Earnings from Tourism: Are we getting it right?

Abstract

Sri Lanka is expecting the earnings from tourism to play a significant role in driving the recovery of Sri Lanka’s foreign currency. However, there are important concerns accuracy of the estimated earnings from tourism. In 2018 Sri Lanka has the highest reported earnings from tourism of USD 4.4 Billion, while in 2019 the earnings from tourism dropped to USD 3.6 Billion. This earnings figure is a calculation done using three variables; 1. Number of tourists arrivals – (in 2019 – 1.91 Mn), 2. Average duration of stay by a tourist – (in 2019 – 10.4 days), 3. Foreign Exchange receipts per Tourists per day – (in 2019 – USD 181.23 per day). Problems with the Estimation - As mentioned above the foreign exchange receipts per tourist per day is calculated based on an exit survey done at the airport. Based on latest available data online (2018-19), the survey was done on 5,033 tourists and for 2019 foreign exchange receipts per tourist per day stands at USD 181.23 per day. However, this number seems exaggerated as for a couple it comes to USD 362 per night. With accommodation typically being the largest expenditure item for tourists, on average from 2012 to 2019 only 52% of tourist stay in hotels and only 11% out of the total tourists on average stayed in five-star hotels which could charge a premium for their room rates, while the rest of the tourists stay in other hotels or other supplementary accommodations which are unlikely to command a premium. Further, when comparing Sri Lanka’s foreign exchange receipts per tourists per day with Sri Lanka’s regional peers, the likely overestimation becomes evident, when compared to countries such as Indonesia, India, Vietnam, and Nepal where on average Sri Lanka ranks the highest in tourist expenditure per day. According to the recent data, for the month of January 2022, the Central Bank of Sri Lanka estimates tourism 82,327 tourists to arrive yielding revenue of USD 268 Mn, this translates to USD 3,255 per tourist. Hence a tourist staying 10 days would have to spend USD 325 per day and a tourist staying 20 days would still be paying USD162 per day. Even though the average length of stay may have increased due to the pandemic, it is likely that if the tourist is staying longer, they will likely switch to a cheaper option to manage total cost.