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Weaker rupee to lead swift tourism industry recovery

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Weaker rupee has better positioned SL as a low-cost tourist destination- CT CLSA
Tourist arrivals projected to surpass pre-crisis levels in 2024
This year’s tourism earnings expected at US $ 1.3bn, US $ 3.5bn in 2023 and US $ 4.6bn in 2024
Lifting of outbound travel restrictions in China to contribute significantly to tourism demand in long term

Following the sharp depreciation of the currency, Sri Lanka’s tourism industry is anticipated to make a rapid and steady recovery in this winter season, with visitor numbers approaching pre-crisis levels in 2024, driven by the nation’s growing attractiveness as a low-cost travel destination.

According to CT CLSA Securities’ most recent research report on the country’s tourism industry, “Considering the near-term arrival growth, a swift recovery in the operations of the tourism industry is expected during the winter season (from December 2022) as the steep currency depreciation has better positioned Sri Lanka as a low-cost tourist destination, respectively.”

Additionally, it continued, “We think that a gradual recovery can be sustained over the period of 2023E and 2024E, supporting the business segment to be continuously profitable as observed before 2019.”

As a result, it is anticipated that the number of tourists arriving would double, from 0.7 million this year to 1.8 million the next year, before returning to the pre-crisis level of 2.4 million in 2024.

Accordingly, the top stockbroking business predicted that by the end of this year, the country’s tourism revenues would double to US $ 1.3 billion, and by the end of the next two years, they would double again to US $ 3.5 billion and US $ 4.6 billion, respectively.

It was emphasized that the recent depreciation of the rupee is allowing the country to draw tourists from new source markets in addition to more people from the existing ones, and that the country is continuing to be popular as a travel destination due to its distinctive and one-of-a-kind array of offerings.

An improvement in tourist arrivals was seen in recent months due to the reduction in social disturbance and the withdrawal of travel advisories by the major source markets. This was further fueled by the return of service by well-known carriers like Aeroflot, Azur Air, and Air France to Sri Lanka. Furthermore, CT CLSA anticipates that the anticipated easing of China’s limitations on outbound travel will have a substantial long-term impact on travel demand. China was one of the top three source markets for Sri Lankan tourism before the outbreak.

As of December 7, the Sri Lanka Tourism Development Authority (SLTDA) reported that there had been 644,186 tourist arrivals. At the same time, tourism revenue exceeded $1 billion for the first time since 2019 by the end of November.

The annual room occupancy levels are projected to have increased this year to around 30% from below 20% during the previous two years. Despite the negative incidents, tourists stayed an average of 15 days (nights) last year, up from 10 days in 2019. Similar to this, the daily revenue from individual tourists increased by 6% during a 10-year CAGR between 2011 and 2021, reaching US $ 173 in 2021.

Sri Lanka had 47,337 officially listed rooms as of the end of 2021, and the SLTDA had approved projects in the hospitality sector totaling US $ 3.9 billion.

Before the industry was impacted by numerous crises, Sri Lanka’s visitor arrivals and revenues peaked in 2018 at 2.3 million and US $ 4.4 billion, respectively.

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