Tourism Loses $1.13 Billion a Year as Sri Lanka Shifts Focus from Arrivals to Value Retention

Sri Lanka’s tourism industry is losing an estimated $1.13 billion every year through economic leakages, underscoring a growing gap between visitor arrivals and real economic benefit. This is despite the sector earning $3.17 billion in 2024 and an estimated $3.2 billion in 2025, according to the country’s first Rapid Assessment of Economic Leakages, released yesterday.

The study was carried out by the Sri Lanka Tourism Development Authority (SLTDA) with technical backing from UN Tourism, and examined three key segments: accommodation providers, inbound tour operators, and the wellness/Ayurveda sector.

Alarmingly High Leakages, but Not Unavoidable

Speaking at the stakeholder workshop where the findings were presented, SLTDA Chairman Buddhika Hewawasam described the scale of losses as “alarming,” but emphasized they are not beyond control.

The assessment reveals that nearly one-third of tourism revenue flows out of the country due to a mix of internal and external leakages. While some leakage is inherent in tourism, Hewawasam stressed that much of it can be reduced through better policy design and structural reform.

Imports and Informality Driving Losses

A major contributor is import-heavy procurement. According to the findings, over $800 million annually is spent on imported food, beverages, furniture, equipment, and energy, reflecting weak local supply chains within the tourism ecosystem.

Informality is another critical issue. The study estimates $84.8 million in annual fiscal losses due to tax non-compliance across the surveyed sectors, limiting the government’s ability to reinvest tourism revenue into development.

Wellness Tourism Shows the Highest Leakage

The wellness and Ayurveda segment recorded leakage rates exceeding 50%, raising concerns about authenticity and local sourcing.

“This is a segment that should be deeply rooted in local value systems,” Hewawasam said, warning that high leakages undermine both credibility and economic impact in a sector marketed as uniquely Sri Lankan.

Arrivals Alone Don’t Create Value

Tourism Deputy Minister Prof. Ruwan Ranasinghe said the findings expose the limits of focusing solely on arrivals and headline earnings.

“When roughly one dollar out of every three leaves the country, tourism cannot truly strengthen the domestic economy,” he said. He added that while some imports are unavoidable, the data clearly shows opportunities to build local supply chains and retain more value within Sri Lanka.

Shift from Analysis to Implementation

Prof. Frederic Thomas, Development Economist at UN Tourism, said the assessment was designed to move beyond diagnosis and towards practical solutions.

“Not all leakages are equal,” he noted. “Some are structural, but many are avoidable and can be addressed through policy.” He pointed out that imports of goods and services account for the largest share of losses, making them a priority for reform.

Workshop discussions focused on formalisation, licensing, digital payments, strengthening local value chains, and sustainability standards. These outcomes will feed into a three-year implementation roadmap led by the SLTDA, marking a strategic shift from increasing visitor numbers to maximizing retained value.

Record Arrivals, Weak Revenue Growth

In 2025, Sri Lanka welcomed a record 2.36 million tourists, yet tourism income grew by just 1.6%, reflecting declining per-day visitor spending and growing concerns over the quality of tourism growth.

The SLTDA recently revised average daily spending per foreign visitor down to $148, from the earlier $171 figure established a decade ago, highlighting the urgent need for a new value-driven tourism strategy.