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Following the Money: Tourism’s revenue crisis behind the arrival numbers – PART II

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(Article 2 of the 4-part series on Sri Lanka’s tourism stagnation)

If Sri Lanka’s tourism story were a corporate income statement, the top line would satisfy any minister. Arrivals went up 15.1%, targets met, records broke. But walk down the statement and the story darkens. Revenue barely budges. Per-visitor yield collapses. The money that should accompany all those arrivals has quietly vanished, or, more accurately, never materialised.

This is not a recovery. It is a volume trap, more tourists generating less wealth, with policymakers either oblivious to the math or unwilling to confront it.

Problem Diagnosis: The Paradox of Plenty:

The numbers tell a brutal story.

Read that again: arrivals grew 15.1% year-on-year, but revenue grew only 1.6%. The average tourist in 2025 left behind $181 less than in 2024, an 11.7% decline. Compared to 2018, the drop is even sharper. In real terms, adjusting for inflation and currency depreciation, each visitor in 2025 generates approximately 27-30% less revenue than in 2018, despite Sri Lanka being “cheaper” due to the rupee’s collapse. This is not marginal variance. This is structural value destruction. (See Table 1)

The math is simple and damning: Sri Lanka is working harder for less. More tourists, lower yield, thinner margins. Why? Because we have confused accessibility with competitiveness. We have made ourselves “affordable” through currency collapse and discounting, not through value creation.

Root Causes: The Five Mechanisms of Value Destruction

The yield collapse is not random. It is the predictable outcome of specific policy failures and market dynamics.

1. Currency Depreciation as False Competitiveness

The rupee’s collapse post-2022 has made Sri Lanka appear “cheap” to foreigners. A hotel room priced at $100 in 2018 might cost $70-80 in effective purchasing power today due to depreciation. Tour operators have aggressively discounted to fill capacity during the crisis recovery.

This creates the illusion of competitiveness. Arrivals rise because we are a “bargain.” But the bargain is paid for by domestic suppliers, hotels, transport providers, restaurants, staff, whose input costs (energy, food, imported goods) have skyrocketed in rupee terms while room rates lag in dollar terms.

The transfer is explicit: value flows from Sri Lankan workers and businesses to foreign tourists. The tourism “recovery” extracts wealth from the domestic economy rather than injecting it.

2. Market Composition Shift: Trading European Yields for Asian Volumes

SLTDA data shows a deliberate (or accidental—the policy opacity makes it unclear) shift in source markets. (See Table 2)

The problem is not that we attract Indians or Russians, it is that we attract them without strategies to optimise their yield. As the next article in this series will detail, Indian tourists average approximately 5.27 nights compared to the 8-9 night overall average, with lower per-day spending. We have built recovery on volume from price-sensitive segments rather than value from high-yield segments.

This is a choice, though it appears no one consciously made it. Visa-free entry, aggressive India-focused marketing, and price positioning have tilted the market mix without any apparent analysis of revenue implications.

3. Length of Stay Decline and Activity Compression

Average length of stay has compressed. While overall averages hover around 8-9 nights in recent years, the composition matters. High-yield European and North American tourists who historically spent 10-12 nights are now spending 7-9. Indian tourists spend 5-6 nights.

Shorter stays mean less cumulative spending, fewer experiences consumed, less distribution of value across the tourism chain. A 10-night tourist patronises multiple regions, hotels, guides, restaurants. A 5-night tourist concentrates spending in 2-3 locations, typically Colombo, one beach, one cultural site.

The compression is driven partly by global travel trends (shorter, more frequent trips) but also by Sri Lanka’s failure to develop compelling multi-day itineraries, adequate inter-regional connectivity, and differentiated regional experiences. We have not given tourists reasons to stay longer.

4. Infrastructure Decay and Experience Degradation

Tourists pay for experiences, not arrivals. When experiences degrade, airport congestion, poor road conditions, inadequate facilities at cultural sites, safety concerns, spending falls even if arrivals hold.

The 2024-2025 congestion at Bandaranaike International Airport, with reports of tourists nearly missing flights due to bottlenecks, is the visible tip. Beneath are systemic deficits: poor last-mile connectivity to tourism sites, deteriorating heritage assets, unregistered businesses providing sub-standard services, outbound migration of trained staff.

An ADB report notes that tourism authorities face resource shortages and capital expenditure embargoes, preventing even basic facility improvements at major revenue generators like Sigiriya (which charges $36 per visitor and attracts 25% of all tourists). When a site generates substantial revenue but lacks adequate lighting, safety measures, and visitor facilities, the experience suffers, and so does yield.

5. Leakage: The Silent Revenue Drain

Tourism revenue figures are gross. Net foreign exchange contributions after leakages, is rarely calculated or published.

Leakages include:

· Imported food, beverages, amenities in hotels (often 30-40% of operating costs)

· Foreign ownership and profit repatriation

· International tour operators taking commissions upstream (tourists book through foreign platforms that retain substantial margins)

· Unlicensed operators and unregulated businesses evading taxes and formal banking channels

Industry sources estimate leakages can consume 40-60% of gross tourism revenue in developing economies with weak regulatory enforcement. Sri Lanka has not published comprehensive leakage studies, but all indicators, weak licensing enforcement, widespread informal sector activity, foreign ownership concentration in resorts, suggest leakages are substantial and growing.

The result: even the $3.22 billion headline figure overstates actual net contribution to the economy.

The Way Forward: From Volume to Value

Reversing the yield collapse requires

systematic policy reorientation, from arrivals-chasing to value-building.

First

, publish and track yield metrics as primary KPIs. SLTDA should report:

· Revenue per visitor (by source market, by season, by purpose)

· Average daily expenditure (disaggregated by accommodation, activities, food, retail)

· Net foreign exchange contribution after documented leakages

· Revenue per room night (adjusted for real exchange rates)

Make these as visible as arrival numbers. Hold policy-makers accountable for yield, not just volume.

Second

, segment markets explicitly by yield potential. Stop treating all arrivals as equivalent. Conduct market-specific yield analyses:

· Which markets spend most per day?

· Which stays longest?

· Which distributes spending across regions vs. concentrating in Colombo/beach corridors?

· Which book is through formal channels vs. informal operators?

Target marketing and visa policies accordingly. If Western European tourists spend $250/day for 10 nights while another segment spends $120/day for 5 nights, the revenue difference ($2,500 vs. $600) dictates where promotional resources should flow.

Third

, develop multi-day, multi-region itineraries with compelling value propositions. Tourists extend stays when there are reasons to stay. Create integrated experiences:

· Cultural triangle + beach + hill country circuits with seamless connectivity

· Themed tours (wildlife, wellness, culinary, adventure) requiring 10+ days

· Regional spread of accommodation and experiences to distribute economic benefits

This requires infrastructure investment, precisely what has been neglected.

Fourth

, regulations to minimise leakages. Enforce licensing for tourism businesses. Channel bookings through formal operators registered with commercial banks. Tax holiday schemes should prioritise investments that maximise local value retention, staff training, local sourcing, domestic ownership.

Fifth

, stop using currency depreciation as a competitive strategy. A weak rupee makes Sri Lanka “affordable” but destroys margins and transfers wealth outward. Real competitiveness comes from differentiated experiences, quality standards, and strategic positioning, not from being the “cheapest” option.

The Hard Math: What We’re Losing

Let’s make the cost explicit. If Sri Lanka maintained 2018 per-visitor spending levels ($1,877) on 2025 arrivals (2.36 million), revenue would be approximately $4.43 billion, not $3.22 billion. The difference: $1.21 billion in lost revenue, value that should have been generated but wasn’t.

That $1.21 billion is not a theoretical gap. It represents:

· Wages not paid

· Businesses not sustained

· Taxes not collected

· Infrastructure not funded

· Development not achieved

This is the cost of volume-chasing without yield discipline. Every year we continue this model; we lock in value destruction.

The Policy Failure: Why Arrivals Theater Persists

Why do policymakers fixate on arrivals when revenue tells the real story?

Because arrivals are politically legible. A minister can tout “record tourist numbers” in a press conference. Revenue per visitor requires explanation, context, and uncomfortable questions about policy choices.

Arrivals are easy to manipulate upward, visa-free entry, aggressive discounting, currency depreciation. Yield is hard, it requires product development, market curation, infrastructure investment, regulatory enforcement.

Arrivals theater is cheaper and quicker than strategic transformation. But this is governance failure at its most fundamental. Tourism’s contribution to economic recovery is not determined by how many planes land but by how much wealth each visitor creates and retains domestically. Every dollar spent celebrating arrival records while ignoring yield collapse is a waste of dollars.

The Uncomfortable Truth

Sri Lanka’s tourism “boom” is real in volume, but it is a value bust. We are attracting more tourists and generating less wealth. The industry is working harder for lower returns. Margins are compressed, staff are paid less in real terms, infrastructure decays, and the net contribution to national recovery underperforms potential.

This is not sustainable. Eventually, operators will exit. Quality will degrade further. The “affordable” positioning will shift to “cheap and deteriorating.” The volume will follow yield down.

We have two choices: acknowledge the yield crisis and reorient policy toward value creation or continue arrivals theater until the hollowness becomes undeniable.

The money has spoken. The question is whether anyone in power is listening.


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Features

Relief without recovery

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A US airstrike on an Iranian oil storage facility

The escalating conflict in the Middle East is of such magnitude, with loss of life, destruction of cities, and global energy shortages, that it is diverting attention worldwide and in Sri Lanka, from other serious problems. Barely four months ago Sri Lanka experienced a cyclone of epic proportions that caused torrential rains, accompanied by floods and landslides. The immediate displacement exceeded one million people, though the number of deaths was about 640, with around 200 others reported missing. The visual images of entire towns and villages being inundated, with some swept away by floodwaters, evoked an overwhelming humanitarian response from the general population.

When the crisis of displacement was at its height there was a concerted public response. People set up emergency kitchens and volunteer clean up teams fanned out to make flooded homes inhabitable again. Religious institutions, civil society organisations and local communities worked together to assist the displaced. For a brief period the country witnessed a powerful demonstration of social solidarity. The scale of the devastation prompted the government to offer generous aid packages. These included assistance for the rebuilding of damaged houses, support for building new houses, grants for clean up operations and rent payments to displaced families. Welfare centres were also set up for those unable to find temporary housing.

The government also appointed a Presidential Task Force to lead post-cyclone rebuilding efforts. The mandate of the Task Force is to coordinate post-disaster response mechanisms, streamline institutional efforts and ensure the effective implementation of rebuilding programmes in the aftermath of the cyclone. The body comprises a high-level team, led by the Prime Minister, and including cabinet ministers, deputy ministers, provincial-level officials, senior public servants, representing key state institutions, and civil society representatives. It was envisaged that the Task Force would function as the central coordinating authority, working with government agencies and other stakeholders to accelerate recovery initiatives and restore essential services in affected regions.

Demotivated Service

However, four months later a visit to one of the worst of the cyclone affected areas to meet with affected families from five villages revealed that they remained stranded and in a state of limbo. Most of these people had suffered terribly from the cyclone. Some had lost their homes. A few had lost family members. Many had been informed that the land on which they lived had become unsafe and that they would need to relocate. Most of them had received the promised money for clean up and some had received rent payments for two months. However, little had happened beyond this. The longer term process of rebuilding houses, securing land and restoring livelihoods has barely begun. As a result, families who had already endured the trauma of disaster, now face prolonged uncertainty about their future. It seems that once again the promises made by the political leadership has not reached the ground.

A government officer explained that the public service was highly demotivated. According to him, many officials felt that they had too much work piled upon them with too little resources to do much about it. They also believed that they were underpaid for the work they were expected to carry out. In fact, there had even been a call by public officials specially assigned to cyclone relief work to go on strike due to complaints about their conditions of work. This government official appreciated the government leadership’s commitment to non corruption. But he noted the irony that this had also contributed to a demotivation of the public service. This was on the unjustifiable basis that approving and implementing projects more quickly requires an incentive system.

Whether or not this explanation fully captures the situation, it points to an issue that the government needs to address. Disaster recovery requires a proactive public administration. Officials need to reach out to affected communities, provide clear information and help them navigate the complex procedures required to access assistance. At the consultation with cyclone victims this was precisely the concern that people raised. They said that government officers were not proactive in reaching out to them. Many felt they had little engagement with the state and that the government officers did not come to them. This suggests that the government system at the community level could be supported by non-governmental organisations that have the capacity and experience of working with communities at the grassroots.

In situations such as this the government needs to think about ways of motivating public officials to do more rather than less. It needs to identify legitimate incentives that reward initiative and performance. These could include special allowances for those working in disaster affected areas, recognition and promotion for officers who successfully complete relief and reconstruction work, and the provision of additional staff and logistical support so that the workload is manageable. Clear targets and deadlines, with support from the non-governmental sector, can also encourage officials to act more proactively. When government officers feel supported and recognised for the extra effort required, they are more likely to engage actively with affected communities and ensure that assistance reaches those who need it most.

Political Solutions

Under the prevailing circumstances, however, the cyclone victims do not know what to do. The government needs to act on this without further delay. Government policy states that families can receive financial assistance of up to Rs 5 million to build new houses if they have identified the land on which they wish to build. But there is little freehold land available in many of the affected areas. As a result, people cannot show government officials the land they plan to buy and, therefore, cannot access the government’s promised funds. The government needs to address this issue by providing a list of available places for resettlement, both within and outside the area they live in. However, another finding at the meeting was that many cyclone victims whose lands have been declared unsafe do not wish to leave them. Even those who have been told that their land is unstable feel more comfortable remaining where they have lived for many years. Relocating to an unfamiliar area is not an easy decision.

Another problem the victims face is the difficulty of obtaining the documents necessary to receive compensation. Families with missing members cannot prove that their loved ones are no longer alive. Without official confirmation they cannot access property rights or benefits that would normally pass to surviving family members. These are problems that Sri Lanka has faced before in the context of the three decade long internal war. It has set up new legal mechanisms such as the provision of certificates of absence validated by the Office on Missing Persons (OMP) in place of death certificates when individuals remain missing for long periods. The government also needs to be sensitive to the fact that people who are farmers cannot be settled anywhere. Farming is not possible in every location. Access to suitable land and water is essential if farmers are to rebuild their livelihoods. Relocation programmes that fail to take these realities into account risk creating new psychological and economic hardships.

The message from the consultation with cyclone victims is that the government needs to talk more and engage more directly with affected communities. At the same time the political leadership at the highest levels need to resolve the problems that government officers on the ground cannot solve. Issues relating to land availability, legal documentation and livelihood restoration require policy decisions at higher levels. The challenge to the government to address these issues in the context of the Iran war and possible global catastrophe will require a special commitment. Demonstrating that Sri Lanka is a society that considers the wellbeing of all its citizens to be a priority will require not only financial assistance but also a motivated public service and proactive political leadership that reaches out to those still waiting to rebuild their lives.

 

by Jehan Perera

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Supporting Victims: The missing link in combating ragging

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A recent panel discussion at the University of Peradeniya examined the implications of the Supreme Court’s judgement on ragging, in which the Court recognised that preventing ragging requires not only criminal penalties imposed after an incident occurs but also systems and processes within universities that enable victims to speak up and receive support. Bringing together perspectives from law, university administration, psychology and students, the discussion sought to understand why ragging continues to persist in Sri Lankan universities despite the existence of legal prohibitions. While the discussion covered legal and institutional dimensions, one theme emerged clearly: addressing ragging requires more than laws and disciplinary rules. It requires institutions that are capable of supporting victims.

Sri Lanka enacted the Prohibition of Ragging and Other Forms of Violence in Educational Institutions Act No. 20 of 1998 following several tragic incidents in universities, during the 1990s. Among the most widely remembered is the death of engineering student S. Varapragash at the University of Peradeniya in 1997. Incidents such as this shocked the country and revealed the consequences of allowing violent forms of student hierarchy to persist. The 1998 Act marked an important legal intervention by recognising ragging as a criminal offence. The law introduced severe penalties for individuals found guilty of engaging in ragging or other forms of violence in educational institutions, including fines and imprisonment.

Despite the existence of this law for nearly three decades, prosecutions under the Act have been extremely rare. Incidents continue to surface across universities although most are not reported. The incidents that do reach university administrations are dealt with internally through disciplinary procedures rather than through the criminal justice system. This suggests that the problem does not lie solely in the absence of legal provisions but also in the ability of victims to come forward and pursue complaints.

The tragic reminders; the cases of Varapragash and Pasindu Hirushan

Varapragash, a first-year engineering student at the University of Peradeniya, was forced by senior students to perform extreme physical exercises as part of ragging, resulting in severe internal injuries and acute renal failure that ultimately led to his death. In 2022, the courts upheld the conviction of one of the perpetrators for abduction and murder. The case illustrates not only the brutality of ragging but also how long and difficult the path to justice can be for victims and their families. Even when victims speak about their experiences, they may not always disclose the full extent of what they have endured. In the case of Varapragash, the judgement records that the victim told his father that he was asked to do dips and sit-ups. Varapragash’s father had testified that it appeared his son was not revealing the exact details of what he had to endure due to shame.

More than two decades after the death of Varapragash, the tragedy of ragging continues. The 2025 Supreme Court judgement arose from the case of Pasindu Hirushan, a 21-year-old student of the University of Sri Jayewardenepura, who sustained devastating head injuries at a fresher’s party, in March 2020, after a tyre sent down the stairs by senior students struck him. He became immobile, was placed on life support, and returned home only months later. If the Varapragash case exposed the deadly consequences of ragging in the 1990s, the Pasindu Hirushan case demonstrates that universities are still failing to prevent serious violence, decades after the enactment of the 1998 Act. It was against this background of continuing institutional failure that the Supreme Court issued its Orders of Court in 2025. Among the key mechanisms emphasised by the judgement is the establishment of Victim Support Committees within universities.

Why do victims need support?

Ragging in universities can take many forms, including verbal humiliation, physical abuse, emotional intimidation and, in some instances, sexual harassment. While all forms of ragging can have serious consequences, incidents involving sexual harassment often present additional barriers for victims who wish to come forward. Victims may hesitate to complain due to weak institutional mechanisms, fear of retaliation, or uncertainty about whether their experiences will be taken seriously. In many cases, those who speak out are confronted with questions that shift attention away from the alleged misconduct and onto their own behaviour: why did s/he continue the conversation?; why did s/he not simply disengage, if the harassment occurred as claimed?; why did s/he remain in the environment?; or did his/her actions somehow encourage the accused’s behaviour? Such responses illustrate how easily victims can be subjected to a second layer of scrutiny when they attempt to report incidents. When individuals anticipate disbelief, minimisation or blame, silence may appear safer than disclosure. In such circumstances, the presence of a trusted institutional body, capable of providing guidance, protection and support, become critically important, highlighting the need for effective Victim Support Committees within universities.

What Victim Support Committees must do

As expected by the Supreme Court, an effective Victim Support Committee should function as a trusted institutional mechanism that places the safety and dignity of victims at the centre of its work. The committee must provide a safe and confidential point of contact through which victims can report incidents of ragging without fear of intimidation or retaliation. It should assist victims in understanding and pursuing available complaint procedures, while also ensuring their immediate protection where there is a risk of continued harassment. Recognising the psychological harm ragging may cause, the committee should facilitate access to counselling and emotional support services. At a practical level, it should also help victims document incidents, record statements, and preserve evidence that may be necessary for disciplinary or legal proceedings. The committee must coordinate with university authorities to ensure that complaints are addressed promptly and responsibly, while maintaining strict confidentiality to protect the identity and well-being of those who come forward. Beyond responding to individual cases, Victim Support Committees should also contribute to broader awareness and prevention efforts, within universities, helping to create an environment where ragging is actively discouraged and students feel safe to report incidents. Without such support, the process of pursuing justice can become overwhelming for individuals who are already dealing with the emotional impact of abuse.

Making Victim Support Committees work

According to the Orders of Court, these committees should include representatives from the academic and non-academic staff, a qualified counsellor and/or clinical psychologist, an independent person, from outside the institution, with experience in law enforcement, health, or social services, and not more than three final-year students, with unblemished academic and disciplinary records, appointed for fixed terms. Further, universities must ensure that committees consist of individuals who possess both expertise and genuine commitment in areas such as student welfare, psychology, gender studies, human rights and law enforcement, in line with the spirit of the Supreme Court’s directions, rather than consisting largely of ex officio positions. If treated as routine administrative positions, rather than responsibilities requiring specialised knowledge, sensitivity and empathy, these committees risk becoming symbolic rather than functional.

Greater transparency in the appointment process could strengthen the credibility of these committees. Universities could invite expressions of interest from individuals with relevant expertise and demonstrated commitment to supporting victims. Such an approach would help ensure that the committees benefit from the knowledge and dedication of those best equipped to fulfil this role.

The Supreme Court judgement also introduces an important safeguard by giving the University Grants Commission (UGC) the authority to appoint members to university-level Victim Support Committees. If exercised with integrity, this provision could help ensure that these committees operate with greater independence. It may also help address a challenge that sometimes arises within institutions, where individuals, with relevant expertise, or strong commitment to addressing issues, such as violence, harassment or student welfare, may not always be included in institutional mechanisms due to internal administrative preferences. External oversight by the UGC could, therefore, create opportunities for such individuals to contribute meaningfully to Victim Support Committees and strengthen their effectiveness.

Ultimately, the success of the recent judgement will depend not only on the directives it issued, the number of committees universities establish, or the number of meetings they convene, or other box-checking exercises, but on how sincerely those directives are implemented and the trust these committees inspire among students and staff. Laws can prohibit ragging, but they cannot by themselves create environments in which victims feel safe to speak. That responsibility lies with institutions. When universities create systems that listen to victims, support them and treat their experiences with seriousness, universities will become places where dignity and learning can coexist.

(Udari Abeyasinghe is attached to the Department of Oral Pathology at the University of Peradeniya)

Kuppi is a politics and pedagogy happening on the margins of the lecture hall that parodies, subverts, and simultaneously reaffirms social hierarchies.

by Udari Abeyasinghe

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Big scene … in the Seychelles

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Mirage: Off to the Seychelles for fifth time

Several of our artistes do venture out on foreign assignments but, I’m told, most of their performances are mainly for the Sri Lankans based abroad.

However, the group Mirage is doing it differently and they are now in great demand in the Seychelles.

Guests patronising the Lo Brizan pub/restaurant, Niva Labriz Resort, in the Seychelles, is made up of a wide variety of nationalities, including Russians, Chinese, French and Germans, and they all enjoy the music dished out by Mirage, and that is precisely why they are off to the Seychelles … for the fifth time!

The band is scheduled to leave this month and will be back after three weeks, but their journey to the Seychelles will continue, with two more assignments lined up for 2026.

In August it’s a four-week contract, and in December another four-week contract that will take in the festive celebrations … Christmas and the New Year.

Donald’s birthday
celebrations

According to reports coming my way, it is a happening scene at the Lo Brizan pub/restaurant, Niva Labriz Resort, whenever Mirage is featured, and the band has even adjusted its repertoire to include local and African songs.

They work three hours per day and six days per week at the Lo Brizan pub/restaurant.

Donald Pieries:
Leader, vocalist,
drummer

Led by vocalist and drummer Donald Pieries, many say it is his

musical talents and leadership that have contributed to the band’s success.

Donald, who celebrated his birthday on 07 March, at the Irish Pub, has been with the group through various lineup changes and is known for his strong vocals.

He leads a very talented and versatile line up, with Sudham (bass/vocals), Gayan (lead guitar/vocals), Danu (female vocalist) and Toosha (keyboards/vocals).

Mirage performs regularly at venues like the Irish Pub in Colombo and also at Food Harbour, Port City.

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