Tourism in 2017

It’s no secret that Sri Lanka has seen a sharp rise in the number of tourists traveling to the island during the past decade, particularly after the end of the country’s 30-year long civil war. As indicated by the Sri Lanka Tourism Development Authority, 2017 recorded the highest number of tourist arrivals with 2,116,407 arrivals which was an increase of 3.2 percent from 2016. Throughout the year, the country’s tourism industry went through several ups and downs due to 3 major setbacks. The partial closure of the Bandaranaike International Airport from January to April 2017 for 8hrs, the disastrous floods which effected the southern half of the country and the dengue disease surrounding Colombo which lasted several months. The tourism arrivals went down over the first and second quarters of 2017, but rose in the third quarter. Tourism revenues increased to USD 287.40 Million in November from USD 261.50 Million in October. The number of tourist arrivals in December were 244,536 which was an 8.8 percent increase when compared to December 2016.

According to The Travel & Tourism Economic Impact 2017 Sri Lanka report, constructed by the World Travel & Tourism Council, the direct contribution of the tourism sector towards the country’s GDP in 2016 was USD4.4billion, 5.1% of total GDP. The sector contributes to the economic growth of the country in ways such as drawing foreign investments, infrastructural developments, and job creation.

What does this mean for real estate?

Some of Sri Lanka’s top travel destinations are Colombo, Kandy and Galle, and these are also some of the leading real estate hotspots in the country. As these regions attract more tourists, the need to establish better accommodation facilities, expands. Furthermore, the increase in tourist arrivals also calls for more foreign companies investing in the country. Over the past few years, Sri Lanka has performed well in terms of attracting foreign revenue. According to the US-based global information company IHS Inc, Sri Lanka was listed among the top 10 FDI hotspots in 2016. At present, many international companies namely, Shangri-La Group (Hong Kong/Singapore) which is a premier Asian luxury hotel chain, India’s upscale ITC Group, Thailand’s Minor Group, Spain’s RIU Hotels & Resorts, Singapore’s Aman Resorts, etc., have already made investments in Sri Lanka. As a result, the country was able to record the highest FDI in the year 2017 at USD 1.63 billion.

With the increasing number of tourists coming into the country, facilitating easy transportation links between prime cities such as Colombo, Kandy, Gampaha and Galle becomes crucial. As a result, Sri Lanka witnessed its first ever expressway from Colombo to the southern hub of Galle in 2011 and the Colombo to Katunayake expressway in 2013. Furthermore, highways from Katunayake to Anuradhapura, Colombo to the hill capital Kandy and from Anuradhapura to Jaffna at the northern tip of the country are being finalized. Developments in infrastructure leads to the growth in urbanization in such cities which as a result boosts the demand towards obtaining properties in these areas.

What type of properties can expect an increased demand due to the tourism industry?

The Sri Lankan government has a target of attracting more than four million tourists annually by 2020. As such, commercial properties focused on tourism as well as short-term residential properties offered for rent can expect a significant demand in the next few years.

According to Lamudi Sri Lanka’s in-house data, commercial property types directly linked with the hospitality industry such as Hotel/Leisure properties are becoming more widely available for new investors. Conversely, the trend also has a positive effect on properties such as Commercial Buildings, Retail properties as well as Lot/Land in coastal areas that are indirectly linked to the industry.

Apart from that, on-demand short-term rentals, such as Single-Family Houses, Villa/Bungalows, Short-term Rental Houses/ Apartments as well as Penthouse Apartments can expect a boosted demand in the near future.