The COVID-19 pandemic has no doubt had  enormous economic impact on the tourism and hospitality industry the world over,  including Sri Lanka. For close upon two years international travel has been just reduced to a trickle, with hardly any tourist arrivals. Consequently, there has not been any healthy revenue streams to the industry, with little or no occupancy over the past 20 months. 

It is actually a small wonder that one does not hear of many tourism establishments going bankrupt. Of course, there are several smaller hotels up for sale already. Everyone is suffering, large and small, with very serious cash flow problems and the government loan repayment moratoriums have had only a marginal effect on  reliving the burdens. 

On the other hand, hundreds of staff have been discontinued, especially casuals and contractual. The smaller independent tourism service providers are in dire straits and in a more precarious position than the larger operators. Due to the very large multiplier effect tourism has in Sri Lanka, this fallout cascades across all social strata. 

The full impact of the direct and indirect socio-economic effect therefore on Sri Lanka will be quite gigantic and very difficult to assess. 

Direct economic impact (forex earnings) 
Hence, while certainly the indirect ‘soft’ impact may be large and important, it is also worthwhile to assess the pure direct economic impact, due to the downturn in tourism.

This can be relatively easily assessed taking some reasonable assumptions.  

• Establish 2018 as the base year as it was the best for Sri Lanka tourism (2019 terrorist attacks and then COVID) 
• Forex earnings from tourism in 2018 were US $ 4.4 billion.
• It was the third largest contributor to forex earnings, amounting to about 15 percent of earnings to the country.  
• Forex earnings have been increasing YoY at about 12.5 percent. 
• So, if COVID was not prevalent, then forex earnings for 2020 would be about US $ 5.5 billion.In 2020, the forex earnings from tourism were US $ 0.95 billion.
• Thus, the effective forex loss is about US $ 4.55 billion.
• This would be approximately 5.3 percent of Sri Lanka’s GDP.

This goes to show the sheer importance of the tourism and hospitality industry to the economy of Sri Lanka. It is vital hast the government fully understands this and lends all its support to revive the industry.