curtail its own unhealthy overreliance on mass tourism markets – there is still no specific strategy or objective to address the non-differentiation of Sri Lanka’s tourism product. This is not entirely surprising; when footfall is high, the mass tourism sector replicates more of the same; when demand is low, it discounts prices instead of differentiating the product. In a crisis, it simply has no response to the need for better tourists, and a better distribution of tourist by season or location, for the destination.


The untapped potential of alternate tourism

The global tourism sector is expected to return to pre-pandemic tourism levels by 2024 – a slow and lengthy recovery period that has significantly impacted the mass tourism segment. Many consumers have lost wages or jobs, and since travelling will take a larger share of their disposable income, it is extremely unlikely that a rebound in visitor flows will equate with a recovery in visitor spending (expect more cheap all-inclusive packages to lure more cheap tourists). According to international research, the travel behaviour and preferences of the mass tourist will also look different in the future as they take fewer, more memorable trips, with a greater demand for experiences in the outdoors away from crowds.

Meanwhile, high value travellers – the segment Sri Lanka has consistently overlooked in its drive for ‘more’ (volume over value/quantity over quality) – will continue to travel in significant numbers as global mobility returns in 2021. Yet here too, their motivations and behaviours converge on the need for unique and meaningful experiences in nature and wildlife – again, where Sri Lanka has failed to develop and differentiate its product.

Many countries have used the pause this year to rethink their business as usual model and search for answers to important questions such as: will the post-Covid tourists be the kind of visitor we want? Will they improve seasonal spend, stay longer, and disperse economic benefits further into local communities? New Zealand, for example, is ‘reimagining tourism’, with key stakeholders arguing for a value over volume approach to managing tourism numbers while they await an industry recovery. Tourism is New Zealand’s biggest export industry, contributing 20.4% of total exports or 5.8 % of its GDP in 2019.

Meanwhile, Tourism Australia has identified a market opportunity of 80m high value travellers globally, of whom 32mn consider Australia as a destination to visit in the next four years. ‘Nature & Wildlife’ is the #1 driver of destination choice for this demographic from their 14 key inbound markets. This bears repeating: 72% Chinese, 73% Indians, 63% Indonesians, 76% Japanese, 66% Singaporeans, 67% South Koreans, 79% British, 63% US, 74% Germans, 68% Hong Kongers, 65% Malaysians, and 73% New Zealanders from the high value traveller segment visit Australia to experience its nature and wildlife assets.

Malaysia acknowledged the natural wealth of its country to drive revenue even earlier. In 1996, it published its National Ecotourism Plan to attract more visitors and increase visitor spend by developing competitiveness in its nature and wildlife assets. In 2002, nature and wildlife tourism established 10% of the country’s tourism sector; by 2019, this had tripled to 30.4%.


$11m is a wild elephant’s lifelong intrinsic value to tourism

We can no longer be blind to what we are most blessed with. Instead of playing to our strengths, we continue to run a race in a global tourism market where the ten major destinations attract 70% of the worldwide tourism market. It is now time to match our best assets – nature and wildlife – with the best tourists – the high value traveller. And this can be done. Our natural landscapes and attractions boast of the richest species concentration in Asia and one of the highest rates of biological endemism in the world, for both plants and animals.

Consider the wild elephant population: 70% roam outside the protected areas, offering the best viewing opportunities in Asia and representing a huge revenue stream for the tourism sector. We determine the tourism value of a single elephant, alive, to contribute $0.16mn per year. Since elephants live for up to 70 years, the total revenue that a single elephant can generate is immense – $11mn over its lifetime to our hotels, resorts, airlines, travel companies, and – potentially – local economies.

We say potentially, because the value per elephant is significantly diminished under the mass tourism model, where the asset is perceived as an irrelevant pest rather than an important generator of profits. (Conversely, these assets are precisely what high value travellers – who outspend mass tourists by 3-4 times – value most). As global demand rises, therefore, Sri Lanka’s supply diminishes: 350 elephants perished in 2019 – an estimated commercial loss of $3.9bn to the sector, which is the value the animals would have distributed among the recipients in the tourism sector had they lived their lives fully.

Deforestation also dismantles the very assets – animal or plant, elephant or forest – that are required for a product differentiation strategy. When ancient migratory corridors are disrupted, elephants will die. When forests are uprooted, we will no longer be ‘green’ – a fundamental driver of destination choice for high value travellers. When the damage is done – when our natural assets are stripped away – Sri Lanka will no longer be able to position itself as anything other than a cheap destination for sun-sea-sand tourism. The entry of international budget hotel chains over the past half-decade point to our destination relevance in the future.

Amid the increase in deforestation, the silence from the mass tourism sector is deafening, revealing, firstly, just how disconnected its suppliers are from the wider ecology within which they operate, and secondly, the poverty of their vision for the sector and country.

It should come as no surprise, then, that disruption to the mass tourism model has come from the market’s edges rather than any single operator within the mass tourism sector. Dilmah has brought its compelling vision and business strategy to compete against commoditization in the tea industry to the tourism sector. Its luxury offering can generate eight times more revenue per tourist than the mass tourism offering, indicating the potential Sri Lanka has to pivot from mass to class and drive revenue as a destination.

We would question whether it is even possible to carve out other profitable niches without building on Sri Lanka’s strengths in nature. Consider the wellness segment which reconnects consumers to nature through the restorative benefits of ayurvedic medicine and Hela Wedakama, the mindfulness meditation techniques of Buddhism, and yoga retreats. In a short span of time, the segment already accounts for $180mn export revenue (while the spices sector, which has existed for centuries, accounts just $300mn).


A reality check

Sri Lanka is weak or entirely lacking in the underlying enablers of export competitiveness. Without improved FDI flows, the government remains incapable of single-handedly investing in infrastructure and injecting working capital to promote export-driven businesses.

Allocating forest-land to export development (and as the twelve BOI export processing zones remain largely unutilized) dismantles the only competitive advantage Sri Lanka has to compete in international markets and become the primary source of foreign exchange for the country.

By stripping away our nature and wildlife assets, we are left with only our beaches and reputation for cheap sea-sun-sand tourism. The tourism sector is therefore not a fringe player in what happens next – it is right at the centre, because it is these very assets that enable its future competitiveness. We must now urgently commit to a diverse tourism portfolio targetting different tourism segments. A cut tree, a dead elephant, is a lost tourism dollar in the future.

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *


People’s Bank celebrates world MSME Day with Biz fair 2022



Coinciding with World Micro – Small and Medium Scale Business Day, the small and medium scale business unit of People’s Bank, recently organized a trade fair called ‘Biz Fair 2022’ at the third floor of their Head Office, Colombo 02.

This fair was held with the participation of several entrepreneurs who benefitted from the ‘People’s Spark’ entrepreneurship development program along with other business clients. The exhibition consisted of stalls promoting clothes, confectionery items, dairy products, spices and related products, organic fertilizer, electrical items, ornamental jewelry and much more.

This Biz fair commenced with the patronage of the Chairman of People’s Bank – Sujeewa Rajapakse and Chief Executive Officer /General Manager – Ranjith Kodituwakku. Senior Deputy General Manager (Payment, Digital, Process Management & Quality Assurance) of People’s Bank – K. B. Rajapakse, Senior Deputy General Manager (Overseas Customer Services) – Rohan Pathirage, Deputy General Manager (Enterprise Banking) – Krishani Narangoda, Asistant General Manager (Small and Medium Enterprise) – Wickrama Narayana, other members of the corporate and executive management and other staff members also participated.

Continue Reading


CSE bounces back despite SL’s dismal Q1 growth stats



By Hiran H.Senewiratne

The CSE did not react yesterday to the survey done by the US Consumer Confidence Survey, when the US and all Asian stock markets were recorded as performing negatively, stock market analysts said.

The US survey revealed that United States’ consumer confidence edged lower in May as Americans’ view of their present and future prospects dimmed in the midst of persistent inflation.

The Conference Board said on Tuesday that its consumer confidence index dipped to 106.4 in May, still a strong reading from 108.6 in April.

Amid those developments the CSE bounced back following the previous days’ dip without a proper fundamental base. However, the economy in the first quarter had contracted by 1.6 per cent, the Department of Census and Statistics (DCS) revealed yesterday.

It was confirming that the country was in bad shape long before the current crisis emerged. The dismal performance in the first quarter is despite the 2021 fourth quarter registering a 1.8% growth, despite the COVID-19 pandemic and 3.3 per cent growth overall last year. In 2021 1Q the economy grew by 4%.

Agriculture and Industrial sectors suffered contractions of 6.8 per cent and 4.7 per cent respectively in 1Q of 2022, while the Service sector recorded a trivial expansion of 0.7per cent when compared to these values in the first quarter of year 2021. This would likely affect listed companies that engaged in the agriculture and industrial sectors, market analysts said.

Amid those developments both indices moved upwards. All Share Price Index went up by 53.2 points and S and P SL20 rose by 25.2 points. Turnover stood at Rs 778 million with three crossings. Those crossings were reported in Lanka IOC, which crossed 1.7 million shares to the tune of Rs 115.5 million and its shares traded at Rs 68, Print Care two million shares crossed to the tune of Rs 60 million; its shares traded at Rs 30 and Access Engineering 2.5 million shares crossed to the tune of Rs 25 million; its shares traded at Rs 10.

In the retail market, top seven companies that mainly contributed to the turnover were, Expolanka Holdings Rs 149.2 million (151,000 shares traded), Lanka IOC Rs 84.4 million (1.2 million shares traded), HNB Rs 61.4 million (786,000 shares traded), Browns Investments Rs 47.5 million (6.3 million shares traded), Vallibel One Rs 26.6 million (one million shares traded), LOLC Finance Rs 16.1 million (2.4 million shares traded) and Sampath Bank 14.8 million (494,000 shares traded). During the day 34.7 million share volumes changed hands in 8000 transactions.

Yesterday the Central Bank announced the US dollar rate. Its buying rate was Rs 355.81 and the selling rate Rs 367.07.

Continue Reading


Constant ‘monetary financing’ had little backing from fiscal side, says Central Bank



by Sanath Nanayakkare

The majority of external obligations in the recent past were financed by sources like the Central Bank of Sri Lanka or through monetary financing, but fiscal consolidation through revenue enhancement as well as expenditure rationalization deemed necessary under such circumstances were hard to come by, R.A.A. Jayalath , Assistant Governor of the Central Bank of Sri Lanka said recently.

He said so while addressing a high level seminar held on the topic on “Confronting the Current Foreign Exchange Crisis in Sri Lanka: Lessons from Global Experience”.

“Thus, a significant amount of monetary financing by the Central bank has resulted in worsening inflation and exchange rate outcome”, he observed.

He went on to say: “In this environment, the tax cuts introduced in 2019-2020 with a reduction of VAT threshold was a grievous policy, in my view. Total impact of such a tax cut was over Rs. 600 billion and some put it at Rs. 800 billion. The resultant revenue drop was about 7.7% of GDP. The mainstream economic theory suggested such tax cuts would enhance money in circulation in the economy supporting growth in the medium to long term. The combination of pandemic-induced additional expenses and limited resource mobilization had widened the fiscal deficit. Tax cuts, low interest rates and high liquidity environment created higher demand for imports. In addition to that, the pandemic hit the brakes on tourism-related revenue which was the fifth largest inflow which had been normalizing after Easter Sunday attack in 2019. The pandemic related mobility restrictions around the world strengthened remittances via banking channels. However, this was short-lived as mobility increased after successful immunization programmes as a result of which the pattern of the flow of remittances changed. This was exacerbated by the fixation of exchange rate at Rs.200 levels”.

“Tourism brought USD 4.4 billion – 5.6% of GDP in 2019 – and it was reduced to 0.8% in 2020. Then the government decided to ban the import of agro-chemicals in April 2021 for health reasons and to promote eco-friendly sustainable agriculture. Although the transition towards organic farming seemed like an environmentally friendly sustainable step, the sudden shift was like a time bomb waiting to explode. Whatever the rational, the sudden transmission was extremely problematic due to lack of organic farming infrastructure, dependence on imported agro chemicals and lack of access to modern agricultural techniques. …….This disrupted the economy’s self-sufficiency in rice production requiring rice imports using scarce foreign exchange reserves. The nation’s external economic performance deteriorated and the current account deficit increased from 1.14 billion in January 2022 from 0.13 in January 2021.”

“When you look at Sri Lanka’s current crisis, we can’t forget the legacy the country has been carrying. Since post-independence, Sri Lanka has been a twin-deficit country except for a few years. The number of times the country has sought assistance from the IMF in its post-independence history shows the frequency of BOP challenges it faced. Today we are seeking the global lending agency’s support for the 17th time.”

“The country’s trade account was continuously in deficit. Import expenditure was almost double the exports. In the current account, it showed some relief mainly because of migrant worker remittances. But that was insufficient to cover the twin deficit. The majority of the country’s foreign exchange inflows didn’t come via non-debt creating flows like FDIs, but through further borrowings. On top of this fiscal balance or the government budget was continuously in deficit. And it was increasing due to ever-increasing commitments of the government sector. Thus the country’s primary account balance – the government budget before deduction of debt servicing expenses – was in deficit except for a few years.”

“Government revenue as a percentage of GDP was constantly on the decline since 1980s except in 2015, and 2016. Tax revenue was declining until 2015, and showed some increase in 2017/2018. But the budget deficit was significant. In 2019, it was around 9.6% and increased to 11.1% in 2020 and 2021, so both fiscal and Balance of Payments ( BOP) issues were at the heart of Sri Lanka’s macroeconomic performance constantly. In addition, heavy and continuous borrowings by the government to bridge the fiscal deficit over the years, has led to monetary policy and exchange rate management having limited effectiveness in managing the fallout of funding the fiscal gap. Subsequent to the global financial crisis and the presence of low interest rates in the developed market, Sri Lanka shifted its strategy significantly towards foreign market borrowings, exposing the country towards global credit cycles. So although we witnessed rapid economic growth, majority of them were coming from borrowed funds and at the same time they were invested mostly in non-tradable sectors or slow-revenue generating sectors.”

“This was reflected in the trade balance which was not sound and was deteriorating. The other factor that led to the rapid shift in our debt composition was when we moved to commercial borrowings, particularly after we lost access to concessional borrowings. Since we graduated to middle-income country status in early 2000, most of our borrowings were commercial borrowings. We didn’t have access to low-cost borrowings from multilateral agencies. And as concessional loans declined, the economy increasingly moved towards commercial loans mostly by way of international sovereign bonds (ISBs) and other bank and overseas borrowings. While the domestic /public debt level remained mostly stable, foreign debt became primarily the force driving the Sri Lankan economy.”

“Foreign debt to GDP ratio increased from 30% in 2014 to above 50% in 2020. Although Sri Lanka’s foreign debt to GDP ratio has witnessed a significant reduction over the past two decades, the change in the composition of high level of external debt has made the economy more vulnerable to a currency crisis in the past few years. Consequently, in 2021, the economy had net repayments to foreign creditors; therefore, the entire budget deficit was financed by domestic financing. It was kind of domestication of external obligations,” the Assistant Governor said.

Continue Reading