sri lanka tourism sector summary overview - 2011-2020 · outbound tourism grows at a cagr of 10%...
TRANSCRIPT
Sri Lanka Tourism Sector Summary
Overview - 2011-2020
20/20 Vision:
Coming into Focus
August 2011See important disclaimers on p. 31
Concentration
of 4-5 star
hotels
Contents
2
I. 2.6m visitors by 2020 possible if shortages of
rooms and workers addressed
II. India likely to lead robust arrivals growth, with
China a wild card
III. Higher-end hotels likely to prosper
Page No.
5
13
26
Executive Summary: A 15% tourist arrivals Cagr (2011-20) is
possible, but not easy
Shortages in graded rooms and qualified workers are two of the
greatest challenges the industry will have to overcome
India may become the single most important source market and
China remains a dark horse with enormous potential, while arrivals
from W. Europe may taper off from current high levels
With regard to investment opportunities, 4-5 star hotels on the south
coast are more attractively positioned than 3 stars and below
3
I. 2.6m visitors by 2020 possible if shortages of rooms and workers addressed
Sri Lanka's many attractions suggest it can generate a 15%+ arrivals
Cagr, thereby driving arrivals from c.650k to 2.6m from 2011 - 2020 similar
to Cambodia’s arrivals growth from 2001 - 2010
5
Figure 1: Cambodia’s historical tourist arrivals and room numbers
Source: Cambodia tourism statistics annual report 2010
k
5k
10k
15k
20k
25k
30k
35k
40k
45k
0.00
0.50
1.00
1.50
2.00
2.50
3.00
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
No
of
roo
ms
Arr
iva
ls (
Mil
lio
ns)
Total Number of rooms Tourist arrival numbers
A 15% arrivals Cagr through 2020 would result in 2.6m
visitors, but substantial supply-side constraints exist
Hotel rooms: >9,000 additional graded rooms would be needed
above the current pipeline of c. 7,000
Qualified workers: >9,000 direct employees may be needed per
annum for the hotel sector vs. the current 1,500 yearly output of
industry graduates
On the other hand, airport capacity constraints are not likely to be
binding given the option to add larger capacity planes to Colombo
routes, plus the pending opening of the Hambantota International
Airport in 2012
6
At the current rate, total tourist arrivals may reach a record
900k by end 2011
7
Figure 2: Tourist arrivals to Sri Lanka (2005-2011)
Source: SLTDA, CAL estimates
549k 560k494k
438k 448k
654k
382k
519k
46%
38%
-20%
-10%
0%
10%
20%
30%
40%
50%
k
100k
200k
300k
400k
500k
600k
700k
800k
900k
1000k
2005 2006 2007 2008 2009 2010 2011E
Actual arrivals Forecast arrivals Growth rate (%)
900k
Over 9,000 additional graded rooms may be needed above
the current pipeline of 7,000 to achieve a 15% arrivals Cagr
8
Source: Pipeline figures – SLTDA, CAL estimates
15k 15k
7k
4k 6k7k
9k12k
k
5k
10k
15k
20k
25k
30k
35k
40k
Current2011
Current+pipeline
Occ85%
Occ80%
Occ75%
Occ70%
Occ 65%
2020 room supply gap based on av. occupancy with a 15% arrivals Cagr
Figure 3: Current graded room supply and forecast rooms gap by 2020
44% of the existing graded rooms, including those in the
pipeline, are in the west
9
Source: SLTDA
5,8005,100
200
3,600
3,800
900
1,200
1,100
0
2,000
4,000
6,000
8,000
10,000
12,000
West South East Others
Existing Pipeline
Figure 4: Regional distribution of overall graded rooms including pipeline
With most new room applications currently being processed,
construction is unlikely to have started for most of the pipeline
10
0
5
10
15
20
25
30
35
40
45
50
Inspections of application carried
out -Final approvals granted
Inspections application carried
out - being processed
Inspections to be carried out
Applications rejected
No
of
app
licat
ion
s
Source: SL Economic Summit Presentation -Tourism
Figure 5: Status of applications for graded hotel projects
At an arrivals Cagr (2011-20) of 15%, the hotel/restaurant
industry may also require over 9,000 new employees yearly
vs. the current output of 1,500 industry graduates
11
Figure 6: Current and forecast direct labour requirement by hotels/restaurants
Source: SLTDA, CAL estimates
48k
33k
127k
2010 2020
Supply at current rate
No of emp needed byhotels and restaurants
At the current rate of 1500 industry graduates p.a. - a gap of 79,000 may exist for 2020
Airport capacity will not be a binding constraint
12
Source: AASL
5m6m
12m
1m
0
2
4
6
8
10
12
14
Passengers processed 2010 Processing capacity 2010 Expected capacity in 2016
Mill
ion
s
Bandaranayake I.A Hambantota I.A
Hambantota I.A to add 1m capacity
in 2012
13m
Figure 7: Current and future international airport passenger processing capacity
Delays in the short
run may be avoided
by efficiency
improvements
II. India likely to lead robust arrivals growth
Inbound arrivals are likely to remain strong, and India may
become the single most important tourist source market
India arrivals may grow 6x by 2020 – provided overall costs remain
competitive and more direct daytime flights are added
China has the potential to become a major source market – may
require Mandarin-language tour guiding, bigger tour buses and
larger-scale shopping options
W. Europe arrivals may continue to grow, but at a more subdued
rate
The introduction of large-scale casino gambling would likely provide
a substantial boost to India and China tourists, but was not
considered in this report.
14
Western Europe represented 42% of incremental arrivals in
2010, while India accounted for 21% on a standalone basis
15
Source: SLTDA
448k
654k
24k
63k
43k27k
50k
2009 Total arrivals
UK W.Europe ex. UK
India Asiaex. India
Others 2010 Total arrivals
Figure 8: Regional breakdown of incremental arrivals from 2009-10
0
200
400
600
800
1000
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
Ind
ex
Tourist arrivals (Thailand) Tourist arrivals (SL)
The Government projects 2.5m arrivals in 2016,
but the industry will lack the rooms and trained
staff to hit that goal
Meanwhile, Sri Lanka has the natural attractions
to rival better-known and well-developed
destinations such as Bali
The Government’s objective is to move tourism
up market and has implemented measures such
as minimum room rates for city hotels in
furtherance of the same
0.00
0.50
1.00
1.50
2.00
2.50
3.00
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
Mil
lio
ns
Tourist arrivals (SL)
2.5m
Sri Lanka’s high-end is still in its infancy, but Thailand and Bali have shown what is feasible
16
Figure 9: Government forecasts and Tourist arrivals SL Vs Thailand
Source: SLTDA. Tourism Authority of Thailand
Government projected tourist arrivals (SL)
14,932
49,800
2010 2016
No of rooms
Shortage of available rooms
SL Tourism: 25 years of catch-up
At a Cagr of 11% (2005-09), tourist arrivals to Bali from the
UK, Germany and France appeared unaffected by the Global
Financial Crisis of 2008-2009
17
Source: Sri Lanka Tourism Annual Report 2010, Bali Tourism Board
166k
278k
196k183k
k
50k
100k
150k
200k
250k
300k
2004 2005 2006 2007 2008 2009 2010
Bali SL
Figure 10: Historical arrivals from UK, Germany and France to Bali and Sri Lanka
India arrivals to Sri Lanka may grow 47% to 187k in 2011,
representing just 1.4% of a c.13m outbound market
18
Source: SLTDA, CAL estimates
32k
129k
84k
127k
187k
k
20k
40k
60k
80k
100k
120k
140k
160k
180k
200k2
00
0
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
E
1H11 arrivals were up 47% YoY
Figure 11: India tourist arrivals to Sri Lanka (2000-2011)
India's potential as a source market for Sri Lanka is evident
from its size, proximity, cultural affinity; and Goa’s success
19
12.1 M
2.2 M
127K
India total outbound India tourists to Goa Indian tourists to SL
Figure 12: India tourist market: 17x more visitors to Goa than to Sri Lanka (2010)
Source: India Tourism Statistics At a Glance 2010, SLTDA, Goa Tourism Development Corporation website
India arrivals to Sri Lanka could grow 6x by 2020 to 750k
20
Source: SLTDA, CAL estimates
127k
440k
750k
2010 2020 2020
Scenario 1: If India outbound tourism
grows at a Cagr of 10% (2011-20) and SL's
market share remains at 1.4%
Scenario 2: If India outbound tourism grows at a Cagr of 10% (2011-20) and SL's market share increases to 2.4%
Figure 13: Growth scenarios for India tourist arrivals: 1.4% vs. 2.4% market shares
*airfare+10 day stay
A 2.4% India outbound tourist share should be easily
achievable given a 10-25% cost advantage over Goa if 1-3
stars price more competitively and . . .
21
Source: booking.com, tripadvisor.com , expedia.com
0
500
1000
1500
2000
2500
3000
5 Star 4 Star 3 Star 2 Star 1 Star
US$
SL South coast Goa
Figure 14: Room plus airfare costs for India tourists compared for a 10-day stay
7
3
12
3
0
2
4
6
8
10
12
14
16
18
20
Goa Sri Lanka
No
of
flig
hts
Mumbai
Delhi
10 flights departing
11.30am - 5.00pm 2 flights departing 4.30am -5.30am (1Hr flight)
All flights departing10.00am - 5.30pm (2.5Hr
flight)2 flights departing at
7.00am 1 flight departing at 12.20pm ( 3.5Hr flight)
All flights departing
2.00am-3.30am (2.5Hr flight)
… more direct daytime flights are added from India’s major
cities to Sri Lanka
22
Figure 15: No. of direct flights to Goa and Sri Lanka from Mumbai and Delhi
Source: AASL, Expedia, mapsofindia.com, directflightsindia.com
South Asia receives fewer tourists from China compared to
Phuket and Bali
23
Source: SLTDA, maldivesonlineguide.com, Bali Tourism Board, Phuket 2010 – Hotel
Market Update (Hotelworks Consultancy), India Tourism Statistics Annual Report 2010.
Figure 16: China tourist arrivals to South Asia, Phuket and Bali
10k
119k
100k375k
200k
China arrivals to Phuket and Bali
China arrivals to South Asia
Sri Lanka2010
Maldives2010
India2009
Phuket2009
Bali2009
Typically two-thirds of the 57m China outbound market head
to Hong Kong and Macau, illustrating a significant
preference for gambling and shopping
24
Others32%
HK27%
Macau41%
Source: Euromonitor International - 2010
Figure 17: Major destinations of outbound China tourists
61k
119k
9k 10k
0
20
40
60
80
100
120
140
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
China arrivals Maldives
China arrivals Sri Lanka
The appeal to China tourists of 4-5 star beach resorts in the
Maldives illustrates the potential opportunity for Sri Lanka
25
Figure 18: China arrivals to the Maldives vs. Sri Lanka (2000-2010)
Source: SLTDA, Maldives Holidays Guide website
III. Higher-end hotels better positioned to prosper
4-5 star hotels on the South Coast seem more attractive to
investors given their regional cost-of-stay price advantage
4-5 star rooms in the South Coast are more attractively priced than
comparable rooms for both W. Europe and India tourists vis-à-vis
Bali, Phuket and Goa, with high occupancy rates indicating pricing
power.
Improved accessibility via new highways and conversion of military
to domestic airports may make high-end hotels in the Deep South
and the East of Sri Lanka viable alternatives to the Galle area.
27
*Based on airfare + 10 day hotel costs
4-5 star hotels are 12% cheaper* on average for UK tourists
(a proxy for W. Europe) vis-à-vis Phuket and Bali
28
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5 Star 4 Star 3 Star 2 Star 1 Star
US
$ SL South coast
Phuket
Bali
Source: booking.com, tripadvisor, expedia.com
Figure 19: UK tourists’ total costs of stay: Sri Lanka vs. Phuket and Bali (2011)
4-5 star occupancy rates in 2010 were higher than other
classes, reinforcing SL’s relative value proposition
29
77%
75%
68%67%
67%68%
5 Star 4 Star 3 Star 2 Star 1 Star Unclassified
Source:SLTDA
Figure 20: 2010 occupancy levels for graded rooms
Increased domestic and international accessibility may make
higher-end hotels more viable, particularly in the south and the east
30
Concentration of 4-5
star hotels
International Airports
Domestic Airports
Bandaranayake I.A. (Main)• Passenger capacity to be increased from 6m to 12m
Hambantota I.A. (2nd South – 2012)• Initial passenger capacity – 1m passengers
Five regional domestic airports to be restructured
at a total cost of approx. Rs. 2bn: Rathmalana,
Ampara, Koggala, Trincomalee & Jaffna
•Rathmalana will be developed as a “City Airport”
Katunayake – Padeniya – Anuradhapura HighwayFrom Katunayake to Anuradhapura
Colombo – Kandy Highway (2014)Travel time to be reduced from 3 hrs to 1–1.5 hrs
Colombo – Katunayake Expressway (2012)Travel time to be reduced from 50 mins to 20 mins
Highways
Southern Expressway – Phase 1 (2011)Travel time to be reduced from 3.5 hrs to 1.5 hrs
Southern Expressway – Phase 2 (2013)Travel time to be reduced from 4.5–5 hrs to 2 hrs
Source: Road Development Authority, Development.lk, SLBC.lk, AASL
Disclaimer This document has been prepared and issued on the basis of publicly available information, internally developed
data and other sources, believed to be reliable. Capital Alliance Securities (Private) Limited however does not
warrant its completeness or accuracy. Opinions and estimates given constitute a judgment as of the date of the
material and are subject to change without notice. This report is not intended as an offer or solicitation for the
purchase or sale of any financial instrument. The recipient of this report must make their own independent
decision regarding any securities, investments or financial instruments mentioned herein. Securities or financial
instruments mentioned may not be suitable to all investors. Capital Alliance Securities (Private) Limited it’s
directors, officers, consultants, employees, outsourced research providers associates or business partner, will
not be responsible, for any claims damages, compensation, suits, damages, loss, costs, charges, expenses,
outgoing or payments including attorney’s fees which recipients of the reports suffers or incurs directly or
indirectly arising out actions taken as a result of this report. This report is for the use of the intended recipient
only. Access, disclosure, copying, distribution or reliance on any of it by anyone else is prohibited and may be a
criminal offence.
Contacts
Research Team
Tel No: +94 11 2317777 (General)
Email : [email protected]
Head of Research
Kishan Gunawardena
Tel No : +94 11 2317784
Email : [email protected]
Dimantha Mathew
Tel No : +94 11 2317746
Email : [email protected]
Udeeshan Jonas
Email : [email protected]
32