The Sri Lanka Tourism Development Authority (SLTDA), in collaboration with UN Tourism, convened the country’s inaugural national multi-stakeholder validation workshop on January 28, focusing on economic leakages within the tourism sector.

This workshop was grounded in the Rapid Assessment on Economic Leakages across the accommodation, travel agents/tour operators, and wellness sectors. The assessment revealed that nearly one-third of the value generated by tourism in these segments does not remain within the domestic economy, due to a mix of external, internal, and invisible leakages.

Crucially, these figures should not be viewed as an indicator of weak economic impact but rather as a sign of untapped potential. They underscore the opportunities to enhance domestic value retention, deepen local supply chains, and boost the contribution of tourism to income, employment, and fiscal revenues.

Furthermore, the assessment only covered three segments of the tourism value chain. Additional activities such as casinos, crafts, and selected leisure services are likely to increase the overall volume of recoverable value, emphasizing the need for targeted, pragmatic action rather than concern over tourism’s economic role.

In 2024, tourism generated USD 3.17 billion in receipts, ranking as Sri Lanka’s third-largest source of foreign exchange. However, a significant portion of this value does not remain within the domestic economy, due to structural factors such as offshore bookings (with OTA and international operator commissions being inherent in global tourism markets), high import dependency, fragmented local supply chains, and high informality.

Key findings included:

• Informality across the three sectors significantly contributes to economic leakages and related fiscal losses. Precise quantification remains ongoing, given limited visibility on the full scale of unregistered operators, the extent of offshore-held revenues, and the fact that some market segments are more influenced by informal actors than others.
• Procurement-related leakages, largely driven by imports of food, equipment, vehicles, utilities, consumables, furniture, and textiles, exceeded USD 800 million annually. These leakages are not solely supply-side issues; visitor behavior also plays a role, as informed tourists are more likely to prefer locally sourced products and services when the origin and impacts are clearly communicated.
• Leakage rates above 50% were observed primarily in the spa and wellness segment, mainly due to reliance on foreign therapists and imported packaging for retail products.
• Conversely, Ayurveda demonstrated a significantly stronger local economic impact, with deeper local supply chains, greater value retention, and more socially responsible practices, including gender-appropriate service provision.

The workshop was designed as a pragmatic validation exercise, focusing on turning evidence into action and identifying realistic opportunities for progress:

• What could be implemented within existing institutional mandates
• What could be achieved in the short and medium term
• What actions required sequencing or broader coordination beyond sector-level authority

The objective was clear: not to debate the existence of leakages, but to collectively identify actionable steps to enable Sri Lanka to capture greater value from its tourism economy.

Three thematic panels addressed:

• Formalization, digitalization, and incentives
• Strengthening local value chains and sourcing
• Sustainability, skills, and destination positioning

With support from industry associations, the workshop’s outcomes will directly inform the preparation of a three-year implementation roadmap led by SLTDA. This roadmap will prioritize practical and achievable measures, including clearer and progressive formalization pathways, realistic opportunities for import substitution, and enhanced consumer awareness through better use of digital tools.

A key focus will be on improving market credibility and access, where continued access to platforms, promotion, and partnerships will increasingly depend on compliance with SLTDA registration and quality requirements, preceding any enforcement or sanctioning measures. Improved inter-institutional coordination will support this transition.

As tourist arrivals continue to recover, Sri Lanka’s challenge is not merely to increase visitor numbers but to ensure that a larger share of tourism value remains in the country and benefits its citizens. This workshop marked a significant first step toward achieving that goal.