Following the expected under-performance in the tourism sector this year, Sri Lanka’s tourism is poised to reach new heights with tourist arrivals projected to reach 2.9 million generating US$ 5.4 billion income.
According to CT CLSA Securities, visa free access, outbound recovery of Chinese and European arrivals, increased air-connectivity and the new government’s heavy focus on tourism are set to drive tourism growth in 2025. In addition, large-scale private sector tourism projects such as Cinnamon Life and Downtown Duty-Free also will contribute to this growth.
“Our forecast for 2024E estimates 2.1 million arrivals (with US$ 3.5 billion earnings); however, due to current underperformance, it is unlikely to surpass the 2018 peak of 2.3 million arrivals.
Despite this, the projects in place to improve tourism are emerging. This, we expect arrivals for 2025E to surpass 2018 levels to 2.9 million arrivals,” CT CLSA Securities stated in a latest report.
In particular, it emphasised that the proposed free tourist visa for 39 countries would play a major role in tourist arrival growth next year in enhancing the country’s competitive edge. So far, five other prominent countries in the region including Indonesia, Malaysia, Singapore, Vietnam and Thailand have launched similar schemes to woo tourists.
The proposed scheme which is already approved by the Cabinet of Ministers is expected to come into force after Parliamentary Elections.
The tourism related-listed entities are expected to see improvement in financial performances including JKH and Aitken Spence in the second half of this financial year.
“While several tourism-related listed entities reported negative TTM earrings as of 1Q25, performance is projected to improve in 2H25E,” CT SLSA Securities noted.
With the reinstatement of the ETA system in late-September, Sri Lanka is positioned for a pick-up in connection to winter tourist arrivals.
“We anticipate demand to pick up towards the end of this year as the Peak season begins in October this year, along with reinstatement of the ETA system,” it said.
The report underscored that the new administration’s heavy focus on tourism could transform the sector to become a major contributor to the national economy.
“With ETA system now operational and free visa arrivals to Sri Lanka set to be implemented this year; along with the new government’s heavy focus on tourism as a heavy contributor to the country’s reforms, Sri Lanka holds a significant growth potential,” it added.
The new administration aims to revitalise the tourism sector by introducing new policy focused on boosting foreign tourist arrivals and enhancing infrastructure. Under the policy, it is proposed to establish National Tourism Commission (NTC) as the main tourism body.
Tourism Policy Formulation Council for policy guidance and development with experts from inside and outside the industry and the Sri Lanka Tourism Authority are to implement policies.
Meanwhile, room infrastructure has recorded a steady growth over the years in reacting to incoming demand .There has been a notable increase in guest houses, bungalows and home-stay units from 2018 to 2023 with the trend of growing backpackers who prefer low-cost accommodation.
At end of 2023, Sri Lanka’s room stock rose by 56 percent YoY to 53229 rooms , notably, guest house, bungalow and home-stay room units surged by 82 percent , 150 percent and 142 percent YoY in the period.
