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Sri Lanka: A stronger target for development

Sri Lanka has miles of untarnished beaches, ancient Buddhist shrines, tea plantations and wildlife preserves. But tourism languished in the heat of a brutal civil war that ended in 2009.

After local hotel operators paved the way, international chains such as Shangri-La, Hilton, Hyatt and ITC are pouring into the Indian Ocean island. Nine chains have projects in the pipeline with more than 2,800 rooms scheduled to come online through 2020, according to Thailand-based consultancy C9 Hotelworks. “The market was undersupplied,” said Bill Barnett, managing director of C9. “The new hotels, with their higher quality, will make the locals up their game.”

Already, the number of hotels had increased by about 45% to 400 from 2012 to 2016, according to the Sri Lanka Tourism Development Authority (SLTDA). Hoteliers are heartened by the rise in international travelers, up 14% to 2 million last year, according to the SLTDA. From 2011 to 2015, growth averaged 20% a year. Forbes magazine placed Sri Lanka among the 10 coolest places to visit in 2015.

Seeing stars

Previously, Sri Lanka was seen as an affordable, off-the-beaten-track place to explore, said Giles Selves, general manager for Minor Hotel Group’s four properties in Sri Lanka. “With 5-star brands coming in, the island will become a more upscale destination.”

Thailand-based Minor was a pioneer: It opened hotels under its Avani flag in 2011 and 2012 — 4-star properties with rooms in the US$150 range. It opened its first 5-star resort under the Anantara flag at Tangalle on the southern coast in December 2015. A year later it opened a second Anantara resort at Kalutara on the southwest coast, designed by the late Sri Lankan architect Geoffrey Bawa. Room rates start around US$320. The island traditionally drew visitors from Western Europe, but increasingly they’re coming from India, China, Australia and the Middle Eastern Gulf states, Selves said.

Minor Hotel Group's Anantara Peace Haven Tangalle, on Sri Lanka’s southern coast, opened in late 2015.
Minor Hotel Group’s Anantara Peace Haven Tangalle, on Sri Lanka’s southern coast, opened in late 2015.

A big challenge for the newcomers is recruiting and training staff. “With the lack of tourism in the early 2000s, many left the country,” Selves said. “We’re starting to see them coming back.” Competition for top talent is beginning to push up wages, which will raise the local standard of living even as it increases operator costs.

While the international chains are developing the resort market, they also are expanding in the capital city of Colombo with mixed-use developments that will cater to affluent locals as well as the business travelers that make up an estimated 15% of visitors. Hong Kong-based Shangri-La Hotels & Resorts last year opened a 300-room resort in the southern district of Hambantota and is close to completing a luxury property in the capital, with 466 rooms, an office tower, residences and high-end shopping mall.

Hilton has seven projects in the pipeline. In April it announced an agreement with local partner Melwa Hotels & Resorts to manage three Hilton and three DoubleTree hotels. In June, it signed a management agreement with local partner KDU Adventures to manage a DoubleTree resort in Weerawila on the southern coast, near popular wildlife sanctuaries. The hotel is scheduled to open early next year; the Melwa properties are slated to open between 2019 and 2025.

“We want to be where our guests and global travelers want to be, whether for leisure or business,” Guy Phillips, senior vice president, development, Asia and Australasia at Hilton, said in an email. “Sri Lanka offers unrivalled potential for travel and tourism that has so far been largely untapped.”

Colonial renovations

Other hoteliers are staking out different slices of the market. Sri Lanka-based Cantaloupe & Co. is developing boutique hotels and is looking to renovate colonial-era properties. Cantaloupe operates two hotels on the south coast and plans to open two southwest coast beach properties this year, said Nadeem Rajabdeen, director of marketing and sales. Cantaloupe recently teamed with one of the country’s oldest engineering firms to secure a 105-year-old former department store in a historic district of Colombo that has been earmarked for tourism development. The partnership plans to restore and develop the property into a 50-room luxury boutique hotel.

Cantaloupe also is bidding for two more historic properties in the area. “There’s a movement to protect our heritage,” Rajabdeen said.

Others said there’s only so much room for 4- and 5-star properties. Bali, Indonesia-based Le Pirate is looking to build three or four 3-star resorts over the next few years. “We want to be the first to get into undeveloped areas and create a vibe,” said Louka Taffin, managing director at Le Pirate. The operator is targeting millennials, whom it believes are looking for experiences and prefer a room in the US$75 range — nothing fancy. “They’re surfing, backpacking or canoeing,” Taffin said, “and they’re steering away from conventional hotels.”

There’s a lot of segmentation, Taffin added. “Sri Lanka is a diverse culture waiting to be opened up.”

 


 

Prior hotel openings in Sri Lanka

Year    Hotels      Rooms
2015       2              280
2016       4           1,198

By Sri Lanka pipeline stage

Pipeline stage                Projects      Rooms
Under construction            8              2,541
Starts next 12 months       3                 549
Early planning                   7              1,302
Total pipeline                18              4,392

 


Contributed by Judith Crown

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