Sri Lanka’s five-star average room rate remains 20% above regional peers due to high cost bases and limited supply of rooms, constraining competitiveness in the mid to upper-tier segment, HNB Stockbrokers said.

Five-star average room rate is estimated at  $ 160-240 in Sri Lanka, while peers such as Thailand has much broader range, and Hanoi, Vietnam has the lowest rate supported by lower cost base, an abundance of room supply and a traveller mix skewed towards price-sensitive domestic travellers.

“Maldives maintains the region’s highest rates reflecting its exclusive resort based model and tightly controlled capacity,” the report by HNB Stockbrokers said.

On the demand side, it said that a steady rebound in arrivals and limited new supply have allowed select Sri Lankan hotels to reach occupancy levels of 70% or higher across popular urban and resort sub markets.

However, nationwide occupancy averaged at 45% in 2024 (25 percentage points below pre-pandemic levels) signalling both underutilisation and recovery potential.

“Full recovery towards pre-pandemic occupancy levels will hinge on improved price competitiveness and stronger penetration into higher-yield segments beyond budget and short stay travellers,” the report said.

Across the region, Thailand, Cambodia, and Vietnam enjoyed occupancy rates above 70%, aided by diversified demand sources and aggressive tourism promotion campaigns.

Thailand, however, saw a softening in the first half of 2025 as rising supply outpaced demand in key resort destinations such as Phuket.

Meanwhile, the Maldives continues to command strong pricing power, with peak-season occupancy (November-April) remaining robust.

HNB Stockbrokers said that the success underscores the profitability advantage of a high-yield, low-volume strategy, compared with Sri Lanka’s broader but more price-sensitive model.

Sri Lanka’s tourism arrival has grown by 16% year-on-year to 1.72 million by the end of September, collecting revenue of $ 2.47 billion.