Sri Lankan Tourism Industry

SRI LANKAN TOURISM STEPPING TOWARDS A NEW ERA Membership Number: 12313667 Word count : 3190 Chartered Postgraduate Diploma in Marketing (Level 07) Unit 01 – Emerging Themes Membership Number: 12313667 Tourism as an emerging theme Tourism industry includes, attracting tourists from local and foreign nations. Now- a- days, most of the countries highly pay their attention on upgrading tourism industry as it boosts the economy and finally the countries will be benefited from the industry. Country to country the target markets and product types are different.

That means countries like Dubai, Switzerland promote tourism as a luxury product but countries like India, Malaysia, Maldives and Sri Lanka promote tourism as an economic product where travelers can afford the prices of hotels, foods and etc. With the popularity of tourism industry and its’ benefits, so many concepts were emerged such as Medi tourism, eco tourism. Countries differentiated its products based on various concepts. However in Sri Lanka, for tourism industry, there is an emerging market, after the thirty years of war.

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When looking at Sri Lanka’s point of view, there is a vast opportunity to marketers in this industry among locals and foreign countries. The geographic location of Sri Lanka is also an additional advantage to the country to promote tourism industry as a differentiated product among various visitors across the globe. Sri Lanka is a country which has enough natural resources to attract travelers and those recourses are inherited as blessing of the Mother Nature. Virgin beaches, wonderful mountains, natural and non-polluted air at up country, two climatic differences within the same geography attract more and more travelers.

As a result of above reasons Sri Lanka becomes a world’s strategic point of global tourism. 2 Membership Number: 12313667 Tourism is one of emerging industries in Sri Lanka especially in post war period. Within last two decades, where ethnic conflict existed in Sri Lanka clear decrease in tourist arrivals were noted. Especially after the airport attack by rebels, substantial decline in tourism arrivals were experienced. It is a very clear fact that war situation creates more barriers to promote tourism industry. Presently the war condition is over and therefore it has created big opportunity to Sri Lanka to promote tourism industry.

When considering about the relative importance of the tourism industry as a national income generator, it is the fourth best income earning industry in Sri Lanka according to the publications by Central Bank of Sri Lanka-2007. To upgrade tourism sector there should be good infrastructure systems. Recently government has undertaken many large scale projects for construction of roads and high ways and port development activities. As a result of those facilitating activities and prevailing peace condition, the tourist arrivals were increased and expected to increase in the future.

The following graph explains the increase of tourist arrivals. Further the trend line explains that there will be great boom of arrivals in the future. 70000 tourst arrivals of sri Lanka 2009-2010 60000 50000 num ber of tourist arrivals 40000 30000 20000 10000 0 Jan- Feb- Mar- Apr- May- Jun09 09 09 09 09 09 Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun09 09 09 09 09 09 10 10 10 10 10 10 months Jul10 Source: Monthly Statistical Bulletin of Sri Lanka Tourism Development Authority 3 Membership Number: 12313667 Potential publication list

The following publications were selected because of the ability to reach the expected customer segment, circulation, readership, and the coverage of the particular article. When evaluating available publications, the following five publications were selected as effective medias. Sunday times is one of the popular week end news papers in Sri Lanka as well as across the globe. Hence this news paper and the online publications can be accessed by the people all over the globe. When looking at sri lankan edition, The Sunday Times is one among the top market leaders.

People who read this news paper are the businessmen, proffessionals and the general public. Sunday observer is another impotant week end news paper which records high sales in Sri Lanka. Proffessionals, business people , students of proffessional bodies refer this news paper and there are special pages for local and global emerging issues. DAILY FT business news paper publishes buniness news in every week day. The online edition and the paper publications are popular in sri lanka as it records considerable amount of sales. LMD is monthly publication of business highlights.

The customers of this publication are the business crowd and LMD is popular among various business professionals as well. 4 Membership Number: 12313667 The marketer is a UK publication, through which we can reach the international customers and it is popular among the marketing professionals as well as other business professionals. How the publisher will be benefited through this article Though this special article, one of the major emerging themes in Sri Lanka as well as the globe is addressed since almost all the countries keep their eye on tourism industry.

Through this article, the focus is given to the changes applicable to the tourism business in Sri Lanka due to world economic changes and the institutional decisions. This adds benefits to the publisher in various ways. Discussion of the prevailing issues will attract more readers. Tourism is one of the major emerging themes, as discussions and special interest devoted by the people in the present. Hence publication can reach relatively high target groups because of the validity of the factors. Getting support of the top authorities for the publication.

Countries like Sri Lanka still struggling to promote tourism. Therefore publishing this article can be considered as an indirect involvement of promoting the business. Hence publisher can gain support from government and the top bodies which are involve in tourism business. Financial benefits for publisher. If a publication keeps on discussing emerging issues, the more and more business people will be attracted. This does not merely mean attracting readers only, this includes attracting sponsorships, attracting advertisements of related businesses. 5

Membership Number: 12313667 Building the publication’s brand equity. It takes long time to build popular brand and brand equity. But trough publishing this type of article the magazine will be famous among the business crowd. 6 Membership Number: 12313667 Reasons for the fluctuations occurred in tourism sector along with the changes of world economy. The world economy is an important factor, which makes upturns and downturns of the tourism sector. Hence it has a high influence on tourism business. Time to time variations of the world economy is evident.

Some incidence’s impacts are short term while other’s impacts are long term. Economic recessions, crisis situations, currency fluctuations, government spending can be taken as examples. In 2007 and 2008 period there was a global economic crisis occurred at USA due to poor fund management, it impacted on all economies through trade channels and the financial channels. USA economy being the world’s largest economy its impacts were spread all over the world and impacted on all most all industries. In crisis era (2007/2008) tourist arrivals decreased in a considerable amount.

As in this crisis era unemployment rates were increased in USA and Euro block since crisis had a great impact on those economies. During that particular time period unemployment rate of America was about 20%-28%. Hence people had less money to satisfy their wants and needs that money was allocated for essential goods and services for their survival. Therefore it highly impacted on entertainment industries like tourism. The following table clearly states the decrease of tourist arrivals in Euro block and USA during 2007 and 2008 when compared to 2005 and 2006. Tourist arrivals by the region.

Region Relative share 2005 Africa America East Asia and pacific Europe Middle east Total 4. 6 16. 6 18. 3 54. 7 4. 8 100 2006 4. 8 16. 2 18. 8 54. 4 4. 8 100 2007 4. 9 15. 8 19. 5 53. 5 5. 2 100 2008 5. 1 16 19. 2 52. 8 5. 7 100 Source: – United nations world tourism organization annual report 7 Membership Number: 12313667 On one hand in crisis era capital out flows from USA was declined. This had a negative effect to the countries like Sri Lanka. Because countries like Sri Lanka need Foreign Direct Investment for development of the tourism and other related industries.

However when considering the current situation of the financial crisis, it has been shown favorable conditions as it shows recovering of crisis situation. This is one of the good signs for tourism industry. Not only the crisis situations but also the fuel price hikes, food crisis at 2008 and huge exchange rate fluctuations also adversely affected on tourist arrivals. When discussing in detail about the fuel price hikes during 2008 which was one of the major factors that discourage travelers, as it make travels more expensive. It had been estimated that during 2006-2008 period, worldwide oil prices were increased by 350%.

On the other hand fluctuations of exchange rates also affect tourism industry. If a currency of a particular country devalued, it caused less tourist arrivals as tourist has to spend more ever than before. This has happened to USA in 2007-2008 periods because of the global financial crisis. Now countries are looking for having economic integrations with other countries. Day by day new economic integrations are emerged. If there is an economic recession or the crisis occurred in one country, whole integrated countries are affected. The best example is current debt crisis occurred in the euro block.

This affect the value of euro as it made it devalued against other major currencies. In that the case people avoid tours as they have to afford big price for that. There are some countries like China, India, Hong Kong, Indonesia and etc; those are called emerging markets. Those countries have acquired relatively high economic growth; it is about 8%-10%. With the vast economic growth, the lifestyles of the people have changed. For an example in China, online purchases and credit card payments were increased. Hence this is a good implication for marketers to convert this opportunities to benefits. Membership Number: 12313667 Purchasing power parity dollar income of selected emerging market ( ppp$) country Hong Kong Indonesia India china Malaysia Thailand 1993 21560 3270 8360 6350 2000 25153 3042 2358 3976 9668 6404 2003 27179 3361 2892 5003 9512 7595 2005 34833 3843 3452 6757 10882 8677 2007 42306 3712 2753 5383 13518 8135 Source: Asian Development Bank Annual report Will institutional weaknesses obstruct the success of the tourism industry? There is a relatively good opportunities available for marketers, especially in the post war period.

Even though said opportunities are still prevailing; it is difficult to get the advantage due to mismanagement of the resources by key institutions. After the war, government also invested large proportion of money on infrastructure development with the intention of developing the tourism sector as it is the fourth best foreign income generator of the country. In year 2008 government investments in infrastructure developments has been recorded as LKR 42,519 million. Government investment on economic infrastructures economic infrasructure investment 180 160 140 120 100 80 60 40 20 0 1 2 3 4 5 6 7 8 9 2000-2009 n e t e t o e o o ic v sm n n c n m inr su t r s( s n f a t cue R . b ) economic infrasructure investment Source – Economic and Financial report 2009 Central Bank of Sri Lanka 9 Membership Number: 12313667 Even the government spent more money on infrastructures; still Sri Lanka could not achieve the required amount of growth. One reason behind this is institutional inertia and behavior. In Sri Lanka the political interference is relatively high. Therefore it is difficult to undertake promotional programs. The best example for this is “small miracle “. This is proposed to upgrade tourism sector of Sri Lanka.

But officials unable to continue the programs due to high level of political interference. Because of this matter number of investments became worthless. In Sri Lanka, top level authorities form unachievable goals. For an example even there is no enough room capacity; promotional campaigns are aimed at 2. 5mn tourist arrivals in 2016. With the available resources this is some kind of wild dream set by the top authorities. The minister of tourism in Sri Lanka changed four times recently. All these changes were taken place within one year. This discourages the consistency of handling promotion programs.

On the other hand changing government is the other reason which hinders the growth of the tourism industry. Because of changes in political parties coming to the power Sri Lanka is unable to maintain intended policies. Other most critical issue which affects the tourism sector growth is government budget financing mechanism. In Sri Lanka government always goes to domestic market debts hence it creates crowding out effect. Because if government uses the fund that are available for private sector investment that will discourage private sector to investment on economy due to lack of funds.

Still it is a big challenge to attract tourists. What else marketers can do? Because of the potential profits in the tourism sector, almost all countries keep their eye on it. Therefore diverse strategies are used by tourism sector. It is necessary to view 360degree view when forming strategies. Still Sri Lanka is famous for economical tourism sector or budget tourism, because still as a tourist destination, the prices are lower than the competitors. Therefore still Sri Lanka can promote its businesses as low cost provider by introducing various benefited packages to tourists.

Through that it can be effectively addresses the price conscious customer segment via special promotions for air tickets, price reductions in accommodation by offering special couple and family packages at relatively lesser price. 10 Membership Number: 12313667 It is a well known factor that Sri Lanka has limited number of occupancy capacity. This is one of the major constrains face by the country. Over demand may create undue pressure in some months. But in some months most of the rooms are vacant. As marketers it is must to identify the peak times and the off peak times.

In peak times it can be held “home stay” programs promotions while hand in hand with the citizens of Sri Lanka who has luxury houses. Currently countries like France, Malaysia and etc. are getting advantages over this type of programs. The catalog of the approved homes should be published via virtual medias as well as through nonvirtual medias, where visitors can easily access the information. On one hand during the off peak season various programs should be undertaken to induce local travelers by giving them discounts, credit card payment discounts, price reduction and etc. to avoid vacant the capacities as vacant capacity adds cost.

The following graph will help to identify peak and off peak months of tourist arrivals. Monthly Occupancy Rates in Graded Establishments by Region – 2008 p r e t g o mnh ec na e f o t ly 80 70 60 50 40 30 20 10 0 oc pny cu a c Colombo South coast east coast high country JU L Y M A R M A Y months Source: Monthly Statistical Bulletin of Sri Lanka tourism development authority Especially after ethnic war, tourism industry can be expanded to North province and Eastern province to develop the market. To make it successful it is essential to build hotels and restaurants in those areas.

Those can be built through projects or by encouraging foreign direct investment. Hence there is a big role to be played by the government. 11 N O V JA N S E P Membership Number: 12313667 There is an increasing trend of moving both local and foreign visitors to East and North areas especially after the month of May 2008. Still tourism industry of Sri Lanka is in its preliminary level. To acquire considerable growth there should be good growth in other tourism related businesses. For example still Sri Lanka does not have air flights for internal migrations.

On the other hand shopping malls, Ayurvedic spas and etc should be developed. Another option with marketers is forming strategic alliances with related businesses. For an example partnerships along with the air travel agencies, hotels or the restaurants, and tourist shopping malls enable industry as a whole to get benefits. For local visitors the discounts can be offered for credit card payments and online payments, as a result of alliances all parties are benefited. On another hand visitors can be retained in the region if countries have good collaboration. In some seasons total available rooms are fully occupied.

If there is a good collaboration with countries, those visitors can be sent to partnering country. This is best strategy where there is high level of traffic of tourist arrivals. Another critical way to attract visitors is to use different concept. Adapting various types of concepts such as Medi tourism, Echo tourism, Budget tourism and etc. will help marketers to access various customer groups. 12 Membership Number: 12313667 Inherited cultural rituals and activities and multicultural background make Sri Lankan tourism business different from other tourist destinations in the region.

Rather than promoting the country as low cost destination, it will be worthwhile to promote it as differentiated product. For an example various cultural activities can be used for advertising. Not as per earlier days, it is a must to consider about the CSR practices for sustainable advantages. Tourism as industry, it is must to protect environment as environment conditions are key for tourism industry. This can be done as best CSR practice and benchmark the industry as green marketing industry. For an example Sri Lanka can be labeled as a green brand of tourist destination through eco friendly tourism practices.

How big change is required in the predictable future? The future of the tourism sector is not easy to predict by the marketers, but addressing above issues are essential. As per the current situation, tourism industry has to face high competition level, changes of the life styles of the people, increasing income level of households, attitude and beliefs revolution all are the factors marketers should address in the future. On the other hand two decades back, people were looking to full fill their basic needs and wants, the life styles were easier than now.

With the changes of lifestyles, the needs and wants of the human were changed. Unlike decades back, people put high values on entertainment activities. All those changes are implication for marketers for new business opportunities in the tourism sector. Another important implication for marketers is the changing income level of the house hold. Earlier there were big disparity of income among developed nations and the developing nations. But now the gap between those is decreasing because of the growth of the economies in developing countries.

As purchasing power is increasing worldwide, it can be seen more demand for entertainment industries. This will boost the tourist arrivals. Especially it is expected that out ward travels will be increased in countries like China, India, Philippines and Vietnam as they have recorded considerable boom. So it is essential to develop communication skills of the marketers, especially multi language skills. Because it is the best way to make visitors feel comfortable with the services provided. 13 Membership Number: 12313667 With the technological revolution, the usages of electronic medias are increasing.

People now rely on e-payments, high credit card usage, online accessing product & service information than earlier. In the future it is expected that usage of electronic commerce will increase. Therefore marketers should have sound knowledge about the e- marketing practices. Rather than competing country as individual, it is better to form economic integrations with countries in the region. This will encourage more migrations within the region due to fewer tariffs among countries. Therefore strategic thinking abilities should be enhanced by the marketers.

More over marketers should develop their analytical skills as it helps them to take decisions, identify the peak and non peak times and categorize nations according to their arrival periods. Analytical skills help marketers to identify hidden trends. For an example through analyzing the past data they can identify countries, where Sri Lanka is popular as a tourist destination. As per the implications marketers can allocate budgets for further promotional activities. Similarly it is important to have financial and cost management skills because before handling promotional campaigns, it is a must to pay attention on profitability of it.

Network marketing practices may use more in the future as it is a good way of finding new visitors. Through virtual networks and non virtual networks it is expected to focus tourism business to a large crowd. 14 Membership Number: 12313667 Appendix ‘I confirm that in forwarding this assessment for marking, I understand and have applied the CIM policies relating to word count, plagiarism and collusion for all tasks. This assignment/project is the result of my own independent work/investigation except where otherwise stated. Other sources are acknowledged in the body of the text and/or a bibliography is appended.

The work that I have submitted has not previously been accepted in substance for any other award and is not concurrently submitted in candidature for any other award. ’ 15 Membership Number: 12313667 References • Sri Lanka tourism development authority” Monthly Statistical Bulletin available online at: http://www. sltda. gov. lk/node/13 [accessed 21st may 2010] • Annual statistical report of Sri Lanka tourism development authority (2008)”tourism research and statistics” available online at: http://www. sltda. lk/node/438 [accessed 18th may 2010] •

Sri Lanka tourism development authority” Sri Lanka Tourism Statistics at a Glance” available online at: http://www. sltda. lk/statistics_at_a_glance [accessed 25th may 2010] • Central bank of Sri Lanka (CBSL)” Economic and Financial report 2009” available at online at: http://www. cbsl. gov. lk/pics_n_docs/10_pub/_docs/efr/annual_report/ar2009e/PDF/7_cha pter_03. pdf And http://www. cbsl. gov. lk/pics_n_docs/10_pub/_docs/efr/annual_report/ar2009e/PDF/10_ch apter_06. pdf • Images available at http://www. google. lk/imghp? hl=en&tab=wi News papers and business magazines • Athukorala,R. 2010 guest column: Maldives can be the ‘small miracle’ of the Asia. Daily Financial Times,2 feb. p. 10 • Andree, M. , 2010 tourism: tourist arrivals record increased growth Daily Financial Times, 24 feb. p. 3 16 Membership Number: 12313667 • Renton, A. , 2010 my view out of the box: sustainable investment in tourism Daily Financial Times, 28 Jan. p. 15 • Special report: global crisis, Sri Lanka: impact and policy responses Daily financial times, 28 Jan. p. 13 • Savithri ,R. , 2010 tourism’s big change: big reflection LMD, March. • Stefan, F. , 2010 leading edge: tourism revival or survival? LMD, Jan . p. 82 17

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