"Looking at other markets, we find entertainment coupled with local culture as the key reason for people to go to these destinations," says Dileep Mudadeniya, Managing Director, SriLanka Tourism Promotion Bureau.
"So the Hikkaduwa beach festival is one step in a long journey to get the youth market back to Sri Lanka."
Officials say there is a booming global youth market of 20 to 30-year-olds and India and China are also emerging in to the field, with growing economic affluence. But Sri Lanka has been losing out so far.
"There was the idea that the youth market is not lucrative, they don't spend," says Mudadeniya.
"But now we call them flashpackers. They like to flash their money - to spend."It's an emerging market, especially Indians who have high disposable income. We have lost this market.
"Sri Lanka has rarely catered to the needs of this age group with little or nothing happening in the way of entertainment," says Mudadeniya.
Officials say at a time when high fuel prices are making long-haul flights expensive, attracting visitors from short haul destinations makes better economic sense.
The country's prime attractions – at least the actively promoted ones - are its archeological sites and cultural pageants.
The cultural pageants are strictly religious and allow no revelry among guests and onlookers unlike in some other countries.
Sri Lanka is also famous for its beaches, but with the ethnic conflict, the more beautiful ones, such as Nilaweli and Arugam bay in the east, have become no-go zones.
This leaves the southern coast with Hikkaduwa being one of the key spots.
Chairman of Sri Lanka Tourism Renton de Alwis says Hikkaduwa peaked in the 1960s. The 1960s was a time of change when post-second World War baby boomers revolutionized the culture of the western world.
The beach festival, however, hopes to re-engineer Hikkaduwa's image.
"Through events like this, Hikkaduwa can get rejuvenated and people will again begin to look back at Hikkaduwa," says de Alwis.
"We believe that Hikkaduwa will need a re-engineering of a sort, as a destination.
"This year we are looking at the festival as a take-off. More importantly Hikkaduwa will be getting a flavor as the carnival in Rio."
Hikkaduwa is already geared for the youth market, with local revelers going there from the capital on weekends in addition to a steady stream of foreign visitors.
A beach carnival last year had attracted mostly Sri Lankan youth. Foreign visitors had made up about 20 percent of the total.
This year the Tourist promotion office hopes to double foreign visitors to 40 percent.
Mudadeniya says most places in Hikkaduwa are already full. Hotels from Galle to Bentota up and down the coast are also expected to fill up, during a usually dull-period in a country where hotels fill up only during the European winter season.
The festival may generate about 16,000 room nights in all.
The tourist promotion office has launched a website, www.srilanka.travel/hikkaduwa for visitors to get more information.
Artistes and DJs from India, United States, Europe and UK will join popular Sri Lankan performers, giving the beach festival a mix of cultures across continents.
Bikram Jith Singh, a renowned flutist from India, Glamslam girls from UK, and international DJs such as Micheal Parsberg of Denmark and Lisa Littlewood of Scotland will be in action in Hikkaduwa next week.