Sri Lanka tourism investment is being actively encouraged by the government as economic and political stability take firmer hold following years of crisis. The renewed appeal highlights the sector’s central role in attracting foreign capital and accelerating post-crisis recovery.
Sri Lanka tourism investment urged as stability returns
Sri Lanka’s Minister of Foreign Affairs and Tourism, Vijitha Herath, has called on Sri Lankan expatriates to play a more active role in attracting new investors to the country’s tourism industry, citing improved economic and political stability. The appeal was made during the groundbreaking ceremony of the AUREUM luxury hotel complex, a European-backed project that had been delayed for several years due to the COVID-19 pandemic.
Addressing stakeholders at the event, the minister noted that businesses shuttered during the pandemic are now reopening under new ownership as confidence gradually returns to the economy. He pointed to renewed investor interest, particularly from Europe, as evidence that Sri Lanka is regaining credibility as a destination for long-term tourism ventures.
Sri Lanka tourism investment, once a key driver of growth and employment, suffered a prolonged downturn following a series of shocks. The global pandemic brought international travel to a standstill in 2020 and 2021, dealing a severe blow to the leisure industry, which had been the country’s third-largest source of foreign exchange before the crisis. Hotels, tour operators, and related services faced widespread closures as arrivals collapsed.
The situation deteriorated further in 2022 amid the country’s worst economic crisis in decades. A sovereign default, acute fuel shortages, rolling power cuts, and inflation that surged to nearly 70 percent severely disrupted daily life and undermined investor confidence. Large-scale protests and international travel advisories compounded the challenges, discouraging visitors and delaying investment decisions.
As a result, tourist arrivals fell sharply from a pre-pandemic peak of 2.33 million visitors in 2018, which generated around 4.4 billion dollars in revenue. By 2022, arrivals had declined to just over 700,000, with earnings dropping to approximately 1.1 billion dollars. These losses followed earlier setbacks such as the 2019 Easter Sunday attacks, which had already dented confidence in the sector.
Recovery efforts began to gather pace in 2023 as the government introduced targeted measures to revive tourism. These included easing import restrictions for hotels and related services, introducing visa-free entry for key markets such as India, Russia, and China, and stepping up international promotional campaigns. IMF-backed stabilization policies also helped rein in inflation and rebuild foreign exchange reserves, creating a more predictable operating environment.
These measures translated into a strong rebound in arrivals. Sri Lanka welcomed a record 2.36 million tourists in 2025, generating more than 3.2 billion dollars in revenue despite disruptions caused by Cyclone Ditwah toward the end of the year. The recovery marked a turning point for the sector and reinforced its importance to the broader economy.
Despite the improvement, Sri Lanka tourism investment has recovered only gradually. Foreign direct investment in hotels and tourism infrastructure remained subdued in 2022 and early 2023 due to construction cost shocks and cautious investor sentiment. While several stalled projects have resumed, many investors continue to assess risks related to infrastructure gaps, regulatory consistency, and global competition.
The current administration under President Anura Kumara Dissanayake, in office since late 2024, has placed tourism at the center of its economic strategy. The government has identified the sector as a critical source of foreign exchange, employment, and regional development. Authorities are targeting three million tourist arrivals in 2026 through infrastructure upgrades, sustainable tourism initiatives, and incentives aimed at attracting long-term investors rather than speculative capital.
Minister Herath’s call to expatriates reflects a broader strategy to leverage diaspora networks to bridge the gap between international investors and domestic opportunities. By encouraging Sri Lankans abroad to introduce credible investors, the government hopes to accelerate capital inflows while strengthening confidence in the country’s post-crisis recovery.
As global travel demand normalizes, Sri Lanka’s challenge will be to convert renewed interest into sustained investment that supports quality growth. The revival of delayed projects such as the AUREUM luxury hotel signals progress, but policymakers acknowledge that continued stability, policy clarity, and infrastructure development will be essential to maintaining momentum.