Sri Lanka tourism outlook brightens as war ends

Feb 11, 2009 (LBO) – Sri Lanka’s long-suffering hotel industry faces better prospects as the ethnic war that has kept visitors at bay is almost at an end, while depressed valuations and investment needs may trigger take-overs, an equities researcher has said. Srimal Liyanage of Lanka Securities said he believes the hotels listed on the Colombo stock exchange are ripe for a re-rating, having hit rock-bottom.

The hotel industry is bound to see an upturn in the medium turn as was the case with other Asian countries battered by conflict like Cambodia and Vietnam where tourist arrivals recovered sharply when the violence ended.

“We believe there’s massive potential in the leisure sector with the war coming to an end,” Liyanage said in a presentation on the industry.

Sri Lanka’s government has said it is on the verge of ending what is known as Asia’s longest insurgency, having cornered the Tamil Tiger rebels in a small patch of territory on the island’s north-east corner.

Takeovers

The 33 listed hotels might also generate some takeover activity as low market valuations make them attractive and low earnings mean owners might be looking to sell.

“Strategic deals are possible, in stand-alone hotels especially, not necessarily in g