Sri Lankan tourism braces for impact

This week, Sri Lankans are trying to come to terms with the appalling tragedy that struck their country on Easter Sunday.

At least 253 lives were lost (the exact number remains uncertain) in a series of terrorist attacks that took place across the island nation. Tuesday was declared a day of national mourning and already, communities and families have begun burying their dead. As many as 45 of the dead were children.

Read more: Sri Lanka: More arrests as death toll grows

As the nation grieves, the Sri Lankan government must now grapple with several troubling questions relating to Sunday's events. One concerns how the attacks might affect the country's fragile economy, which has seen steady progress since the end of the country's long civil war in 2009.

Tourism has been a central driver of Sri Lanka's rising GDP growth figures over the last decade. Since the end of the civil war, the number of tourists visiting the country has gone from less than 500,000 in 2009 to just under 2.5 million in 2019, according to the Sri Lanka Tourism Development Authority.

The sector was the country's third-largest and fastest-growing source of foreign currency in 2018, behind foreign remittances and textile exports — which account for almost half of all Sri Lankan exports. A flow of foreign currency is very important to Sri Lanka, given the country's crippling levels of debt.

Tourism is worth almost $4.4 billion (€3.9 billion) to Sri Lanka each year, accounting for almost 5% of the country's annual GDP. More than 800,000 jobs (around 10% of total employment in the country) depend on the sector, both directly and indirectly.

Gem in the Indian Ocean

During the Sri Lankan Civil War, which lasted from 1983 to 2009, tourism numbers declined and stagnated, but as soon as that conflict ended, the government began to capitalize on the country's natural touristic advantages.

An island nation of tropical beaches, Sri Lanka has a wealth of both natural and cultural attractions. Indeed, last December, the travel publisher Lonely Planet named Sri Lanka as the No.1 country to visit in 2019.

"From its growing surf scene to its ancient temples, there's something for everyone visiting this Asian paradise," the publication wrote.

Before Sunday, the Sri Lankan government could justifiably have expected tourism to continue its relentless pace of growth in 2019. However, beyond the mere fact of terrorism striking the country is the nature of the attacks, which specifically targeted a number of luxury hotels in the capital Colombo.

"The attacks will not only impact already weak economic activity (real GDP growth was at a 17-year low of 3.2% in 2018), but also the country's relatively vulnerable external liquidity position," Citibank's Asia desk said in a note, adding that the tourism sector would suffer the biggest blow of all.

At least 39 of those killed in the attacks were foreign tourists. The Sri Lankan government has declared a state of emergency and several governments around the world have upgraded their travel advice for Sri Lanka.

"Terrorists may attack with little or no warning, targeting tourist locations, transportation hubs, markets/shopping malls, local government facilities, hotels, clubs, restaurants, places of worship, parks, major sporting and cultural events, educational institutions, airports, and other public areas," the US Department of State wrote in an upgraded advisory.

Cancellations likely, but too early to say

Several travel companies have prepared for a wave of cancellations from tourists who were due to travel to Sri Lanka in the coming weeks and months.

India accounted for around 20% of tourists to Sri Lanka in 2018 (more than any other country), and two of its major airlines, Air India and Indigo, say they will allow passengers to delay or change flights without paying a fee. Sri Lankan Airlines, the national carrier, will do likewise.

However, it remains to be seen exactly how much the tragedy will affect tourism in the short term, with several travel companies, such as Thomas Cook India and MakeMyTrip.com, a major booking portal in India, issuing statements saying it was too early to assess the impact of the attacks on tourist traffic.

French example suggests recovery is possible

A high-profile terrorist attack which kills hundreds of people will inevitably have an effect on the numbers of people who choose to travel to that country for leisure purposes. Sri Lanka knows that better than most; its long civil war, which featured many terrorist attacks, kept its tourism numbers low for decades.

Terrorist attacks which struck Tunisia (2015) and Egypt (2013) led to sharp declines in the numbers of European tourists visiting those countries in the short term, but the overall picture is complex, according to the extensive academic research on the topic.

Much of the data shows that countries which are struck by terrorist attacks do not necessarily suffer a decline in tourism numbers, and even if they do, they can quickly recover.

A good example is France. In 2015 and 2016, there were several devastating terrorist attacks in the country which killed hundreds of people. France is traditionally the most popular tourist destination in the world, and while the numbers did take a hit in the immediate aftermath of the attacks in 2016, they surged in 2017 and 2018.

Given the importance of tourism to the country, the Sri Lankan government will surely be looking for ways to minimize the damage to the sector in the months ahead.

For ordinary Sri Lankans, dealing with the trauma and grief of Sunday is a much more important concern at the moment.