Terror attacks could undo a decade of Sri Lanka tourism growth

The Shangri-La Colombo, before it was hit with an explosion. Photo credit: Shangri-La Hotels and Resorts

In the 10 years since its decades-long civil war ended—a war in which no international visitors were reportedly killed—Sri Lanka has seen an influx of visitors and hotel development. On Sunday, however, eight explosions devastated popular attractions across the country—including churches and hotels, packed for Easter services and Sunday brunches, respectively—leaving nearly 300 people dead and more than 500 injured. An estimated 30 of the dead were international tourists.

According to the BBC, the affected hotels were the Shangri-La, Kingsbury and Cinnamon Grand hotels in Colombo. Another blast damaged a guesthouse, the Tropical Inn Hotel in Dehiwala, later in the day.

Shangri-La Hotels and Resorts issued a statement that the company's team was "deeply saddened and shocked by the incident" and that their "thoughts and prayers are with the families of the casualties and those who have been affected." A Shangri-La crisis-management team has been activated to provide all necessary support, the company added, and the team reportedly is working with local authorities and emergency services to support staff and guests. "As this is an active investigation, we are unable to comment further at this stage. We will provide an update once more information is available."

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On its Facebook page, representatives from The Kingsbury Hotel said that team members were “completely aligned with authorities and law enforcement,” and that the property has been isolated for further clearance and safety requirements. The Cinnamon Grand posted a statement on its website:

Cinnamon Grand Statement

The human cost is incalculable, but the damage to the country's steadily growing tourism economy may also leave wounds

Growing Interest

The terror attacks came as Sri Lanka is seeing increased interest from hotel developers. A year ago, Sri Lankan real estate developer Melwa Hotels & Resorts, a subsidiary of domestic steel manufacturer Melwire Rolling, secured a $24 million loan to develop Hilton-branded hotels in the country. The total funding requirement to construct the hotels is slated to exceed $100 million. 

Last summer, IHG signed a management contract with Pearl Grand Tower Hotel to bring its flagship InterContinental brand to Colombo, Sri Lanka's commercial capital and most populous city. The 307-room InterContinental Colombo is slated to open later this year, and is expected to be the tallest hotel tower in the city with 42 floors.

Earlier this year, Hilton announced plans to open the DoubleTree by Hilton Weerawila Rajawarna Resort, close to three of the top 10 most-visited wildlife national park and sanctuaries in Sri Lanka.  

And just this month, Nikki Beach Hotels and Resorts announced plans to expand into Sri Lanka, with a new development slated for Balapitya beach.

Growing Visitor Numbers

Tourist arrivals have increased year over year for the first three months of 2019, up 2.2 percent for January, 7 percent in February and 4.7 percent in March. For the first quarter of 2019, the country had recorded 740,600 visitors, up 4.6 percent from the same quarter in 2018. This could be attributed to the country's ranking at the top of Lonely Planet's Best in Travel list for 2019. In total, Sri Lanka reported 2.3 million visitors in 2018, up from 654,476 in 2010. 

Increased demand has driven supply. As of the end of December, the Sri Lanka Tourism Development Authority had 2,312 accommodation establishments (including hotels and guesthouses) with 38,214 rooms. Of these establishments, only 145 are traditional hotels (with 13,408 guestrooms, more than half of which are in Colombo), and of those, only 23 were in the luxury category. Instead, the SLTDA noted that guesthouses, home-shares and bungalows dominate the industry, offering a guide to developers of where demand is strongest. 

Through the end of 2018, the Sri Lanka Tourism Development Authority had granted final approval to 350 hotels for the country. A further 103 projects are under construction, 193 are in operation and 54 tourism investment projects have not yet commenced. In total, the SLTDA has approved development of 18,760 guestrooms across the country at an estimated total value of $2.9 billion. Most of these projects have fewer than 49 rooms, and only 22 have more than 200 guestrooms.

What Happens Next

Since the explosions, visitors are "flocking" to the main airport and "cutting short their vacations" in fear of more devastation. Kishu Gomes, chairman of the Sri Lanka Tourism Development Authority, told Bloomberg he couldn’t give an exact count of the number of people leaving, but the numbers could reach the thousands. Tour operators in India—reportedly the biggest source market for visitors to Sri Lanka—also are canceling trips. But Pronab Sarkar, president of the Indian Association of Tour Operators, told the paper that any downturn should be short-lived—probably two weeks, he estimated. "The government can’t afford to let that sink again," he said of Sri Lanka’s rejuvenated tourism sector.

Still, several of the bigger hotels in Colombo, including the Taj Samudra and Ramada, have erected barricades around the properties and were reportedly checking vehicles entering the premises. 

According to local paper Daily FT, Tourism Minister John Amaratunga met with leaders from the Hotels Association of Sri Lanka, Colombo City Hotels Association and Sri Lanka Association of Inbound Tour Operators to take stock of the damage and discuss security measures. Sources told the paper that some of the affected hotels have decided not to accommodate locals as a temporary precautionary measure, and prebooked guests will be given the option to check in at other unaffected hotels as well. 

Gomes, who also attended the meeting, told the Daily FT that the SLTDA has assured all city hotels of providing whatever assistance they need. “Security has been beefed up at all city hotels right now,” he added.

Bloomberg noted that Sri Lanka's tourism industries contribute almost 5 percent to the country's economy.  

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