Sri Lanka stock market seen as funding option for hotels

May 04, 2011 (LBO) – Sri Lanka’s hotels, enjoying a boom after the end of a war, can seek expansion funds from the stock market, with banks having difficult history of lending to the sector, a report said. However, unlisted firms which form the bulk of the hotels, may face difficulties in using the stock market, RAM Ratings (Lanka) said in a report on the island’s hotel sector.

Tourist arrivals hit record levels in 2010 after the island’s 30-year ethnic war ended in May 2009 but most hotels face funding constraints in upgrading and expanding to cater to growing demand, it said.

“Banks have been unwilling to lend to the industry because of its dismal performance during the civil war, coupled with the segment’s acute susceptibility to adverse macroeconomic conditions and external shocks,” the rating agency said.

Loans granted to the tourism sector by licensed commercial banks had almost doubled during the first half of 2010 from the previous year.

But their total exposure to the sector only came up to less than three percent or 30.54 billion rupees of the commercial banking system’s entire loan portfolio as of end-June 2010.

“This is also reflected in the relatively low gearing r