Sri Lanka’s Tourism Industry to Invest over Rs 10bn as 2.5mn Visitors are Expected by 2016 Up from 447,890 in 2009

28th March 2010, www.nation.lk, By Santhush Fernando

Sri Lanka’s bullish tourism industry players are to invest over Rs. 10 bn. within the next three years into the industry which is earmarked as the most buoyant thrust industry the country is to see during the next few years.

One of the country’s largest travel and leisure sector players- Aitken Spence will invest Rs. 2.5 bn while the next two biggest hotel chains- John Keells Holdings (JKH) and Jetwings Group are planning to invest nearly Rs. 3.6 bn each.

Managing Director of Aitken Spence Hotels, Malin Hapugoda, told The Nation Economist that Aitken Spence Hotels Holdings PLC declared a rights issue to raise nearly Rs. 2,500 mn to finance new projects/investments to maintain the Company’s position as a leader in the hotel industry. “We will heavily invest in tourism as our hotels would contribute more than what they contributed in the past. We are looking at strategic ventures at strategic locations. Out of Rs. 2.5 bn raised, Rs. 625 will be set apart for hotel development in the North and East under which 108 acres in Nilaveli has been set apart for mixed development project complete with luxury chalets and apartments,” he said.

“We are also looking at converting the 64-roomed Neptune Hotel, Beruwala, into a specialised Ayurveda and Wellness Resort and to brand it as ‘Heritance Mahagedera’ at a cost of Rs. 375mn. Furthermore, a Rs. 625mn joint venture with the international resort chain - Sixth Senses, to construct a boutique resort in the south west coast is also on the cards,” he added.

“The remaining Rs. 625mn is set apart for investments in India, one of which is the Heritance Cochin project, which with its 57 luxury floating villas will commence operations by November 2011 in the backwaters of Kerala,” Hapugoda said.
“Although Aitken Spence owns and manages nearly 2,300 rooms, only 864 are in Sri Lanka, another 375 are in India, 440 in Oman and another 600 in Maldives, in a bid to reduce the risk that had been posed to the country during the three decade old war. After the end of the war, its focal destination would now be Sri Lanka,” he added.

Speaking to The Nation Economist, head of Cinnamon Hotels and Business Development of the John Keells Holdings (JKH) Roshan Gurusinghe said that the Group was looking at extensive expansion in the hotel industry. “There is a lot in the pipeline. The South Wing of the Cinnamon Grand Hotel, comprising of 254 rooms, will be re-furbished during the next few months at a cost of Rs. 400mn,” Gurusinghe said.
In view of the substantial plans for expansion, John Keells Hotels (KHL) announced a rights issue to raise roughly Rs. 3.64 bn. The proceeds of the Rights Issue will be utilised to fund the refurbishment of hotels in Sri Lanka as well as for new hotel projects and for the acquisition of land for new resorts.

The current portfolio of KHL PLC, consists of seven resorts in Sri Lanka (772 rooms), four resorts in Maldives (440 rooms) and four prime properties in Sri Lanka, in which KHL plans to build 410 more rooms along the South and East coast within the next two years, with the proceeds of the rights issue. Refurbishing of 133 roomed Bentota Beach Resort and re-branding as “Cinnamon Beach Bentota” and renovating and re-branding of 115-roomed Coral Gardens, Hikkaduwa, will cost Rs. 800mn each. Constructing of 100-roomed new resort in Ahungalla is to cost Rs. 1.6bn, while another would be spent on building a 190-roomed resort in Beruwala. Re-branding of Club Oceanic in Trincomalee as 56-roomed Chaaya Blue at a consideration of Rs. 400mn and adding of a new 120-roomed hotel in East coast would cost Rs. 1.3bn respectively.

The Country’s third largest resort chain- Jetwings is also anticipating to aggressively expand but when compared with its rivals is unlikely to go for cash calls. “There are many other ways of raising the necessary funds than going for Initial Public Offerings (IPOs) or rights issues. We too have plans of expanding,” Managing Director of Jetwing Hotels Hiran Cooray said.

“The renovating of Jetwings Blue Oceanic and renaming it as Jetwings Blue will cost us nearly Rs. 800 mn while upgrading of Seashells also in Negombo into Jetwing Sea will cost Rs. 400mn. We are hoping to build two resorts in Trincomalee in Kuchchuveli and Uppuveli, respectively, for which we will spend close to Rs. 800 each,” he added.

“We will also rebuild Yala Safari Game Lodge, which was destroyed by the 2004 Tsunami, bearing a cost of Rs. 400mn, once we get the required land from the government. Finally, we will spend another Rs. 500 to 600 for our 80-room project in Balapitiya,” Cooray added.

Meanwhile, a tourism sector analyst said that nearly 1,000 rooms are earmarked by Small and Medium Enterprises (SMEs) to undergo renovation, in an exercise that will cost almost Rs. 3bn. “So altogether over Rs. 10 bn worth of investments will flood the industry,” he said.

The government is hoping to attract 2.5 million visitors by 2016, up from 447,890 in 2009, the final year of the civil strife, while it is anticipated that Rs. 230 bn of tourist revenue would flow in annually by 2016, up from Rs. 40.25 bn earned in 2008.