Risk & Crisis Management in Tourism Sector:
Recovery from Crisis
in the OIC Member Countries
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5.4. Case Study 4 – Sri Lanka (Desk study)
The structure of the Sri Lanka case study section is slightly different from the preceding ones
because the principal crisis was very long-running and affected tourism more fundamentally and
for longer than the crises in the other countries discussed. Accordingly, the principal two crises
(both major ones) are integrated into the discussion of the history and development of tourism in
Sri Lanka.
5.4.1. History and Development of Tourism in Sri Lanka, including Crises
Sri Lanka (named Ceylon until 1972) gained independence from Britain in 1948. By then, it was
already a popular destination with Europeans, who continued to visit after independence. When
modern mass tourism began to develop globally in the mid-1960s the government established The
Ceylon Tourist Board (CTB) and the Ceylon Hotels Corporation in 1966 in order to foster the
tourism sector in a systematic manner. Two years later, the Tourist Development Act of 1968
provided the CTBwith the statutory authority to develop tourismon a planned and controlled basis.
Sri Lanka then experienced a decade and a half of rapid growth, with arrivals increasing at an
average annual rate of over 20% and reaching 407,230 visitors in 1982. The sector was predicted
to make an increasing and significant contribution to foreign exchange earnings (De Bruin and
Mithiyanandam, 2000). In 1983, however, tensions between theminority Tamil population and the
majority Sinhalese broke out into communal violence, and civil conflict continued with varying
degrees of intensity for the next 26 years. Given the sensitivity of international tourism to
insecurity, the situation had a profoundly negative effect on arrivals. Decline throughout the 1980s
was followed by a partial recovery during the 1990s as confidence grew that the fighting was
confined to the north and north-east of the island, and there was substantial investment in hotels
and other facilities such as golf courses. By 2000 visitor numbers were approaching their pre-
conflict level, with 394,000 arrivals; this was forecast to double by 2010 (WTO, 2000; SLTB, 2006).
In 2002 a peace agreement further stimulated optimism and investment and arrivals surged to
566,000 in 2004. The industry became the fourth-largest source of foreign exchange, directly
supporting around 50,000 jobs and 75,000 indirectly (USAID, 2004; World Bank, 2005). However,
prospects for a full recovery were dashed when the south and west of the country were hit by the
Indian Ocean tsunami of December 2004, killing an estimated 35,000 people (including 250
tourists) in Sri Lanka, making it the worst affected nation after Indonesia.
As far as markets are concerned, the focus during the early years of tourism development (as in
other Asian countries) was on Europe, then recognised as the most lucrative. Since the late 1980s,
though, European arrivals to Asia generally have declined in proportion to intraregional arrivals
because of the growing strength of Asian economies, and while figures for Sri Lanka are hard to
interpret because of the particular circumstances, it is evident that after the 2002 peace agreement
arrivals from elsewhere in Asia were increasing in comparison to Europeans.
In 1992 Asia provided 29% of all visitors to Sri Lanka, declining to 23% in 2000 but rising to 35%
in 2004 and 41% in 2005. However, the relative importance of Asianmarkets since then has barely