Sri Lanka’s tourism industry is confronting a fundamental contradiction: the country possesses internationally admired beaches, diverse wildlife, cultural heritage and established hospitality expertise, yet continues to struggle to transform these advantages into a consistently profitable, high-value investment destination. The central problem, according to industry leaders, is not the absence of tourism master plans but the failure to translate policy intentions into coordinated action, predictable regulations and commercially viable development.
Speaking at the fourth Tourism, Hotel Investment and Networking Conference (THINC) Sri Lanka and Maldives in Colombo, former Board of Investment Chairman Thilan Wijesinghe argued that Sri Lanka had pursued development without a coherent national strategy. He pointed out that the country had formulated approximately 17 to 18 tourism master plans, broadly comparable to the number of IMF programmes undertaken since 1965.
The repeated production of plans, however, has not prevented fragmented approvals, inflated land valuations and poorly coordinated hotel development. These weaknesses raise an uncomfortable question for policymakers: how can Sri Lanka attract sustainable foreign direct investment when investors cannot reliably predict how long approvals will take, what land will cost or whether neighbouring developments will undermine their projects?
One particularly damaging obstacle is the pricing of state-owned land. Wijesinghe cited an example in which an Indian investor acquired freehold land on the eastern coast at Rs.5.5 million an acre, while the Government priced land in the same area at Rs.20 million. Such a disparity, he argued, distorts market valuations and makes tourism investment unnecessarily expensive.
With the State controlling more than 80 percent of the country’s land, public land policy can significantly influence the cost of establishing resorts. Excessive valuations could discourage investment, encourage speculative holding and prevent viable projects from proceeding. Wijesinghe proposed imposing property taxes on undeveloped beach land after a two-year period to discourage speculation and release land for productive use.
However, such a tax would require transparent valuation, clearly defined exemptions and safeguards against penalising legitimate conservation or infrastructure constraints. Otherwise, an instrument intended to unlock investment could become another unpredictable cost for businesses.
Coastal planning presents a second major challenge. Wijesinghe criticised the relaxation of traditional height restrictions, pointing to the 11-storey Weligama Bay Marriott and the proliferation of beachfront apartments. Uncontrolled construction can damage scenic value, increase infrastructure pressure and erode the exclusive character that attracts high-spending visitors.
The experience of Pasikudah demonstrates the dangers of development without adequate product differentiation. Despite public investment in electricity, water and sewerage, the area reportedly developed a mixture of hotels without a coherent destination identity. Wijesinghe cited bankruptcies and properties offered for sale as warning signs.
Sri Lanka must therefore move beyond counting approved hotel rooms and establish destination-specific plans based on environmental carrying capacity, market demand and investor viability. A proposed single-window investment mechanism, supported by the World Bank, could reduce bureaucratic delays while retaining environmental and planning safeguards.
Ultimately, tourism promotion cannot compensate for weaknesses in the investment climate. Sri Lanka needs transparent land pricing, predictable approvals, coordinated coastal zoning and reliable market intelligence. Without these reforms, new marketing campaigns risk attracting visitors to a destination whose development model remains commercially and environmentally vulnerable.
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