Demand, volatility and post-war tourism in Sri Lanka

Abstract

Historically Sri Lanka has always been a tourist destination for centuries because of its strategic location and uniqueness. Although Sri Lankan tourism sector has been growing since 1967, International tourist arrivals to Sri Lanka have experienced notable fluctuations during the nearly three decades of civil war, particularly between 1983 and 2009. Sri Lankan tourism has managed to recover quickly since the end of war in 2009. After recognising the role of post-war tourism, the Sri Lankan government has launched the Tourism Development Strategies for the period 2011-2016. Firstly, The paper carried out systematic statistical analysis for Sri Lankan tourism focussing in particular on the civil war and associated political violence. Secondly, the paper empirically explored whether the targets set in the TDS by the Sri Lankan government are achievable or realistic by using a simple econometric model. Furthermore, post-war tourism development and the tourism boom are being evaluated within the context of the current political and economic situation. The empirical results of the first study demonstrating that the Sri Lankan tourism industry is very sensitive to political violence, exchange rate changes, and seasonal variations. The analysis suggests that significant increases in political violence lowered tourist arrivals in Sri Lanka and created a substantial amount of volatility in tourism demand. The results of the second study indicate that the Sri Lankan tourism industry was in a favorable position to achieve the targets until 2014 but missing the targets in 2015 and it is a challenge to achieve of 2.5 million tourism arrivals by 2016. A number of policy inferences can be drawn from this study. Given the limited resources available to the Sri Lankan government and the competing claims on these resources, development of strategies for and active promotion of public- private partnerships aimed at creating new tourism related infrastructure (hotel resorts, cruise line facilities, road transport upgrades, etc.) are recommended. There is should be a consideration for promoting the country as a price competitive and safe tourism destination. Finally, the country has to maintain political stability and work towards reconciliation process with improved governance and maintaining rules of law in order for the development strategy to be fully realized.