What got us here

wont get us there

June 12, 2015, 9:06 pm

Key note Address delivered by

Srilal Miththapala
Bsc.Eng: C.Eng; FIEE; FIH
At AGM of the Institute of Hospitality UK, Sri Lanka Chapter
on June 111 2015, at the Ramada Hotel, Colombo

Where We Were

Sri Lanka has been known from time immemorial as an exotic destination visited by many
famous travelers. Everyone has employed superlatives to describe the natural beauty of our
island and hospitality we are so famous for. In the early 1960, we were the first South Asian
country to formalise and recognize tourism as an important industry and since then, tourism
has grown steadily in a relatively uncompetitive region until our internal strife began to take
toll on the hospitality industry from around the late 1970s up until 2008.

The light at the end of this long dark tunnel finally arrived in the 2008 with the ending of the
war which immediately transformed the country once again into a safe tourist destination,
fueling an immediate turn around.

Now let us see what got us here.

What Got Us Here

During these 25+ years of strife, it was the resilience and tenacity of the tourism
professionals which kept the industry alive. The strategy was simpleone of pure survival.
This included accepting any segments of tourists at whatever price, reducing and managing
costs, maintaining the plant in good working condition while major development,
improvement and innovation took a back seat. No doubt these were correct strategies, given
the environment that prevailed at that time. In spite of the security situation, tourist numbers
never declined to fewer than 350,000 a year. The quality and service did not suffer and we
earned a reputation as a good bargain destination. We continued to attend international trade
fairs which were the few opportunities that were available to show case that Sri Lanka was
still open for business and safe for tourists to visit. We initiated several sales promotions and
price driven gimmicks to entice tourists to visit the country in spite of the negative publicity.
Buy one get one free, stay 14 days but pay for 10 days, and all other kinds of creative
discounts were resorted to.
This strong price driven discounting sales strategy supported by an extremely lean and mean
operational model was very successful in getting through Sri Lanka tourism to here. In fact,
the former Chairman of Sri Lanka tourism, my friend, Mr. Renton de Alwis used to say that
Sri Lanka hoteliers were crisis junkiesand he may have been correct; we thrived in
operating very effectively in so many crisis situations.

Ironically, the long and protracted war gave us considerable publicity albeit bad, day in day
out. If one were to calculate the total prime time media exposure that Sri Lanka got during
this period, it could possibly run into millions of dollars. Even with this negative publicity, Sri
Lanka was still portrayed as a beautiful tropical island which was going through a horrible
internal war situation. As a result, when hostilities ceased, there was an immediate pent-up
demand to visit the country, which drove, and is possibly still driving Sri Lanka tourism
growth.

So where are we now? Let us now move to the here.

Here

a. Arrivals

As indicated earlier, in the immediate aftermath of the war, the tourism industry was the first
to bounce back with arrival numbers immediately going up in the very next few months after
the war ended. This is adequate proof that tourism is indeed an industry of peace. All other
industries did recover, but they took considerable time to do so.

Since then, arrivals have grown from about 450,000 in 2008 to around 1.5 m in 2014 with
good sustained year-on-year double digit growth. Many hotels have started making profit and
are investing back some of these earning to upgrade the plant. In the meantime, many new
hotels have been built and/or are being built, all over the country.

b. Rooms

Sri Lanka had 279 conventional hotels as at 2013 (ref. SLTDA statistics) with 16,223 rooms
together with another 688 supplementary accommodation units with 7,373 rooms, making a
total inventory of 23,596 rooms. It must be noted that this does not take into account the
numerous unregistered small accommodation units that have cropped up in almost every
tourist city in Sri Lanka they are effectively adding to the room stock. No proper data is
available regarding this informal and unregistered sector with some estimating that the room
strength in this category to be high as 5,000 or more.
According to the Sri Lanka Tourism Development Authority (SLTDA), there are some 96 new
projects that have been approved so far and they will add approximately another 10,000
rooms to the existing stock. This would mean that, within 2-3 years time, when all these new
properties come on stream, there will be about 33,500 rooms in the country (without the
informal sector).

c. Market

There is a substantial shift in the arrival pattern with the traditional markets of UK and
Europe falling somewhat behind with India emerging as our foremost tourism segment. The
numbers from China and Middle East also keep growing and there is much excitement about
the growth of these new and emerging markets.

d. Growth

While certainly there has been steady growth over the years, it is interesting to note that the
year-on-year growth percentage has been steadily declining from 50% in 2010, 30% in 2011,
17% in 2012 and 19% 2013. Hence, there has to be some caution exercised in being overly
excited in these growth figures since it appears that euphoria of the post war boom is slowly
petering out.

This gives some credibility to the argument that there has been no major strategic marketing
thrust in the last five years and that we have got to here from there, primarily riding the
post war boom.

e. Visitor Profiles

There seems to have been consolidation of room demand in both the upper luxury end/
boutique properties, as well as in the lower end home stays/BB informal accommodation
units. It appears that four star hotels are currently in a bit of a no-mans land, caught in a
mid-rate trap. This is being fueled by two categories of tourists, the luxury end and the more
rustic, experience seeking tourists at the lower end. This seems to be borne out by the fact
that most boutique hotels and higher grade resorts are doing better than the middle level
hotels. In 2013, five star hotels achieved close upon 72% year round occupancy while four
and star hotels had only 70% occupancy. On the other end of the scale, there are the more
discerning environment conscious tourists who are seeking authenticity and experience,
shunning the big conventional hotels, and preferring smaller rustic units, where they
experience Sri Lankan authenticity and culture in a much better manner. They seem to be
having disposable income, but want to spend it not on accommodation, but on other
experience seeking activities. This emerging segment has often been called flash- packers by
the industry they have the same characteristics of the budget back-packers (carry one tote
bag, travel light, use public transport, travelling in small groups etc) but having disposable
income in their pockets.

Now let us turn to the there part.

There where do we want to go?

Quite honestly, I think we who are involved with Sri Lanka tourism are not quite sure
ourselves where exactly we want to go.

We have conflicting statements of 2.5 million tourists by 2016, 4 m by 2018, and I recently
even heard a number of six million being talked about in the next five years. We as the
tourism professionals know that tourism is not driven by numbers alone. There are three
important elements that make the business of tourism successfularrivals, yield or earning
per tourist and the correct market mix.

Some of us say that we are still selling cheap, and that our room rates should be increased.
At the same time, some others say that we have out-priced ourselves. What is the current
situation? Do we really know?

Some say we must attract more high-end tourists, while some others say we should follow
the mixed model like Thailand. Which do we want?

Recently, I listened to the Prime Minister articulating some thoughts on Sri Lanka tourism, at
a cocktail party, where he talked about quality tourists as against quantity. He very correctly
pointed out that Europe and the West would still constitute the base load for Sri Lanka
tourism, while the new emerging markets would only be the icing on the cake and fillers for
off season lulls. I tend to agree with him and have been personally a bit skeptical about the
so-called large increase in the Chinese market. Most of us in the hotel sector know what sort
of rates we are getting from such groups. Is it this quality of tourists that we need to attract
to simply chalk up the numbers?

We have meandered through many tourism slogans from a Land like no other to Small
miracle, 8 Experiences in 8 days , Refreshingly Sri Lanka, Wonder of Asia, One island:
thousand treasures and most recently One million tree stories. There has been no consistent
message. What is the real differentiation and USP of Sri Lanka tourism? I dont think anyone
of us have a clear picture. We all need to agree on this before we embark on any form of
strategic marketing or development, since the products and services must follow the overall
positioning of Sri Lanka tourism.
Some years ago, for the first time, we all came together, and worked with many professionals
of diverse fields, together with foreign facilitators and marketing experts, and produced what
I think was possibly Sri Lankas best positioning statement Asias most authentic, diverse and
compact is land. In my mind, this encapsulates everything that Sri Lanka stands for, and
should be the bedrock on which all future marketing and development must take place.

This positioning statement encompasses the very important aspects of environment

sustainability, which is fast becoming a major differentiating factor in tourism.

Sri Lanka is an island nation with only 65,000 sq km of land and our rich natural heritage and
culture are Sri Lanka Tourisms most precious assets.

Given the pristine and unique nature of our environment and the small land mass of our
island, it is extremely vital therefore that tourism development should take into careful
consideration the disruption and damage that may be caused to the environment, culture and
authenticity of our country.

Has anyone given any thought of carrying capacity, and that there should be careful
monitoring, and even restriction on development and visitation to certain areas?

It is due to this very reason, that careful planning of tourism development has to be
undertaken to ensure that strict environmental guidelines are in place for development.

Of late, in the quest for fast track tourism development, the environment has taken
somewhat a backseat when new projects are approved. Hotels of various kinds and sizes,
including hitherto unseen high rise buildings on the beach, are cropping up all over the
country, sometimes circumventing the environment and building guidelines.

Therefore, environmental sustainability has very definitely to be woven deep into the brand
ethos of Sri Lanka Tourism.

So, in the post war scenario, we seem to be in a somewhat confused state, trying to establish
what Sri Lanka tourism really should portray, and what are proper targets are.

Last year, the key note speaker at the AGM of IH, Dr. Saman Kelegama, Executive Director of
the Institute of Policy Studies, stated that "Sri Lanka lacked a collective marketing strategy
and campaign, based on a nationally agreed privatepublic sector partnership. Firstly, does
Sri Lanka have an effective brand destination? Second, is there a general marketing strategy
for tourism? To match the slogan, Wonder of Asia, what are the wonders that Sri Lanka
possesses? Therefore, it is questionable whether the branding of the destination is correctly
placed."

David Keen, CEO of Quo, a hospitality branding specialist, speaking at the recently concluded
Hospitality Investment Conference Indian Ocean (HICIO) 2015 said: "I would reckon the ( Sri
Lankan) product hotel rates are underpriced by at least 50 per cent because you have a value
proposition that is very diverse and rich, and can command a higher premium You need to
move forward. Sri Lanka tourism needs to redefine the brand proposition of Sri Lanka with all
its diversity, richness, colour and natural beauty. Sri Lanka has such a breadth of diversity
but the Wonder of Asia doesnt talk about the incredible offerings like kids going to school,
devotees in temples, churches, chatter on the streets, lifestyles, cooking a curry,"

A foreign tourist who had visited Sri Lanka often recently asked for a packaged tour of Sri
Lanka, and found that the offering was similar to that she experienced 10-15 years ago. "It
was no different. I have been visiting Sri Lanka for many years and the package was the
same as 10-15 years ago. You need to change your product, you need to provide
experiences."

So, I believe we, most of us are operating in our post-war comfort zones, treading the same
familiar cow paths and meandering around without a clear focus. Therefore, it is essential
that the entire industry, both private and public sectors, clearly come together to decide on
the overall vision and focus on Sri Lanka tourism.

How to get there

As indicated earlier, the world tourism environment has gone through dramatic changes
during the past few years fueled by rapidly changing technology, different lifestyles and
demands of tourists.

Therefore, I believe that we should call time and take a step backwards and reassess our
entire strategy. We need to carefully identify what our tourism policy will be; what the brand
and positioning that we need to articulate to the world. Failing to plan is planning to fail!

The same strategies which we practiced before,will certainly not get us From here to there

Consistency should be the key.

We also have to guard against quick fixes. While certainly the low hanging fruit must be
capitalised upon; caution should be exercised in launching multiple, disjointed campaigns
which could clutter the perception of Sri Lanka in the market. In trying to grab at every
opportunity for publicity we may be damaging the overall positioning of Sri Lanka in the world
and sending confusing messages to the market.

The crying need is for a proper strategic vision for Sri Lanka Tourism, and a Marketing Plan

I do realise that the current administration has its work cut out and are working under trying
circumstances and constraints. But, it is time we pulled up our socks and took a long, hard
look at how we need to get there.

The private sector has also been selfish and preoccupied with its own business activities
without spending time on the national issue of Sri Lanka tourism. We have sat back and
criticised the authorities without taking the leadership ourselves.

Given the constraints under which the SLTPB is working, I am aware that an urgent short
term marketing plan has been prepared for the next one year. This encompasses primarily
activities related to trade fairs in a cross section of countries.

However, what is required now is a more holistic, all-encompassing detailed strategic plan
and a clear road map, backed by a consistent brand value proposition, and positioning.

This is the crying need of the day if we are really to get there.

Need for quality trained staff

To get to there, we need good frontline people for our industry. All of us know that the
tourism industry succeeds because of its frontline staff and services they provide. Currently,
there is a major shortage of both quality and quantity in this area.

In 2013, we had 112,558 staff directly employed in tourism while another 157,600 were
indirectly employed the total number being 270,158. ( Ref SLTDA)

If we pro-rate the future staff requirements, based on the arrivals, the staff numbers required
to service about 2.5 m to 3 m tourists will be about 365, 000, which is almost a 100,000
shortfall in the next few years. If we are trying to ramp up the arrivals to 6 m, we can work
out the math and see what the consequences are.

I believe that this is an equally important aspect that we are neglecting and quite possibly we
could be sitting on a time bomb with a slow fuse.
This also has to be addressed in a holistic analytical manner urgently if Sri Lanka is not to
lose its advantage asa genuinely warm hospitable destination.

Reliable Data and Analysis

There is no doubt that the Sri Lanka tourism market is now maturing and facing stiff
international competition from its neighbours. Responding to these challenges requires
analytical assessment, study and research of data and emerging trends. For any analysis,
timely and accurate data is essential. This is vital, and without it, we will be groping in the
dark.

It is only the SLTDA, which produces a comprehensive statistical report, but how many of us
really analyze and study these statistics to understand the underline trends?

In the past, there have been controversies about the reliability of some of this data and also
there had been inordinate delays in the release of this data. I am aware that the new
administration is actively taking steps to remedy this situation, and we all hope that the 2014
annual statistical report, which would should have been released in early 2015, will be soon
published by the SLTDA.

Over and above this, I believe Sri Lanka tourism needs establish a Think Tank of a group of
tourism leaders and analysts,working independently, to study and research the available data
and statistics,and to produce meaningful evaluations, based on which, the industry can take
strategic decisions.

To conclude, I hope I have been able to stimulate some thinking in all of us, and generate an
urgent call for action. I may have ruffled some feathers, and trod on some toes- but that
was done in good faith.

We should all, therefore, take this opportunity of making a fresh start under a good
private/public sector interactive partnership, to develop Sri Lanka tourism in a better and
sustainable manner so that we could move forward boldly, and to get there.