Sri Lanka tourism leakages are estimated at $1.13 billion annually, highlighting deep structural weaknesses in value retention despite steady growth in headline earnings, according to a new rapid assessment released by the Sri Lanka Tourism Development Authority.
Sri Lanka tourism leakages shift focus from arrivals to value retention
Sri Lanka tourism leakages have emerged as a major concern for policymakers and industry stakeholders, with the country losing an estimated $1.13 billion annually despite earning $3.17 billion from tourism in 2024 and approximately $3.2 billion in 2025. The findings come from the country’s first Rapid Assessment of Economic Leakages, released by the Sri Lanka Tourism Development Authority with technical support from UN Tourism.
The assessment shifts attention away from visitor arrivals and headline revenue figures toward the more complex issue of how much tourism income is retained within the domestic economy. It focuses on three key segments of the industry: accommodation providers, inbound tour operators, and the wellness and Ayurveda sector, areas identified as having significant implications for local value creation.
Addressing a stakeholder workshop held to present the findings, SLTDA Chairman Buddhika Hewawasam described the scale of the leakages as alarming but manageable. He said the assessment showed that at least $1.13 billion is lost each year through a mix of internal and external leakages, adding that while some level of leakage is inherent in tourism, a significant portion can be mitigated through targeted structural reforms.
One of the largest contributors to Sri Lanka tourism leakages is procurement-related imports, which exceed $800 million annually. Heavy reliance on imported food and beverages, furniture, equipment, and energy inputs has reduced the sector’s ability to generate strong backward linkages with the local economy. Hewawasam said this dependency highlights gaps in domestic supply chains that could otherwise support agriculture, manufacturing, and services.
Informality across the surveyed sectors also emerged as a major issue. The assessment estimates that informal operations result in annual fiscal losses of about $84.8 million due to unpaid taxes and levies. This not only affects government revenue but also distorts competition and undermines the long-term sustainability of the tourism industry.
Leakage rates were found to be particularly high in the wellness and Ayurveda segment, exceeding 50 percent. Hewawasam noted that this raises serious questions about sourcing practices and credibility in a segment that is expected to be deeply rooted in local traditions, knowledge systems, and natural resources. High import dependence and weak regulatory oversight were cited as contributing factors.
Tourism Deputy Minister Prof. Ruwan Ranasinghe said the findings underline the limitations of measuring tourism success purely through arrivals and gross earnings. He noted that roughly one-third of every dollar earned through tourism leaves the country, reducing the sector’s real contribution to economic development.
Prof. Ranasinghe added that while imports are unavoidable in certain areas, the assessment clearly identifies opportunities to strengthen domestic supply chains and retain a larger share of tourism income. He said policy interventions must be grounded in a realistic understanding of where leakages occur and which can be addressed without compromising service quality.
UN Tourism Development Economist Prof. Frederic Thomas said the assessment was designed to move the discussion beyond diagnosis toward implementation. He emphasised that not all leakages are equal, noting that some are structural while others are avoidable and responsive to policy action. According to the study, imports of goods and services account for the largest share of losses.
Thomas said the stakeholder workshop marked a transition from analysis to action, with discussions centred on formalisation, licensing, digital payment adoption, strengthening local value chains, and sustainability standards. These measures are seen as critical to improving transparency, compliance, and domestic value retention.
The findings come at a time when Sri Lanka’s tourism growth model is under increased scrutiny. In 2025, the country recorded its highest-ever tourist arrivals of more than 2.36 million. However, tourism income grew by only 1.6 percent, reflecting declining average per-day spending and intensifying concerns over the quality and value of growth.
The SLTDA recently revised down estimated per-day spending by foreign visitors to $148 from the earlier $171 figure derived from a survey conducted a decade ago. This downward revision has reinforced concerns that rising arrivals alone are insufficient to deliver meaningful economic benefits without corresponding improvements in value capture.
Hewawasam said the rapid assessment has reframed the national conversation on tourism development. He noted that the objective is no longer simply to achieve higher revenue in a given year, but to increase the quality of expenditure and ensure that value is created through better strategy, marketing, and sectoral development.
The outcomes of the stakeholder dialogue are expected to inform a three-year implementation roadmap led by the SLTDA. The roadmap will prioritise retaining a higher share of tourism-generated value within Sri Lanka, signalling a strategic shift from volume-driven growth toward a more sustainable and economically integrated tourism model.