Sri Lanka Tourism has naïve slogans, uncompetitive strategies, policy mismatches

The whole world is talking about Sri Lanka Tourism the Government talks of it as one of the key economic drivers for us in the next 10 – 15 years. However, the big players are running away and most new players are bleeding. This is an oxymoron to say the least. My simple assessment is that we have an opportunity but we have no strategy. What we have is wishful thinking. Also, there are some significant policy mismatches that are rendering us uncompetitive in a regional context.

Marketing a destination

I certainly believe tourism is a key growth pillar for us and actually, it is only one of the two globally competitive asset classes we have in Sri Lanka, the other being our location. There is no other asset class that is globally unmatched.

However, slogans like “Visit Sri Lanka” is just naïve and wishful thinking and not good enough. We need to communicate to the world, why visit Sri Lanka, what are the sub-products, and how they are better than our competition. The communication itself needs to be much more than trade shows and painted taxi campaigns.

Also, one of the key conclusions in the sub-product categorisation was that we do not have a competitive advantage on the beach. We just cannot compete on the beach with Maldives and it’s also a common product for most countries in this region. However, a majority of our rooms are still located on the beach. As a country, this is not going to help us get to where we should be.

However, when you look at other sub products, like wildlife, ancient cities, hills, nature and scenic beauty, tea, culture, we have unbeatable products.

I f you compare with Thailand, on these aspects, we have a better offering than Thailand. Thai ancient cities, Chang Mai, Chang Rai, and Sukoth Thai, are not comparable to Sigiriya, Dambulla, Polonnaruwa or Anuradhapura. Our cities have a longer history with unparalleled architecture and magnificent settings.

However, the three Thai cities get more tourists than the whole of Sri Lanka. Thai wildlife is again not comparable to Sri Lanka and they do not have anything like our hills and scenic beauty. Yet, Thailand is a 35 million destination and we are still about 2 million.

Budget travels

Recently, comparisons have been made to Thailand and it has been said we need to bring all budget airlines to Sri Lanka and that way we can attract and fill all budget accommodations in Sri Lanka. This is true but again not a holistic analysis. Thailand not only gets budget travellers but travellers that range from budget to US$2000 a night and they cover many sub products from beach to ancient cities to wildlife and adventure, to shopping. I believe we are better or can be better than Thailand in each of these aspects.

Then we need to see where these tourists come from for each sub product and target market the Sri Lankan sub products to each of the segments. If you look at source markets for Thailand, some of the top 10 countries such as Malaysia, Korea, Japan, and Singapore, which collectively produced more than 6.5 million visitors to Thailand in 2017, do not even come on our top 10. Now these are visitors that are visiting for a similar product/experience and we can do better except for sex tourism.

If you analyse our top 10 source markets and compare those countries as to what they produce in Thailand, it underscores a failure in understanding our opportunity. China produces about 10 million tourists to Thailand while we are getting only about 300,000. UK, which is the 10th producer in Thailand, sends over 1 million while we are getting only about 200,000. We can do significantly better with our own top 10 markets. This is with our existing products and existing markets. Both these are low hanging fruits and we are better than Thailand in most of the product attributes.

Having a 4 million target is also sub optimal as once we hit the 4 million number there will be a supply gap as we are planning our supply for 4 million. What we need is fact based, bench marked strategic planning and we can easily get to 10 million by 2025.

Policy mismatches

I think, the policy mismatches are not just for the tourism industry but the entire country is suffering as a result of very bad and naïve old-fashioned policymaking. In general, I think the whole policymaking mechanism should be completely overhauled.

Today technocratic economists and corrupt politicians draft policy. Unfortunately, these are people who have in most cases never run a business, have not created any jobs, and who seem to have minimal knowledge about competition in the global market.

Modern policymaking has changed and the process starts with businesses coming up with ideas and new projects based on their industry realities and then policy being created to enable these new businesses that contributes to growth. This way the policy is much more targeted and relevant.

Taxing the industry

In the tourism sector, there are few immediate policy corrections that are needed if we are to be competitive and realize the true potential. The government has rendered us uncompetitive from a regional context by imposing over 21 per cent in taxes. The VAT in Thailand is only 7 per cent and the total taxes a tourist pays is less than 10 per cent. In Indonesia its only 10 per cent, in Malaysia its only 6 per cent; however a tourist coming to Sri Lanka pays 21 per cent.

A potential tourist can go to Phuket, Langkawi, or Bali at a lower price and get a better product. This is a clear example where blanket policymaking is not working.

We need to immediately relook at our tax structure and reduce the taxes on industries that have the potential to take this country forward and make them competitive. This is about creating a level playing field and enabling the industries to compete globally.

Another issue related to taxes and duties are our construction costs. Our construction costs are about 40 per cent more compared to Indonesia and about 20 per cent more compared to Thailand. This again makes us uncompetitive even before we start, as we have to charge a higher price for a similar product, as our cost of production is high. This is also rendering us a weak investment destination as investment returns are less as the same room rate/cost per key ratio is less at any given room rate in Sri Lanka.

Also, skills transfer through foreign labour participation is a key for the industry as we grow and need more clear and transparent policy on this.

What is disappointing is we are killing our own golden goose through bad politics and sub-standard policymaking.

The writer is Founder and CEO of Santani Resort and Spa and also worked as a Lead Consultant to the Malaysian Finance Ministry in developing that country’s Economic Transformation Programme and the Outcome Based Planning project. He can be reached at vickum@santani.lk