ABSTRACTDespite the rapid rise of tourism as a major international commercial activity and the marked increase in the numbers of tourists visiting the Third World over the last several decades, the pace of publication of academic papers examining the growth and development of the industry in various tropical locations has remained relatively moderate. This article attempts to redress some of this deficiency and to fill a gap in the geographical literature of Third World tourism. An investigation of market fluctuation within the Sri Lankan tourist industry over the last decade, in particular that of the rapid reduction in tourist arrivals during the period of political instability between 1982 and 1989, and the impressive recovery of the tourist market since 1989, is examined. The progress of Sri Lanka's tourist experience over time is assessed in the light of R.W. Butler's (1980) evolutionary model of tourist development. While the early expansionist development of the Sri Lankan tourist industry between the mid‐1960s and early 1980s fits Butler's model fairly closely, the market response of ‘bust and boom’ since 1983 diverges substantially from his theoretical ideas. The case study also demonstrates that tourism need not exercise a wholly negative influence on an economy; but under the right circumstances can be of benefit to Third World countries. An outline is also given of the methods by which Sri Lanka has attempted to keep in check the negative aspects of tourism in order to ensure that tourism is a positive and successful development strategy. In looking to the future, the tourist industry in Sri Lanka appears to have the potential for continued growth and development provided political conditions in the country remain stable. The industry promises to be an important aspect of Sri Lanka's development strategy, if the negative aspects of tourism can be contr