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

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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.



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DFCC Bank facilitates the continued growth of Sri Lankan SMEs amidst the COVID-19 pandemic

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The unprecedented surfacing of the COVID-19 pandemic has left a lasting scar on the global population and economy. With no precise warning on the horizon, businesses everywhere were thrown into the deep end, and survival seemed uncertain during the peak of the pandemic. In Sri Lanka, a nation where SMEs form the integral backbone of the economy, the ill effects have been taking a heavy toll on businesses both fiscally and mentally.

However, we as Sri Lankans are resilient at our core, and with the integral support of frontline workers, officials, and essential services such as our banking partners, we set forth on a journey to assess, adapt and survive. One such story about perseverance through a valuable relationship comes from K.S.K. Menan of Star Food Store (Pvt) Ltd, and his trusted banking partner, DFCC Bank.

Emerging from humble beginnings, Menan’s story is one that inspires patriotism, and reaffirms the importance of giving back to your motherland. As a self-made entrepreneur, Menan was successfully engaged with the departmental store industry in the United Kingdom, when one day, he decided to leave everything there and come back to his home, Sri Lanka. He was on a mission to give back to the country that had given him so much, and that led to the birth of ‘Star Food Store’ in Kokkuvil, a supermarket equipped with all the necessary household essentials. DFCC Bank had been by his side throughout the entire journey until the opening of his outlet, and even more when the COVID-19 pandemic struck.

“When Imoved back to Sri Lanka in 2016, the very first account I opened was with DFCC Bank, and with their support, I was able to open the first‘Star Food Store’ in November 2019. However, when COVID-19 struck, everything came to halt. When restrictions were relaxed, I faced multiple problems with bringing things back to how they were. DFCC Bank stepped in and gave me overdraft facilities, helped clear my cheques, and provided additional funds at a low interest rate”.

Today, Menan has been able to open a second Star Food Store outlet at Achchuveli in August 2020, and a third at Idaikkadu in February 2021. He states that expansion is the last thing most businesses consider during this turbulent time, however, the X factor that has allowed him to do this is his banking partner.

“The confidence an entrepreneur gains with the right banking partner is immeasurable, and I have been able to find that with DFCC Bank. They have always gone out of the way to ensure my venture’s continuity, from sending someone from the branch immediately if there is an issue with the card machine during business hours, or even understanding that loose change is important for a supermarket and sending bags of coins from the Colombo branch for business use. I now have plans of constructing a state-of-the-art shopping complex in Jaffna, and look forward to working with DFCC on this project”.

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Covid-19 third wave fears dampen stock market

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By Hiran H.Senewiratne 

The CSE witnessed a steep decline following worries over the possible outbreak of a  Covid 19 third wave in the country and the continuation of selling pressure for certain stocks in the market, stock market analysts said.

CSE investors worried over 52 new cases being detected in two retail stores at Pamunuwa and at a state bank in Colombo at the end of the April holidays. Sri Lanka’s Health Ministry warned of a possible surge in COVID-19 cases in the coming weeks, market analysts said.

  Consequently, the All Share Price Index declined by 2.9 percent and S and P SL20 dropped by three percent. Major companies sought after by investors negatively contributed to both indices during the day. According to  market analysts,  these companies  were:  LOLC (27 negative points),  Expolanka (19 negative points), Vallibel One (12 negative points), Hayleys (11 negative points) and JKH (10 negative points).

All Share Price Index went down by 198.39 points and S and P SL20 down by 93.89 points. Turnover stood at Rs. 3.7 billion with a single crossing. The crossing was reported in Ceylon Cold Stores (CIS), which crossed 60000 shares to the tune of Rs. 35.4 million, its shares traded at Rs. 594. 

In the retail market, five companies that mainly contributed to the turnover were: Browns Investments Rs. 717.6 million (114 million shares traded), Expolanka Rs. 480 million (9.8 million shares traded), Hayleys Rs. 392 million (five million shares traded), Dipped Products Rs. 389 million (6.9 million shares traded) and LOLC Rs. 193 million (587,000 shares traded). During the day 197 million share volumes changed hands in 31305 transactions.  

Sri Lanka rupee quoted firmer around 192/194 levels to the US dollar in the spot market on Tuesday, while bond yields slightly eased, dealers said. Sri Lanka rupee last closed at 194/198 levels to the US dollar in the spot market on Monday. The Central Banks Telegraph Transfer rates stand at 187.93/191.97 levels below the spot rates on Monday.

Sri Lanka’s rupee has come under pressure amid money printing and low-interest rates, despite the worst import controls since the 1970s, observers said.

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SAT launches F5 portfolio to deliver secure digital experiences

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(At left) : Edgar Dias, Regional Vice President of Channels and Partnerships, Asia Pacific, F5. (At right) : Sanjaya Padmaperuma, CEO of SAT.

South Asian Technologies (Pvt) Ltd, announces its appointment to be a distributor for F5 within Sri Lanka and Maldives to deliver secure digital experience to enterprises.

The cutting-edge technology is a portal for delivering applications and data with greater agility, security, availability, performance, and scalability.

F5’s portfolio of automation, security, performance, and insight capabilities empowers customers to create, secure, and operate adaptive applications that reduce costs, improve operations, and better protect users.

“With the increasing necessity for digitalisation in the workspace, now more than ever, organisations need proven solutions to help secure their businesses. Adding F5 to our existing portfolio gives South Asian Technologies, a more omniscient opportunity to equip our partners and customers with best-in-class application security and delivery solutions. As F5 enables adaptive applications, the SAT team is ecstatic at the prospect of securing our clientele with robust security offerings that have a proven history with Fortune 500 companies across the globe,” said Sanjaya Padmaperuma, CEO of SAT.

Every company today is in the digital experience business. In the wake of COVID-19, customer expectations are higher than ever, as the experiences garnered are the primary way that people interact and transact with just about every organisation at present.

F5 helps organisations deliver and secure the premium digital facilities that customers demand by enabling adaptive applications which, like living organisms, will naturally adapt based on their environment – growing, shrinking, defending, and healing themselves.

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