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Friday, April 23, 2010

Sri Lanka braced for tourist onslaught

Tourism is rebounding so quickly in Sri Lanka after the end of the island’s civil war that in one or two years the country will lack the hotel capacity to meet visitor arrivals, according to the head of the country’s biggest listed company.

Ajit Gunawardene, chief executive of John Keells, said Sri Lanka’s existing tourist infrastructure could handle a maximum of 800,000 visitors a year, comfortably meeting expected demand this year of 500,000.

But in the next one or two years, visitors arrivals are expected to double and then double again two years later to 2m, suggesting that unless the country embarks on a hotel construction boom it will fail to meet demand.

“This gives you an indication of the type of momentum we want to maintain,” Mr Gunawardene said.

Investors in Sri Lanka are betting that the island’s violent past is behind it following the defeat of the rebel Liberation Tigers of Tamil Eelam last May in its battle for an independent Tamil homeland in the north and east.

Hopes of political stability have been fuelled by landslide victories in the presidential and parliamentary elections this year by the incumbent leader, Mahinda Rajapaksa, and his ruling coalition, the United People’s Freedom Alliance.

Sri Lanka’s market is up 22 per cent so far this year.

The rally has been led by John Keells, which accounts for about 10 per cent of market capitalisation and is expected to be one of the key beneficiaries of the economic recovery given its interests in hotels, ports and retail.

“The UPFA’s win bodes well for policy continuity and investment-led growth,” said Anushka Shah, an economist at Citigroup.

Tourist arrivals have risen for 10 consecutive months since May and were up 29.3 per cent in the nine months ended March 31 compared with a year earlier.

Mr Gunawardene said John Keells had begun renovating existing hotels and building new ones to meet the tourism boom.

It is upgrading its major hotel in Colombo, overhauling a hotel in Trincomalee in the war-torn east as well as building more tourist hotels in the popular south.

John Keells also plans to participate in the expansion of Colombo’s port, which is strategically placed on shipping lanes between Europe, the Middle East and China.

The group is expected to bid with its partner Denmark’s Maersk for an additional terminal when the port’s capacity is increased to 16m twenty foot equivalent units a year over the next decade. That would make it South Asia’s biggest port.

Tenders for the three new terminals in phase I are expected to be valued at about $500m.

By Joe Leahy in Colombo
Financial Times


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