NEPAL: So Many Mushrooming Hotels, Yet Few Tourists

Due to the slow development of infrastructure, hoteliers may have to compromise on the occupancy rate for many more years to come.

The hotel industry that was hit hard by the devastating earthquake last year followed by political problems and economic blockade is almost back on its feet, as per hoteliers. The hotel occupancy rate that decreased by 30 per cent in 2015, increased by 65 per cent in 2016.

The hotel industry is the backbone of the tourism industry and is also one of the most job generating markets for Nepalis. According to World Trade Organisation, one tourist directly or indirectly creates jobs for 12 people. The industry has the potential of creating major employment opportunities for Nepalis in the next few years. The hotel industry is led by the private sector and the government is yet to take a proactive role for its development.

“Nepal received eight million tourists in 2014, 5.38 million in 2015, and the estimated number for 2016 is around six million. We have 36,000 beds in 22,000 rooms at present. By 2020, 4,000 star rooms will be added. To occupy these rooms the hotel industry needs more than two million tourists by 2020,” said Binayak Shah, General Secretary of Hotel Association Nepal (HAN). He said that HAN has planned for international marketing, local promotion, and upgrading service standard/hospitality in order to increase hotel occupancy. According to him, HAN has, in the past years, focussed its promotional campaigns in neighbouring countries as Nepal is the ideal destination for tourists visiting from these countries. “Our government is too slow in reforming economic and tourism agendas that include proper plans and policies for development of the tourism sector. The government is still not working in collaboration with the private sectors to uphold tourism,” said Shah.

Talking about occupancy rates in hotels, Shagun Shakya, a member of KGH Group, said, “Last year was a disaster with the blockade but this year the situation is as good as pre earthquake times.” She further said, “Presently the KHG Kathmandu Guest House is doing well with occupancy ranging from 70 to 100 per cent in all its seven hotels. The private sector has invested a lot for the upliftment of tourism. It’s the government who has to build the infrastructure now.” According to hoteliers, the hotel industry will progress with better infrastructure development, smart marketing and good service development.

“Nepal has been and will always be a unique destination for tourists wanting to explore. Post the incidents in the past year, tourist numbers have dwindled and affected overall businesses in the country,” said Sinead O Reilly-Henell, General Manager, Hyatt Regency Kathmandu. She elaborated, “However, for us at the Hyatt Regency Kathmandu, we’ve been able to improve the tourist number from 2015. As an industry, we need to work together involving all the stakeholders to develop short, medium, and long term plans pertaining to infrastructure.”

Bijay Amatya, CEO of Kora Tours, also agreed with most hoteliers on the need for basic infrastructure in place for tourism to flourish. He said, “By 2030 two billion people will be travelling worldwide spending USD three trillion. Foreign investors looking to invest in Nepal know that the prospect is very good here. That’s why they want to invest in tourism. But to cater to the investors and tourists alike we lack the infrastructure. We need to focus on improving our infrastructure, we need to have a very strong national carrier, and trained human capital to meet the demand of these tourists. These three things must be carried out simultaneously. We need to invest money on worldwide marketing with major focus on the consumers.” According to him, Nepal has a strong hold in adventure tourism whereas cultural tourism needs more looking into — reconstruction and restoration of the heritages is of utmost importance if we are to revive cultural tourism.

Hoteliers further pointed out that the underlying reason for trickling number of tourists visiting Nepal is the current condition of Tribhuvan International Airport (TIA), the only international airport in the country.

TIA currently handles traffic beyond its capacity and still lacks proper connectivity between countries with limited number of aircraft bringing in tourists. And, even if the influx of tourists were to increase the absence of road connectivity directly hampers the tourism industry and hoteliers.

“Tourist number will go up to 1.4 million by 2020 and Nepal needs to be prepared. Airport construction needs minimum four to five years and in order to cater to the expected number of tourists, this process must be fast-tracked and prioritised. Right now our airport has a limited capacity which directly limits tourist inflow,” said Amatya.

The airport expansion project is to be completed by 2018 but due to the 2015 earthquake, it is on hold for now. Without the expansion of the airport and increase in number of aircraft the development of tourism industry is impossible.

With mushrooming of hotels in the country, Nepal is already heading to a catastrophic turmoil caused by more supply than demand. Without proper plan there is going to be a fierce price war within the industry. The hotels are already operating at a survival rate and cutting down prices more will lead to disastrous times for hoteliers. “All of us want improvement and development right now. Handling tourism correctly could be the best source for generating revenue and national income,” said Shah.

But on the bright side, the mushrooming of hotels also mean that Nepal has found its foothold in the tourism scene worldwide. Reilly-Henell said, “The upcoming hotels in Nepal are a positive indicator especially with international chains looking to have a footprint in Nepal.

This will definitely set Kathmandu as an international destination with world class standards.” New hotels have a future if the tourism industry flourishes in the coming years. Proper tourism development generates maximum employment opportunities with higher hotel occupancy.

This year tourism entrepreneurs marketed destinations mostly with Indian and Chinese tourists and were successful in bringing in the numbers. After the excessive loss of last year hoteliers are trying their best to increase their occupancy rate this year. But due to the slow development of infrastructure, hoteliers may have to compromise on the occupancy rate for many more years to come.

Overall hoteliers have managed to upgrade their occupancy rates above 40 per cent this year with 60 per cent being the average occupancy rate of most hotels. The occupancy is expected to rise further with the arrival of more tourists as Nepal still holds its charm for untainted natural beauty and as a value destination.

“By 2030 two billion people will be travelling worldwide spending USD three trillion. Foreign investors looking to invest in Nepal know that the prospect is very good here”