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The Current Situation of Tourism Industry in Sri Lanka

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Sri Lanka, an island nation located in the Indian Ocean, has long been a popular destination for
tourists due to its diverse culture, stunning natural landscapes, and rich history.
One of the main draws for tourists to Sri Lanka is the country’s natural beauty. The island nation
is home to a diverse range of ecosystems, including rainforests, beaches, and wildlife reserves.
The country is also home to many national parks, including Yala and Udawalawe, which are
popular with tourists looking to spot elephants, leopards, and other wildlife.

In addition to its natural beauty, Sri Lanka is also known for its rich culture and history. The
country has a long and complex history, with influences from various cultures such as Sinhalese,
Tamils, Moors, Portuguese, Dutch and British. This can be seen in the many ancient cities,
temples, and palaces that are scattered throughout the country. Some of the most famous
historical sites include the ancient city of Sigiriya, the Temple of the Tooth Relic in Kandy, and the rock fortress of Sigiriya. Sri Lanka has ranked 74th out of 141 countries in the Travel &
Tourism Competitiveness Report 2021 of the World Economic Forum. Tourism offers both investment and trade opportunities.  The government currently offers beach land and islets for tourism development.  Eastern Sri Lanka is an area that offers significant potential due to the quality of beaches in this area.  Locations such as Pasekudah and Arugam Bay are premier destinations, especially for surfing enthusiasts.

Tourism has traditionally been the third largest foreign exchange earner in the country and a
major contributor to Sri Lanka’s economy, accounting for around 5% of the country’s GDP. In
2018, over 2.5 million tourists visited Sri Lanka, generating revenue of over $4 billion. This
revenue is crucial for the country’s development and helps to create jobs in the hospitality and
tourism industry. However, the effects of the COVID-19 pandemic and ongoing economic crisis
crippled the sector in 2020 onward. In 2021 approximately 194,500 tourists arrived and it was a
92 percent reduction, but the government’s 2022 estimates are more promising at 496,400
arrivals as of August.  There is optimism that the sector can emerge strong in 2022-2023 subject
to political stability, economic recovery, and no further major pandemic outbreaks.  It is
estimated that the sector earned around $633 million3.5 billion in 2021. Increased tourism drove
significant growth in the restaurant industry until the global pandemic.
Sri Lanka’s hospitality and tourism industry is also expected to benefit from the country’s
growing reputation as a destination for sustainable tourism. The country has a strong
commitment to protecting its natural and cultural heritage, and many hotels and tour operators
are now offering eco-friendly and sustainable options for tourists. This is an important area of
growth for the country, as it helps to ensure that tourism can continue to benefit the country’s
economy in the long-term, while also preserving its natural and cultural heritage.
Sri Lanka’s tourism sector also contributes to direct and indirect employment of Sri Lankans,
which has been steadily rising over the last few years until the pandemic hit. The total
employment provided by this sector stood at approximately 403,000 in 2019.

The tourism industry is highly susceptible to crises and tourism demand is strongly influenced by
the economic, social, environmental, health and political aspects of a destination. Throughout the course of history, the tourism industry has encountered overwhelming challenges, in 2019 Easter Sunday Bombings marked the beginning of the collapse of this industry. This was followed by the double-whammy of the COVID-19 pandemic, this bringing the industry almost entirely to a
standstill. After two years of limited recovery, starting in September 2021, a gradual rebound
was experienced in international arrivals to Sri Lanka. However, the latest economic crisis has
started to impact this recovery.

The country faced a horrific terrorist incident in April 2019, when the Easter Sunday Bombings
in the national capital of Colombo, resulted in the deaths of 250 people, of which 42 were
foreign nationals travelling to Sri Lanka. Many of the establishments across Sri Lanka were
forced to pull down their shutters for days in the aftermath of the incident. Other countries were
hasty in putting out travel advisories that warned their citizens to not travel to the island nation.
Tourists exited the nation in large numbers, and the number of visitors fell by more than 70
percent in May and over 60 percent in June compared to the same months in the previous year.
With the current foreign exchange crisis and price hikes coupled with scarcity of essential items
such as gas and petrol, the tourism industry in Sri Lanka has yet another challenge to navigate.
The full supply chain of the industry has been affected, with businesses grappling to keep up
their daily operations. Import restrictions imposed due to the foreign exchange crisis has further
caused disruptions in the supply chain and ability for tourism businesses to deliver products,
services and experiences to tourists.
The latest statistics from the central bank show that for the first time since the pandemic hit,
tourism earnings during the first three months of 2023 crossed the $500 million mark, reaching
$529 million. The number of arrivals in the first quarter reached 335,679 nearly half the 719,978
recorded last year when months of political unrest created yet another disincentive for travelers.
Another 105,498 came in April.

Tourism is expected to play a critical role in the country’s economic recovery by attracting
foreign exchange revenues and supplementing the growth rate in the next years. With the
government looking for a way out of the economic crisis it finds itself in, the tourism sector, which in the past has been a source of much pride for the Sri Lankan economy, would be expected to resurrect its fortunes.
In conclusion, tourism is an essential sector for Sri Lanka’s economy, and the country’s natural
beauty and rich culture and history continues to draw visitors from all over the world. The
country’s growing reputation as a destination for sustainable tourism, is also expected to boost
the country’s economy. With the world recovering from the pandemic, there is a huge potential
for the tourism industry to grow in 2023 and beyond.



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