Optimising investment decisions in homestay tourism: a cost and performance analysis of coastal regions in Sri Lanka

Abstract

Tourism plays a vital role in the economy of Sri Lanka, with homestay accommodations emerging as a key component of community-based tourism. However, the successful development and operation of homestays are influenced by multiple factors, creating challenges for investors and operators. These challenges often result in inefficient investment decisions, underperforming accommodation ventures, and missed opportunities for local economic development. Despite the growing trend of homestay establishments in coastal regions, limited research has been conducted to systematically identify the critical factors affecting their development. Therefore, the main aim of this research is to identify and analyse the key factors influencing the development of homestay accommodations in the coastal regions of Sri Lanka. Accordingly, the study investigates three primary dimensions: cost-related factors, including initial investment and operational expenses; tourist preference factors, focusing on the attributes that influence visitors’ selection of homestays; and social, environmental, and cultural constraints within the Sri Lankan context. Data were collected through a combination of literature review and semi-structured interviews with relevant stakeholders. Mean comparison and thematic analysis were employed to evaluate and prioritise the critical factors affecting homestay development. The findings provide valuable insights for homestay operators and potential investors, enabling more informed decision-making and contributing to the sustainable development of the homestay sector in Sri Lanka.