Sri Lanka is a country with everything a tourist could possibly want. It has mile upon unbroken mile of pristine tropical beach for sun seekers, or verdant tea plantations for those who prefer chillier climes. Wildlife can be viewed up close and personal in scores of national parks, or spotted simply wandering at will through jungle and across paddy fields.
The country is also replete with history. Some eight World Heritage sites conserve its ancient Buddhist, Hindu, and Islamic traditions, not to mention its more recent Colonial heritage.
For three decades much of this splendour was lost on global tourists because of a civil war between the Sinhalese majority and Tamil minority in the north. Since the war ended in 2009, however, the country has become a firm fixture in the travel sections of the world’s media.
Yet supply – whether roads, airports, hotel rooms, restaurants, or shops - has struggled to keep up with demand. The government has also faced the familiar conundrum of how to develop its tourist potential without overwhelming the very history and natural beauty visitors are flocking to experience.
But Sri Lanka appears mindful of what makes its country unique and seems determined to conserve and enhance it. So Colombo’s historic centre is being renovated rather than bulldozed and, so far, there has been no untrammeled development along the coastline.
Mike Davies, the entrepreneur behind Teardrop Hotels, has experienced this attitude first hand. It has taken the Hong Kong-based property investor nine years to renovate a 17th century Dutch era house in the Unesco-protected enclave of Galle Fort and turn it into a luxury boutique hotel.
Throughout the process he has had to work with multiple government agencies and the independent Galle Heritage Committee to make sure the hotel remains sympathetic to its surroundings.
FinanceAsia is offering an opportunity to find out more about the island's development at its Sri Lanka Investment Summit in March.
“It used to be owned by Muslim tea traders who gave it an… art deco makeover,” he told FinanceAsia. “Under instruction from the Urban Development Authority we’ve had to strip that out and bring back all the original Dutch arches. They’ve been visiting at least once month querying the location of each and every brick.”
Davies is now working with Swire to give the Sri Lankan bungalows owned by its local tea-producing subsidiary, Finlays, a five-star makeover. Most of the properties are over a century old and built by the original English and Scottish planters who ran the estates.
“The tennis courts, croquet lawns, and bougainvillea-lined driveways are all still intact,” he said. “But the bungalows themselves were just maintained, rather than lived in. So we’re renovating properties that often have holes in the roof, or no running water."
Teardrop Hotels has first right of refusal over about 20 bungalows through its joint venture with Finlays and hopes to recreate the era of Noel Coward and Somerset Maugham for its guests. Other tea producers such as Dilmah Tea, which owns the luxury collection of plantation bungalows known as Tea Trails, are also busy turning history into tourist dollars.
Few private tea estates come up for sale as the government nationalised the entire industry in the early 1970s, taking over more than 500 British-owned estates. These were then put back into private hands in the early 1990s but most are now large-scale operations.
“There are smaller 30-acre or so estates available but it would be hard for a small investor to make them work as tourist ventures,” Davies said. “The landscaping alone would make them unprofitable.”
In contrast, much of the development along the coast has been driven by high-net-worth investors, many of them Asian investment bankers with the cash to build their own holiday villas. Under the previous government it became increasingly difficult for foreigners to buy their own slice of paradise thanks to a 15% tax on property leases. But that has now been scrapped.
“Foreign investors can now lease land for 99 years without having to pay the land tax of 15% and we’ve noticed a big pick up in activity,” said Savantha de Saram, a partner at local law firm DL&F De Saram. “European investors used to be the big buyers. Now there’s a lot more interest from China as well.”
Arrival of the big hotel operators
Big hotel groups are also moving in. The Aman came to Sri Lanka in 2004 and Thailand’s listed hotel operator, Minor International, opened a hotel in Tangalle last November under its Anantara brand.
But the biggest investment to date has come from the Hong Kong-listed Shangri-La group, which is spending $720 million developing two sites.
In Colombo it has a prime location on former government-owned land overlooking the sea. The development, known as One Galle Face, will encompass a 550-room five-star hotel, 406 apartments, and 500,000 square feet of up-market retail and commercial space.
In the South it is building a 300-room hotel and 18-hole golf course on the beach close to former president Mahindra Rajapaksa’s hometown of Hambantota.
The hotel is due to open this summer and the group no doubt breathed a huge sigh of relief in January when the new coalition government that ousted Rajapaksa a year earlier announced that it would re-start the former president's Southern Expressway project, which links Colombo with Hambantota.
The expressway will halve the five- to six-hour journey time from the capital.
The Shangri-La’s Sri Lanka-based general manager Mehdi Serrour told FinanceAsia that connectivity is just one of the challenges facing the country. Others include the lack of English spoken outside of the capital and the cultural unwillingness of women to work in the hospitality industry lest it harm their reputation.
However, Serrour believes Sri Lanka can take advantage of the backwardness engendered by the civil war. “It’s very clear Sri Lanka is looking at what other countries have done and taking the best aspects to develop its own tourist industry,” he said.
Coming to Sri Lanka has been one of the highlights of a 35-year career opening and managing hotels across the world. “I am always really struck by just how green and authentic this country is,” he noted. “There’s such a sense of spirituality here. Our staff will use their day off to travel hours across country to visit a shrine and every company, no matter how small, seems to take corporate social responsibility very seriously.
“It means the Sri Lankan people really help each other,” he added. “They care about their country and are very clear sighted about protecting the environment and every national monument.”
The growth in tourist arrivals appears to be rewarding those efforts although the gap between Sri Lanka and Myanmar shows just how much potential remains. Both countries have only recently opened up but whereas Myanmar recorded 4.2 million tourists to the end of November, Sri Lanka had just 1.8 million over the course of the entire year.
