Sri Lankan hotel groups face Maldivian downturn

Saturday, 14 February 2009 00:49

Two of Sri Lanka's top conglomerates with resorts in the Maldives could see their earnings affected by a sudden downturn in tourist arrivals to the archipelago, a brokerage said in a research report.

C T Smith Stockbrokers said the Aitken Spence and John Keells groups could be hit as the global economic crisis has begun to reduce visitors to the Maldives as it impacts key Western tourist traffic generating markets It noted that there has been a sharp downturn in arrivals from the most important markets like Italy and Britain. "The effects of the global recession are seen making its impact on long-haul tourism to the Maldives, with arrivals dropping 4.8 percent to 61,531 in January 2009 from a year ago," C T Smith Stockbrokers said.
"Following the dip in arrivals in December 2008 this does not bode well for the industry as this is traditionally the peak season."

December arrivals in the Maldives were down four percent to 62,478 persons from a year ago.
The brokers said they expect tourist traffic to the Maldives to fall this year.
Tourist arrivals to the Maldives increased only 1.1 percent to 683,012 persons in 2008 from the year before. "Given the slowdown in arrivals witnessed in the second half of 2008, along with signs that the global recession is far from over and considering its likely impact on long haul tourism, we estimate Maldives’ tourist arrivals to fall by around 2-3 percent in 2009," the report said.

"Companies likely to get adversely affected by these developments would be Aitken Spence Hotel Holdings and John Keells Hotels, as both companies have significant hotel portfolios in the Maldives." The two groups diversified into the Maldives as part of a strategy to reduce their dependence on earnings from their Sri Lankan hotels. C T Smith Stockbrokers said the sharpest fall in visitors to the Maldives in January 2009 was from the European markets which dropped 9.6 percent to 47,283 persons compared with the year before.
Arrivals from the main markets such as Italy and UK dropped 22.5 percent to 10,441 persons and 19.6 percent to 7,751.

"Italy, UK and France combined represent nearly 40 percent of Maldives’ tourist arrivals, and as the current global recession is expected to carry on well into late 2009, it translates into a likely poor performance from these markets for the year." The report however said that on a more positive note, Asian arrivals had risen 20.3 percent from a year ago, with a 130 percent increase seen in Chinese arrivals to 5,912 persons. Both Aitken Spence and John Keells are looking at further diversifying their hotel business by investing in India and elsewhere in south Asia as well as in the Middle East. Sri Lanka's tourism industry has suffered for years from stagnant or falling arrivals because of the bad publicity generated by the ethnic war.
Low occupancy levels have meant that Aitken Spence Hotel Holdings and John Keells Hotels have seen their properties suffer losses from time to time. Now, however, industry analysts said Sri Lanka's tourism prospects have brightened with the military on the verge of crushing the Tamil Tiger separatist rebellion.


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