Colombo, Sri Lanka | November 28, 2016
Sri Lanka Hotel Performance
According to Sri Lanka’s Tourism Authority, the country has a target of 2.2 million visitors for 2016, which would be a 26% growth compared with 2015. The Tourism Authority’s statistics show that Sri Lanka has welcomed 1.7 million visitors as of October, a 14.6% increase compared with the same time period last year. India, China and the United Kingdom are the top three source markets for Sri Lanka.
Sri Lanka’s government has recently launched several initiatives to attract international arrivals, and there has also been an increase in the number of direct flights to Sri Lanka from various other countries in the Asia Pacific region, as well as discussions on an open skypolicy to further drive air traffic to the country. There is also a new terminal in development at Colombo’s Bandaranike International Airport, which could increase the airport’s passenger capacity.
Through these efforts to help Sri Lanka’s tourism industry grow, the country’s hotel demand has increased 3.5% based on October 2016 year-to-date data. Supply, however, has also increased (+4.2%), with around 900 new rooms added to the market in the first ten months of the year.
Sri Lanka has reported a slight decline in occupancy (-0.7% to 66.3%), while average daily rate (ADR) rose 15.6% to LKR 15,854.99, resulting in double-digit revenue per available room(RevPAR) growth to LKR 10,512.93, a 14.8% increase.
This growth in ADR was helped by the recent opening of new luxury properties, changing the market’s hotel landscape as more of the rooms available are being sold at higher prices.
In the first ten months of the year, Colombo recorded a double-digit RevPAR growth to LKR12,208.13, a 21.9% increase compared with the same period last year. Colombo’s occupancy rose 13.1% to 71.3% while ADR increased 7.8% to LKR 17,133.82.
As both the capital of and a key destination for Sri Lanka, Colombo has substantially benefitted from the increase in international arrivals as well as a rise in demand for corporate travel and MICE business.
Sri Lanka Daily Performance
Between January and October 2016, Sri Lanka’s daily performance data shows a declining compressed room nights distribution.
Occupancy levels hovered mainly in the 70-80% range, with a decline in the number of nights that saw high compression nights (80% plus). This shift in compression is likely due to the additional supply in the market.
Throughout the compression nights of 80% occupancy and higher, Sri Lanka’s average ADR recorded 8.2% increase compared to the non-compressed nights. As a result, Sri Lanka’s average RevPAR gain increased by LKR 4,026.12. While for the compression nights of 70% -80% occupancy, Sri Lanka’s average ADR increased by 9.3% compared to the non-compressed nights.
Sri Lanka Weekday and Weekend Performance
Throughout the first ten months of the year, Sri Lanka hotels recorded a higher absolute RevPAR level on weekdays than on weekends. Tuesdays, Wednesdays and Thursdays were the strongest days of the week, with an average RevPAR of LKR 10,850.43 during those days. Sri Lanka’s weekday RevPAR performance has increased 15.4% to LKR 10,619.15 in 2016, while weekend RevPAR has increased 13.2% to LKR 10,251.10.
Sri Lanka Performance Comparison
Sri Lanka’s 15.6% increase in ADR for the first ten months of the year puts it ahead of many other countries in Southeast Asia in terms of rate growth, including, India, Thailand,Philippines, Malaysia, Vietnam and Indonesia.
With supply growth slowing to 3.2% for October 2016 year-to-date, India’s hotel demand has increased 6.7% compared with last year. This was largely influenced by a 10.5% increase in international arrivals, helped by the country’s e-Tourist VISA programme that launched in August 2015. As the second largest country in the world by population, alongwith recent economic growth and a rising middle class with increasing disposable income, India’s domestic tourism is expanding.
For October 2016 year-to-date, Thailand’s occupancy rose 4.2% to 76.0%, its highest level since 2010. Meanwhile, ADR increased 1.3% to THB 3524.97, leading to a 5.6% increase in RevPAR to THB 2678.75. The country’s hotel market has recorded growth following the political situation in 2013-2014, as the Tourism Authority of Thailand has launched efforts to attract visitors. Also, an increase in the number of direct flights to Thailand from Russia and the Middle East is expected to further boost arrivals.
As of October, hotels in the Philippines have recorded growth across all key performance indicators this year: occupancy (+1.1% to 68.2%), average daily rate (+1.0% to PHP 5,201.88),and revenue per available room (+2.1% to PHP 3548.80). Demand increased 5.4%, while supply grew 4.3%. As of August 2016, the country’s total arrivals increased by 12.6% (4 million visitors)compared with the first eight months of 2015. South Korea, USA and China are the top threesource markets for the Philippines’ tourism.
So far this year, Malaysia’s performance has been driven by occupancy (+3.7% to 63.8%), while ADR has also increased at a slighter pace (+0.8% to MYR 348.74), resulting in a 4.6%increase in RevPAR to MYR 222.39. As the second most visited nation in the ASEAN (following Thailand) according to the UNWTO, Malaysia’s demand rose 7.1% year-to-date, more than double its rate of supply growth (+3.3%).
After welcoming 8.1 million visitors between January and October 2016 (according to the Vietnam Tourism Authority), Vietnam’s international arrivals increased 125.4% compared with the same time period last year. This was largely due to a major influx of Chinese visitors,accounting for roughly 27.6% of all arrivals. An increase in the number of direct flights between Vietnam and China as well as other ASEAN countries has given this market a huge boost in tourism, contributing to a double-digit growth in RevPAR (+11.4%) for October 2016 year-to-date.
Indonesia’s hotel market is facing significant increases in supply. Since the start of the year,54 new properties have opened, accounting for around 8,500 rooms. Most of these new properties are in the Upper Midscale class, while development in the Luxury and Upper Upscale classes has been more modest. This appears to have impacted Indonesia’s ADR,which dropped 6.5% to IDR 1,017,745.69 for the first ten months of the year. Occupancy, however, increased 2.8% to 60.0%.
Sri Lanka Pipeline Performance
According to STR’s Pipeline Report for October 2016, about 4,200 rooms will be added to Sri Lanka’s hotel market over the next two to three years, with most of the projects located in Colombo.
The Luxury and Upper Upscale segments still dominate the nation’s hotel development, with 2,400 rooms currently in the pipeline.
Hotels Entering the Market:
- Marriott International has the most projects in the pipeline, with four properties in development under the brands of Sheraton, Marriott, and Ritz-Carlton.
- After the opening of their first property in Hambantota, Shangri-La Hotels and Resorts is now developing its second property in Colombo.
- Hyatt Hotel Corporation will join the scene with their flagship property, Grand Hyatt Colombo,expected to open in 2018.
- Mövenpick Hotels and Resorts will soon join the market with the addition of the Mövenpick Hotel Colombo.
- Currently in the planning phase is Inter Continental Hotel Group’s Crowne Plaza Colombo Beira Lake.
As the upper end of Sri Lanka’s hotel market continues to grow in supply, ADR is also expected to grow over the next two to three years as more of the rooms available in the market will be sold at higher prices.
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