C. A. Saliya in The Island, February 2025, where the title reads “The hollow recovery: A stagnant industry – Part I” …. with pictorial illustrations now inserted because of the wizardry of my old Aloysian comrade KK de Silva
The headlines are seductive: 2.36 million tourists in 2025, a new “record.” Ministers queue for photo opportunities. SLTDA releases triumphant press statements. The narrative is simple: tourism is “back.”
But scratch beneath the surface and what emerges is not a success story but a cautionary tale of an industry that has mistaken survival for transformation, volume for value, and resilience for strategy.
Problem Diagnosis: The Mirage of Recovery
Yes, Sri Lanka welcomed 2.36 million tourists in 2025, marginally above the 2.33 million recorded in 2018. This marks a full recovery from the consecutive disasters of the Easter attacks (2019), COVID-19 (2020-21), and the economic collapse (2022). The year-on-year growth looks impressive: 15.1% above 2024’s 2.05 million arrivals.
But context matters. Between 2018 and 2023, arrivals collapsed by 36.3%, bottoming out at 1.49 million. The subsequent “rebound” is simply a return to where we were seven years ago, before COVID, before the economic crisis, even before the Easter attacks. We have spent six years clawing back to 2018 levels while competitors have leaped ahead.
Consider the monthly data. In 2023, January arrivals were just 102,545, down 57% from January 2018’s 238,924. By January 2025, arrivals reached 252,761, a dramatic 103% jump over 2023, but only 5.8% above the 2018 baseline. This is not growth; it is recovery from an artificially depressed base. Every month in 2025 shows the same pattern: strong percentage gains over the crisis years, but marginal or negative movement compared to 2018.
The problem is not just the numbers, but the narrative wrapped around them. SLTDA’s “Year in Review 2025” celebrates the 15.6% first-half increase without once acknowledging that this merely restores pre-crisis levels. The “Growth Scenarios 2025” report projects arrivals between 2.4 and 3.0 million but offers no analysis of what kind of tourism is being targeted, what yield is expected, or how market composition will shift. This is volume-chasing for its own sake, dressed up as strategic planning.
Comparative Analysis: Three Decades of Standing Still
The stagnation becomes stark when placed against Sri Lanka’s closest island competitors. In the mid-1990s, Sri Lanka, the Maldives, started from roughly the same base, around 300,000 annual arrivals each. Three decades later:
Sri Lanka: From 302,000 arrivals (1996) to 2.36 million (2025), with $3.2 billion
Maldives: From 315,000 arrivals (1995) to 2.25 million (2025), with $5.6 billion
The raw numbers obscure the qualitative difference. The Maldives deliberately crafted a luxury, high-yield model: one-island-one-resort zoning, strict environmental controls, integrated resorts layered with sustainability credentials. Today, Maldivian tourism generates approximately $5.6 billion from 2 million tourists, an average of $2,800 per visitor. The sector represents 21% of GDP and generates nearly half of government revenue.
Sri Lanka, by contrast, has oscillated between slogans, “Wonder of Asia,” “So Sri Lanka”, without embedding them in coherent policy. We have no settled model, no consensus on what kind of tourism we want, and no institutional memory because personnel and priorities change with every government. So, we match or slightly exceed competitors in arrivals, but dramatically underperform in revenue, yield, and structural resilience.
Root Causes: Governance Deficit and Policy Failure
The stagnation is not accidental; it is manufactured by systemic governance failures that successive governments have refused to confront.
1. Policy Inconsistency as Institutional Culture
Sri Lanka has rewritten its Tourism Act and produced multiple master plans since 2005. The problem is not the absence of strategy documents but their systematic non-implementation. The National Tourism Policy approved in February 2024 acknowledges that “policies and directions have not addressed several critical issues in the sector” and that there was “no commonly agreed and accepted tourism policy direction among diverse stakeholders.”
This is remarkable candor, and a damning indictment. After 58 years of organised tourism development, we still lack policy consensus. Why? Because tourism policy is treated as political property, not national infrastructure. Changes in government trigger wholesale personnel changes at SLTDA, Tourism Ministry, and SLTPB. Institutional knowledge evaporates. Priorities shift with ministerial whims. Therefore, operators cannot plan, investors cannot commit, and the industry lurches from crisis response to crisis response without building structural resilience.
2. Fragmented Institutional Architecture
Tourism responsibilities are scattered across the Ministry of Tourism, Sri Lanka Tourism Development Authority (SLTDA), Sri Lanka Tourism Promotion Bureau (SLTPB), provincial authorities, and an ever-expanding roster of ad hoc committees. The ADB’s 2024 Tourism Sector Diagnostics bluntly notes that “governance and public infrastructure development of tourism in Sri Lanka is fragmented and hampered.”
No single institution owns yield. No one is accountable for net foreign exchange contribution after leakages. Quality standards are unenforced. The tourism development fund, 1% of the tourism levy plus embarkation taxes, is theoretically allocated 70% to SLTPB for global promotion, but “lengthy procurement and approval processes” render it ineffective.
Critically, the current government has reportedly scrapped sophisticated data analytics programmes that were finally giving SLTDA visibility into spending patterns, high-yield segments, and tourist movement. According to industry reports in late 2025, partnerships with entities like Mastercard and telecom data analytics have been halted, forcing the sector to fly blind precisely when data-driven decision-making is essential.
3. Infrastructure Deficit and Resource Misallocation
The Bandaranaike International Airport Development Project, essential for handling projected tourist volumes, has been repeatedly delayed. Originally scheduled for completion years ago, it is now re-tendered for 2027 delivery after debt restructuring. Meanwhile, tourists in late 2025 faced severe congestion at BIA, with reports of near-miss flights due to immigration and check-in bottlenecks.
At cultural sites, basic facilities are inadequate. Sigiriya, which generates approximately 25% of cultural tourist traffic and charges $36 per visitor, lacks adequate lighting, safety measures, and emergency infrastructure. Tourism associations report instances of tourists being attacked by wild elephants with no effective safety protocols.
SLTDA Chairman statements acknowledge “many restrictions placed on incurring capital expenditure” and “embargoes placed not only on tourism but all Government institutions.” The frank admission: we lack funds to maintain the assets that generate revenue. This is governance failure in its purest form, allowing revenue-generating infrastructure to decay while chasing arrival targets.
The Stop-Go Trap: Volatility as Business Model
What truly differentiates Sri Lanka from competitors is not arrival levels but the pattern: extreme stop-go volatility driven by crisis and short-term stimulus rather than steady, strategic growth.
After each shock, the industry is told to “bounce back” without being given the tools to build resilience. The rebound mechanism is consistent: currency depreciation makes Sri Lanka “affordable,” operators discount aggressively to fill rooms, and visa concessions attract price-sensitive segments. Arrivals recover, until the next shock.
This is not how a strategic export industry operates. It is how a shock-absorber behaves, used to plug forex and fiscal holes after each policy failure, then left exposed again.
The monthly 2023-2025 data illustrate the cycle perfectly. Between January 2018 and January 2023, arrivals fell 57%. The “recovery” to January 2025 shows a 103% jump over 2023, but this is bounce-back from an artificially depressed base, not structural transformation. By September 2025, growth rates normalize into the teens and twenties, catch-up to a benchmark set six years earlier.
Why the Boom Feels Like Stagnation
Industry operators report adisconnect between headline numbers and ground reality. Occupancy rates have improved to the high-60% range, but margins remain below 2018 levels. Why?
But scratch beneath the surface and what emerges is not a success story but a cautionary tale of an industry that has mistaken survival for transformation, volume for value, and resilience for strategy.
Problem Diagnosis: The Mirage of Recovery
Yes, Sri Lanka welcomed 2.36 million tourists in 2025, marginally above the 2.33 million recorded in 2018. This marks a full recovery from the consecutive disasters of the Easter attacks (2019), COVID-19 (2020-21), and the economic collapse (2022). The year-on-year growth looks impressive: 15.1% above 2024’s 2.05 million arrivals.
But context matters. Between 2018 and 2023, arrivals collapsed by 36.3%, bottoming out at 1.49 million. The subsequent “rebound” is simply a return to where we were seven years ago, before COVID, before the economic crisis, even before the Easter attacks. We have spent six years clawing back to 2018 levels while competitors have leaped ahead.
Consider the monthly data. In 2023, January arrivals were just 102,545, down 57% from January 2018’s 238,924. By January 2025, arrivals reached 252,761, a dramatic 103% jump over 2023, but only 5.8% above the 2018 baseline. This is not growth; it is recovery from an artificially depressed base. Every month in 2025 shows the same pattern: strong percentage gains over the crisis years, but marginal or negative movement compared to 2018.
The problem is not just the numbers, but the narrative wrapped around them. SLTDA’s “Year in Review 2025” celebrates the 15.6% first-half increase without once acknowledging that this merely restores pre-crisis levels. The “Growth Scenarios 2025” report projects arrivals between 2.4 and 3.0 million but offers no analysis of what kind of tourism is being targeted, what yield is expected, or how market composition will shift. This is volume-chasing for its own sake, dressed up as strategic planning.
Comparative Analysis: Three Decades of Standing Still
The stagnation becomes stark when placed against Sri Lanka’s closest island competitors. In the mid-1990s, Sri Lanka, the Maldives, started from roughly the same base, around 300,000 annual arrivals each. Three decades later:
Sri Lanka: From 302,000 arrivals (1996) to 2.36 million (2025), with $3.2 billion
Maldives: From 315,000 arrivals (1995) to 2.25 million (2025), with $5.6 billion
The raw numbers obscure the qualitative difference. The Maldives deliberately crafted a luxury, high-yield model: one-island-one-resort zoning, strict environmental controls, integrated resorts layered with sustainability credentials. Today, Maldivian tourism generates approximately $5.6 billion from 2 million tourists, an average of $2,800 per visitor. The sector represents 21% of GDP and generates nearly half of government revenue.
Sri Lanka, by contrast, has oscillated between slogans, “Wonder of Asia,” “So Sri Lanka”, without embedding them in coherent policy. We have no settled model, no consensus on what kind of tourism we want, and no institutional memory because personnel and priorities change with every government. So, we match or slightly exceed competitors in arrivals, but dramatically underperform in revenue, yield, and structural resilience.
Root Causes: Governance Deficit and Policy Failure
The stagnation is not accidental; it is manufactured by systemic governance failures that successive governments have refused to confront.
1. Policy Inconsistency as Institutional Culture
Sri Lanka has rewritten its Tourism Act and produced multiple master plans since 2005. The problem is not the absence of strategy documents but their systematic non-implementation. The National Tourism Policy approved in February 2024 acknowledges that “policies and directions have not addressed several critical issues in the sector” and that there was “no commonly agreed and accepted tourism policy direction among diverse stakeholders.”
This is remarkable candor, and a damning indictment. After 58 years of organised tourism development, we still lack policy consensus. Why? Because tourism policy is treated as political property, not national infrastructure. Changes in government trigger wholesale personnel changes at SLTDA, Tourism Ministry, and SLTPB. Institutional knowledge evaporates. Priorities shift with ministerial whims. Therefore, operators cannot plan, investors cannot commit, and the industry lurches from crisis response to crisis response without building structural resilience.
2. Fragmented Institutional Architecture
Tourism responsibilities are scattered across the Ministry of Tourism, Sri Lanka Tourism Development Authority (SLTDA), Sri Lanka Tourism Promotion Bureau (SLTPB), provincial authorities, and an ever-expanding roster of ad hoc committees. The ADB’s 2024 Tourism Sector Diagnostics bluntly notes that “governance and public infrastructure development of tourism in Sri Lanka is fragmented and hampered.”
No single institution owns yield. No one is accountable for net foreign exchange contribution after leakages. Quality standards are unenforced. The tourism development fund, 1% of the tourism levy plus embarkation taxes, is theoretically allocated 70% to SLTPB for global promotion, but “lengthy procurement and approval processes” render it ineffective.
Critically, the current government has reportedly scrapped sophisticated data analytics programmes that were finally giving SLTDA visibility into spending patterns, high-yield segments, and tourist movement. According to industry reports in late 2025, partnerships with entities like Mastercard and telecom data analytics have been halted, forcing the sector to fly blind precisely when data-driven decision-making is essential.
3. Infrastructure Deficit and Resource Misallocation
The Bandaranaike International Airport Development Project, essential for handling projected tourist volumes, has been repeatedly delayed. Originally scheduled for completion years ago, it is now re-tendered for 2027 delivery after debt restructuring. Meanwhile, tourists in late 2025 faced severe congestion at BIA, with reports of near-miss flights due to immigration and check-in bottlenecks.
At cultural sites, basic facilities are inadequate. Sigiriya, which generates approximately 25% of cultural tourist traffic and charges $36 per visitor, lacks adequate lighting, safety measures, and emergency infrastructure. Tourism associations report instances of tourists being attacked by wild elephants with no effective safety protocols.
SLTDA Chairman statements acknowledge “many restrictions placed on incurring capital expenditure” and “embargoes placed not only on tourism but all Government institutions.” The frank admission: we lack funds to maintain the assets that generate revenue. This is governance failure in its purest form, allowing revenue-generating infrastructure to decay while chasing arrival targets.
The Stop-Go Trap: Volatility as Business Model
What truly differentiates Sri Lanka from competitors is not arrival levels but the pattern: extreme stop-go volatility driven by crisis and short-term stimulus rather than steady, strategic growth.
After each shock, the industry is told to “bounce back” without being given the tools to build resilience. The rebound mechanism is consistent: currency depreciation makes Sri Lanka “affordable,” operators discount aggressively to fill rooms, and visa concessions attract price-sensitive segments. Arrivals recover, until the next shock.
This is not how a strategic export industry operates. It is how a shock-absorber behaves, used to plug forex and fiscal holes after each policy failure, then left exposed again.
The monthly 2023-2025 data illustrate the cycle perfectly. Between January 2018 and January 2023, arrivals fell 57%. The “recovery” to January 2025 shows a 103% jump over 2023, but this is bounce-back from an artificially depressed base, not structural transformation. By September 2025, growth rates normalize into the teens and twenties, catch-up to a benchmark set six years earlier.
Why the Boom Feels Like Stagnation
Because input costs, energy, food, debt servicing, have risen faster than room rates. The rupee’s collapse makes Sri Lanka look “affordable” to foreigners, but it quietly transfers value from domestic suppliers and workers to foreign visitors and lenders. Hotels fill rooms at prices that barely cover costs once translated into hard currency and adjusted for inflation.
Growth is fragile and concentrated. Europe and Asia-Pacific account for over 92% of arrivals. India alone provides 20.7% of visitors in H1 2025, and as later articles in this series will show, this is a low-yield, short-stay segment. We have built recovery on market concentration and price competition, not on product differentiation or yield optimization.
There is no credible long-term roadmap. SLTDA’s projections focus almost entirely on volumes. There is no public discussion of receipts-per-visitor targets, market composition strategies, or institutional reforms required to shift from volume to value.
The Way Forward: From Arrivals Theater to Strategic Transformation
The path out of stagnation requires uncomfortable honesty and political courage that has been systematically absent.
First, abandon arrivals as the primary success metric. Tourism contribution to economic recovery should be measured by net foreign exchange contribution after leakages, employment quality (wages, stability), and yield per visitor, not by how many planes land.
Second, establish institutional continuity. Depoliticize relevant leaderships. Implement fixed terms for key personnel insulated from political cycles. Tourism is a 30-year investment horizon; it cannot be managed on five-year electoral cycles.
Third, restore data infrastructure. Reinstate the analytics programs that track spending patterns and identify high-yield segments. Without data, we are flying blind, and no amount of ministerial optimism changes that.
Fourth, allocate resources to infrastructure. The tourism development fund exists, use it. Online promotions, BIA expansion, cultural site upgrades, last-mile connectivity cannot wait for “better fiscal conditions.” These assets generate the revenue that funds their own maintenance.
Resilience without strategy is stagnation with momentum. And stagnation, however energetically celebrated, remains stagnation.
If policymakers continue to mistake arrivals for achievement, Sri Lanka will remain trapped in a cycle: crash, discount, recover, repeat. Meanwhile, competitors will consolidate high-yield models, and we will wonder why our tourism “boom” generates less cash, less jobs, and less development than it should.
….. The writer, a senior Chartered Accountant and professional banker, is Professor at SLIIT, Malabe. The views and opinions expressed in this article are personal…..
An in-depth analysis which clearly indicates many basic structural policy shortcomings. Is this due to lack of clear vision or a confusion caused by having too many ‘cooks spoiling the soup’ syndrome?