Tourism in Sri Lanka Shifts Beyond Colombo to Emerging Inland and Coastal Destinations, Fueling Economic Growth

Published on December 13, 2025

The tourism industry of Sri Lanka is undergoing significant transformation. With rising travel trends emphasising experience-driven holidays, visitor spending has shifted away from the capital city of Colombo and towards emerging inland and coastal destinations. According to new data from the Mastercard Economics Institute, while Colombo remains a major player in the country’s tourism industry, its dominance in tourism-related transactions is gradually waning. New hot spots, such as Ella in the inland regions, and towns along the Southern Belt—namely Ahangama, Weligama, Mirissa, Dickwella, and Matara—have begun to experience rapid growth, indicating a significant shift in visitor preferences.

Colombo’s Declining Share of Tourism Spending

Colombo, historically the epicentre of Sri Lanka’s tourism activities, continues to account for around 25% of the country’s total tourism-related transactions. However, this figure has shown a gradual decline. As more tourists venture beyond the urban sprawl, other destinations are beginning to capture an increasing share of tourist spending. This trend signifies a shift toward more diverse travel experiences that extend beyond the metropolitan areas. The country’s capital, long celebrated for its cultural and commercial attractions, is now seeing its dominance overshadowed by the appeal of emerging destinations.

Rise of Inland and Coastal Destinations

Emerging inland and coastal destinations have become increasingly popular among international travellers. Ella, a picturesque town nestled in the heart of Sri Lanka, has particularly benefited from this shift. Known for its stunning landscapes, tranquil environment, and scenic train routes, Ella has now established itself as a major inland tourism hub. Located in the hill country, Ella offers visitors a slower pace of life and an opportunity to explore Sri Lanka’s natural beauty.

Along the Southern Belt, the towns of Ahangama, Weligama, Mirissa, Dickwella, and Matara are recording notable increases in both arrivals and visitor spending. These areas are celebrated for their idyllic beaches, vibrant coastal culture, and relaxed atmosphere. Sri Lanka’s southern coast has always been known for its pristine shores, but it is only in recent years that these destinations have garnered international attention. With a blend of cultural richness, beach activities, and luxurious resorts, these towns are becoming the preferred destinations for those seeking a more authentic and less crowded experience than what Colombo offers.

Key Market Drivers

The shift in tourism patterns is being fuelled by rising arrivals from major source markets such as India, Russia, and the United Kingdom. These countries have long been key contributors to Sri Lanka’s tourism economy, and their citizens continue to show a strong preference for extended stays and off-the-beaten-path experiences. In particular, Indian travellers, who are the largest group of international tourists visiting Sri Lanka, are increasingly choosing destinations outside Colombo to enjoy longer holidays. Similarly, Russian and UK tourists are opting for more experiential travel, exploring Sri Lanka’s lesser-known gems, where they can connect more deeply with local culture and nature.

The focus on longer stays is reshaping the Sri Lankan tourism model. Tourists are increasingly looking to immerse themselves in local communities, staying in boutique hotels or eco-resorts that emphasize sustainability and cultural authenticity. This has given rise to a growing demand for small-scale, locally owned accommodations that are more in tune with the surrounding environment, rather than large hotel chains concentrated in urban centres.

Expanding Connectivity and Hospitality Investments

As visitor spending increasingly shifts to these emerging destinations, the airline and hospitality sectors are responding to this changing demand. The growth in tourism has led to enhanced connectivity across the island, with more direct flight routes and increased options for transport to these new hotspots. Airlines are expanding their services to cater to tourists who wish to explore beyond the capital, enabling easier access to destinations like Ella, Mirissa, and Matara.

The hospitality sector is similarly adapting to the shift. There has been a notable increase in investment in boutique hotels, eco-lodges, and resort-style accommodations in regions outside Colombo. This new wave of tourism-focused developments aligns with the growing interest in sustainable tourism and culturally immersive experiences. These investments are helping create a more diverse and resilient tourism offering, supporting Sri Lanka’s continued growth as a top destination in Asia.

Sustaining Growth Amid Economic Challenges

Despite modest declines in visitor spending in established tourist towns like Kandy and Galle, Sri Lanka’s tourism momentum remains strong. In fact, the overall sector continues to play a crucial role in supporting the country’s economic resilience. According to the Mastercard Economics Institute, the tourism sector, alongside private consumption and investment, is expected to maintain its contribution to the broader economic growth of Sri Lanka.

However, projections for Sri Lanka’s GDP growth in 2026 indicate a moderation in economic activity. While the tourism sector remains a vital contributor to the country’s economy, it will need to continue evolving to meet the changing needs and preferences of global travellers. The increasing geographic distribution of tourism spending is already providing new opportunities for local businesses, helping to spread the benefits of tourism to regions that have historically been underserved.

The Future of Sri Lanka’s Tourism Industry

Looking ahead, Sri Lanka’s tourism industry is set to undergo further diversification as emerging destinations gain prominence. The island’s abundant natural beauty, rich cultural heritage, and warm hospitality will continue to be key drivers for attracting visitors. As international tourists increasingly seek more authentic and sustainable travel experiences, Sri Lanka’s less explored regions will likely see continued growth in arrivals and visitor spending.

At the same time, the tourism sector will need to navigate ongoing global challenges, from shifting travel patterns to economic pressures. However, with its ability to adapt to changing market dynamics and invest in the right infrastructure, Sri Lanka’s tourism sector is poised to thrive in the coming years.