Business

Tourism must look beyond traditional markets – SLTDA Chairman

– Govt. should revisit its policies to spread the risk

By Charindra Chandrasena

In mid-May, with the tourism industry in dire straits due to the Easter Sunday attacks, Johanne Jayaratne was appointed Chairman of the Sri Lanka Tourism Development Authority (SLTDA). Prior to his appointment, Jayaratne served as Managing Director of the Sri Lanka Tourism Promotion Board (SLTPB) and Executive Director of Airport and Aviation Services (Sri Lanka) Ltd. (AASL). He has also served on the Tourism Advisory Board and was the Chairman of the AASL Organising Committees for the CHOGM, SAARC, and IIFA conferences and has over 30 years of experience in the aviation, aerospace, and biometric industries.

In an interview with The Sunday Morning Business last week, Jayaratne discussed the challenges faced by the industry, his vision for the SLTDA, and changes he plans to bring into tourism.

The following are excerpts of the interview.

You were appointed in May. How has the job been so far?

Quite challenging and exciting. It was not an appointment I was expecting, but it’s good to be here. I think there are a lot of things I can contribute towards getting us out of the situation we are in.

Are you optimistic of the industry recovering within this year?

I must say, recovery has been quite fast compared to the other countries that have been through this type of incident.

We will probably record 2.1-2.2 million arrivals for 2019, just under the 2.3 million we had in 2018.

However, full financial recovery will take longer, probably another 8-12 months. The SMEs in tourism went out of business within a couple of weeks to a month. This shows they had no risk mitigation measures, which is bad business practice. You expect a business to have at least six months to a year of reserves. Everyone became highly complacent after the end of the war and the growth of tourism, but with our history of instability, we should have been better prepared.

Now, it is high time we strengthen tourism with sufficient risk mitigation and risk management measures. This is something the SLTDA will advocate when we get over this hump and our numbers and finances improve.

Does this mean the SLTDA will conduct an educational campaign for SME businesses on risk management and mitigation?

We are toying with that idea, but I don’t know whether we should try to educate people on how to run their businesses. However, it is something we will advocate to make sure businesses maintain reserves, as it is the SMEs which are worst affected by an incident of this nature. If we feel they need financial management and risk mitigation education, it is something we may consider.

You mentioned that the recovery has been faster than expected. However, isn’t it primarily backpackers and discount-hungry tourists visiting Sri Lanka at the moment as opposed to high-spending travellers?

Yes, it is, but these are not necessarily like the hippies from the 1960s. I have been told by restaurateurs that the typical backpacker who spends $ 10 on a dorm-type hostel with bunk beds is dining at places such as Ministry of Crab every night. These are millennials who prioritise experiences over luxuries. They have a high purchasing power and frequent high-end establishments.

What would you term your biggest achievement as SLTDA Chairman?

Obtaining concessions for the aviation industry from the Government. There are three things which have hampered the growth of aviation in Sri Lanka. The first of these is ground handling charges, and Sri Lanka’s was the highest in the region. The second is fuel charges, in which Sri Lanka is the second highest next to Male. In fact, Male has reduced its charges, so we may be the highest in the region now. The third is the embarkation fee; we are certainly charging the highest in the region and probably the highest in the world.

Ground handling charges in particular have been a problem for many years. Now, we have obtained relief for six months and the concession could be anywhere between 18-20% on average, depending on the type of aircraft and frequency. This is a huge achievement and the airlines are delighted. My field is aviation, so this is something I was pushing for over the 10-plus years I was part of the aviation industry. However, I could never break through, so it is very satisfying to have finally made some progress.

As for the embarkation fee, the Government hiked it to $ 60 with the last Budget, but with this latest package, we have been able to keep it at $ 50. I was hoping the Government would reduce it even further to $ 40, but at least now it has stabilised at $ 50, which is good.

The only thing that has not been addressed is fuel, which is going to be a tough one to change because fuel is being subsidised by the Government.

Due to these concessions, airlines will definitely be increasing their frequencies by about October or November, as we are currently in a low season for airlines. I am also hoping the savings brought about for the airlines through these concessions would translate to lower ticket prices; but of course, that is up to the airlines. We can’t force their hand, so we will just have to wait and see.

SriLankan Airlines has a monopoly on ground handling in Sri Lanka and the airline has pointed out that the lowering of ground handling charges would increase its losses. What are your thoughts on this?

To be honest, I don’t think an airline should depend too much on ground handling revenue. In fact, Sri Lanka should ideally have multiple ground handlers, or at least one other ground handler, to create competition and a following. I can confidently speak on aviation because that is my field. Airlines go to destinations where companies like Dnata do the ground handling, because they know that the service is superlative. That is the path we should take for the benefit of the aviation industry.

Since we’re on the subject of the airport; many complaints have been put forward over the years that the airport is congested and its facilities are not on par with airports at other tourist hotspots, which creates a negative first impression to tourists. While the airport does not fall under the SLTDA, is there anything you could do to initiate its development?

Not particularly, because Airport and Aviation Services (AASL) is in complete charge of it along with the Ministry of Transport and Civil Aviation. The terminal was built originally for 6.5 million passengers, but it handled 10.3 million in 2018.

The development of the second terminal was delayed due to an issue with the bids, which were far higher than the engineering estimate, but I think they have resolved this issue now.

However, it is a terminal that was required two years ago. I think the capacity of this second terminal was nine million, and even if the terminal was to begin construction soon, it would take at least two to three years to become operational; by which time, Sri Lanka may be catering to 15 million passengers, which means we will be at capacity shortly after the opening of the new terminal.

However, the tricky aspect of this is that if they were to initiate a complete redesign, it would take that much longer, necessitating a much bigger terminal to cater to the ever-increasing passenger numbers. It is really a chicken and egg-type situation.

However, I am assuming they will go ahead with the nine million-capacity terminal and start planning a third terminal with a capacity of about 15 million soon, which would probably prevent any overcapacity issues in the long term.

In the interim, I think they have increased the number of immigration counters, floor area, customs facilities, etc., so it will be smoother than it is currently, but the congestion problem will not be completely resolved.

The concessions you obtained on airport costs were to benefit the aviation and tourism industries. What changes have you brought in to the SLTDA to develop it as an organisation?

I have initiated a transformation at the SLTDA to ensure our data gathering mechanism and methodology is decision making-oriented. Traditionally, what we have done is data collection, and data collection by itself is not adequate to portray the reality of the market. This has been a shortcoming on the part of our research operation. This is also one reason Sri Lanka has been stuck in traditional source markets such as India and China. There are a lot of tourism markets which are untapped by Sri Lanka. A lesson to be learnt from the aftermath of the attacks is that when you concentrate solely on traditional markets, such as India, China, the UK, and mainland Europe, and an incident of this nature happens, they are the first to stay away.

Now, the SLTDA is working with well-recognised research companies to put out a sophisticated tourism product to niche audiences. At the end of the day, we are striving to attract those tourists who spend $ 220-250 a night. This is not particularly a volume-based game, and I believe we should focus on quality. If we develop a spend rate of around $ 270-300, we don’t really need to chase volume.

Therefore, what we need is data gathering which helps decision making and right now, we are carrying out this transformation by ourselves. However, we may even hire international consultants to help out in this endeavour in time to come.

If we need to move beyond our traditional markets, what are the specific new markets you are hoping to attract and how do you plan to attract them to an unfamiliar destination like Sri Lanka?

Well, if you look at NIS or Newly Independent States, these are countries which are used to volatile environments.

We haven’t tapped these markets. We need to study the outbound tourism figures of these countries and check which destinations they are visiting.

For example, countries like Lithuania or Kazakhstan have a lot of money and their people are travelling. What does it take from our end to get them to come to Sri Lanka? We need to look at whether it is authentic restaurants that serve the indigenous food of these countries or something else; we need to establish that here and for that, we need thorough research and actionable data.

Thereafter, we need to feed that information to SLTPB to enable them to promote Sri Lanka through the use of that information, in these particular markets. Of course, it is a two-way street, because the SLTPB is the entity that visits these countries. Therefore, when SLTPB officials return from their visits to these countries, they need to brief us on the situation on the ground to help us to do the statistical analysis.

How is your relationship with the SLTPB?

Very good. We work hand in hand, and there is a clear-cut separation of the SLTPB’s and SLTDA’s roles. The SLTPB is doing its part in promoting the country and we are doing our bit in improving the infrastructure and level of service within the country.

Are you satisfied with the level of infrastructure available for tourism in Sri Lanka?

I wouldn’t say I am satisfied. I would say there is a lot of room for improvement, overall. However, it must be said that some of the popular tourist sites around the country are being overused. There is “package tourism”, for want of a better word, which offers tourists very little choice as to where to go because they have to visit sites on the itinerary.

If you take a busload of tourists, some may not want to visit Sigiriya or climb a mountain; these tours need to be customised.

We also have to create more diversity in terms of attractions, be it with adventure tourism, ayurvedic tourism, or anything else. We already have a product line which is quite impressive, so we need to market it to the niche tourism sectors. Mass tourism worked once upon a time, but I think the average tourist now is far more sophisticated and knows what they want, when they want it, and how they want it. We need to be able to deliver that kind of product to them on demand.

We are entering election season. Are you dreading any disruptions to tourist activity with rallies or election-related violence?

Elections will happen, rallies will happen, but as long as these are done in a controlled fashion and people are cognisant of the fact that any disruptions politically will lead to a complete downfall of tourism again, I think we will be okay.

If there are any disruptions, it will be even worse than the terrorist attacks. A terrorist attack is a one-off scenario, but this would show that the country is unstable. We have the empathy of the world right now, so we need to ride that wave and show them that we are a stable people.

Staying on politics; how is your relationship with the Government? Have you encountered any issues?

Absolutely none. We have a very good Minister (Minister John Amaratunga) and a very good State Minister (Ranjith Aluvihare). The Minister in particular is very hands-on and has a very good ear for what the industry has to say. The PM (Prime Minister) also spends a lot of time on tourism.

What are the top three things you would like to achieve by the end of 2019?

Well, I don’t think I can stop at three, but I’ll try!

Number one is the complete automation of the standards and quality assurance of the SLTDA, i.e. the frontline of the organisation where people come to get their licenses, renewals, and registrations. This has always been an issue because people have to travel to Colombo and face a lot of inconveniences. Sometimes, it takes six months or one year for them to get a job done. This is purely because of the manual systems which are in place. We are trying to automate that and hopefully, we can have it up and running before the end of September. The only human intervention in the automated process would be when we have to physically send officers to inspect a certain business entity, and it would prevent a lot of these delays and bureaucracy.

Secondly, we have trading resorts which are owned by us in Nuwara Eliya, Bandarawela, Kataragama, and Anuradhapura, catering mainly to domestic tourism. We are the operator of these four resorts and we rent them out.

These are in prime locations, but are in a truly shabby state. They have been historically generating losses running into the millions. Last year, the cumulative loss of these trading resorts was around Rs. 18 or 19 million.

We need to make these resorts break even, at least. For this, we need to stop following the pack. For example, in Nuwara Eliya, the excuse I hear for the losses is that every resort apart from ours has a banquet facility for weddings and functions. So I say, become a boutique hotel. I mean, this is a prime location in Nuwara Eliya, overlooking Lake Gregory. Even if the SLTDA has to pump in Rs. 6-7 million to renovate and uplift the property, it will be worth it. It’s the same story with Bandarawela. Kataragama has the religious tourists, and some of them will want to stay at luxurious resorts instead of the usual low-end places. So we need to stop following the pack. If you maintain a certain standard, you will have business.

The third thing is bringing the informal sector into the formal realm. We have an enforcement unit which is identifying informal businesses and trying to bring them into the fold. This will help cultivate a culture of uniformity going forward – that is essential. Even hostels need to have at least a basic strand of uniformity. That can only be achieved if they are in the formal sector so we can go and inspect these places, because most of these businesses are running unbeknownst to us. The safety and security aspect too can be ensured if they are in the formal realm. Those are the top three things I want to achieve before the end of the year.

Photo Krishan Kariyawasam