After successes in multiple businesses over the years, Arun Chaudhary recently stepped into the hospitality sector. Acquiring the Tigerland Safari Resort at Chitwan, he announced that he will invest Rs 5 billion in hotels within five years. Ranging from a five-star hotel to a business hotel and a wellness resort, the new projects will be located at Lalitpur, Kathmandu, Pokhara and Lumbini. Despite the setbacks the Nepali hospitality sector has incurred due to last year’s devastating earthquake followed by the border blockade, the Managing Director of Chaudhary Group is quite hopeful that his new business venture will achieve success. Apart from the hotel industry, he also has plans to diversify the vehicles trading unit, his largest business. In an interview with Madan Lamsal, Editor-in-Chief of New Business Age, Chaudhary shares his views on the business opportunities available in the country, his new venture and plans for the future. Excerpts:
The private sector is said to be facing tough times. How do you assess the business climate in Nepal?
Business in Nepal is very good. People may think that I am either a hypocrite when I say this or that I do not know about business. But I am not a hypocrite and I know my business very well.
Are you talking about the businesses where you have invested or all the businesses overall?
We need to evaluate what Nepal is good at and what it’s not good at. There are certain sectors in which Nepal could have done much better. Hydropower is the most potent sector with competitive advantage in real terms. However, the sector has been hyper-politicised. Because of that, people have started to over expect from the sector.
People start businesses to earn money. Doing business and earning money is not a sin. If we want to increase businesses and develop entrepreneurship in the country, we need to spread the idea that earning money by doing business is not a sin.
Widespread black marketing practices have hampered honest businesses. What is you view on this issue?
It is a governance issue. Along with those involved in malpractice, the system that fosters such misdeeds also needs to be taken into account. There are lacuna in any sector. It is normal for people to use the lacuna within limits for profit. But, if profiteering goes beyond the limits and is done without proper supervision and administration, we cannot just blame only those who are involved.
There are increasing concerns that the country is heading towards ‘crony capitalism.’ Don’t you see this as really dangerous?
We can’t do anything about this. We have been talking about the political transition for a long time. But nothing is happening. We can’t just shut down our businesses and wait for the situation to normalise.
We have to fight the odds and make our businesses survive. If we can make businesses thrive under adverse conditions, only then can our approaches be meaningful. If we become idealists and expect for an ideal situation to come, then every business will have to shut down in the country.
Today, doing business is not a problem for those who are already well established. However, new investors are surrounded with mounting issues when starting off. What is your view on this?
It is a prevailing situation in the contemporary world. Small enterprises at some point are absorbed by larger organisations. It is important to create a business and drive it to a certain level. Once it reaches that level, it then becomes interesting for bigger business houses to acquire. The popular messaging app Whatsapp, for instance, was created by some young entrepreneurs and later Facebook acquired it.
Newcomers need to be innovative. There are a lot of business opportunities for them. It is not as if everyone should focus on liquor, cigarettes or selling vehicles.
The beer industry, for instance, is not a startup business. If new investors want to compete with the established beer brands, then they need to have deep pockets and a lot of guts. At present, our noodles brand Wai Wai seems to have a monopoly of the market. Nevertheless, we have not restricted anyone to enter the noodles industry. But to penetrate a market in which a brand is already well established will be very difficult for newcomers.
Besides this, we need to explore markets. People have to come up with new ideas and invest properly. Recently, I came across data that shows vegetables amounting Rs 100 million are sold in Nepal daily. It clearly indicates that agriculture carries huge potential in our country.
You have forayed into the hospitality sector with the acquisition of the Tigerland Safari Resort. What was the attraction?
We are in a lot of businesses. We have investments across multiple sectors including automobiles, real estate, education and manufacturing. Our manufacturing units produce various items such as edible oils, lubricants, starch and liquid glucose. Automobiles, however, has been the high profile one as it is the most visible business in the market. Nevertheless, we have realised the need to balance our businesses as the emphasis so far has been more on the automobile sector. So keeping this in mind, we decided to diversify into the hospitality sector.
Tourism is one of the most lucrative sectors with comparative advantage for Nepal. Despite carrying huge potential, the sector is largely underutilised. Recently, I came across a survey that said the tourism sector is a USD three trillion global business. Around 27 million tourists visit Bangkok and 26 million make their trips to Malaysia every year. However, we celebrate if only 500,000 foreigners come to Nepal. We get less because we target very less. We need to broaden our vision. We have a lot to offer to the tourists. We can offer rich cultural heritage, adventure, sports to our guests. Similarly, it is relatively easy to do business in the tourism sector as it has not been politicised yet.
However, the occupancy rates of the hotels are said to be very low at present. Is it an issue of management?
It is not a management issue. The reason behind the low occupancy rate is due to less numbers of tourists visiting the country. Due to the increase in negative news about Nepal, there have been security concerns among foreigners. These things cannot be fixed overnight. We have to address their security concerns while also having proper infrastructures to facilitate their entry into the country. We need to target at least five million visitors annually. We need to upgrade our airports and provide additional facilities in order to attract visitors.
What are your visions to move further ahead in the hospitality business?
We have acquired the 35-cottage Tigerland Safari Resort at Jagatpur, Chitwan as a start. Similarly, we are opening a 200-room five star hotel at Jhamsikhel which will be managed by Holiday Inn. Next, we are planning to open a business hotel at Tripureshwor. Likewise, we are opening a wellness centre at Budhanilkantha.
I always look for the mid segment as it has the largest chunk of the market pyramid. We will have a little less than 500 rooms altogether. We are planning to start all these projects within five years. We have also plans to open hotels at Pokhara and Lumbini.
What will be your marketing strategy regarding the hotels? How will it be different from others?
My entire business segment is much more focused rather than just doing marketing. Banqueting has become one of the biggest businesses in Nepal along with hotels. The country lacks banqueting facilities at five star levels. Our hotel's USP will be banqueting facilities which will be as big as Hyatt and Soaltee hotels. We are centrally located (at Jhamshikhel) and there are no other internationally managed hotels in the Patan area which will be another advantage for us.
I am fully confident that our partnership with the IHG Holiday Inn will achieve a huge success. The hotel chain has a specific business model called the ‘Tube’ where they have a very well managed system of customers. Holiday Inn has the world’s best brand recall among the hotels chains with 600,000 rooms across the world.
How do you see the Nepali hospitality sector progressing in the coming years?
By and large, around 3,000 hotel rooms will be added within the next 5-7 years. This will put pressure on entrepreneurs who are involved in the hospitality business. When a sector with underutilised potential is pressurised, it will ultimately result in evolving new ideas to address the problems. This creates a situation where the entire business grows.
We have a sufficient number of domestic tourists for the local resorts. The rise in the disposable income of Nepalis has resulted on increased spending of domestic tourists. We need to tap that potential to increase our capacity to achieve further growth in the hospitality sector.
What are your expectations from the government?
To be truthful, I am not expecting anything from the government. I am only hoping that any untoward incident will not happen in the country that may adversely affect the tourism sector.
It would be better if the government would focus on improving and developing infrastructures necessary for the tourism and hospitality sector. The government can support us by improving the airports. There are hygiene related issues that need to be addressed at our international and domestic airports at present. Similarly, timely arrival of luggage and managing 24 hr aircraft landing are also other areas the government can look into.
How is your automobile business doing?
This is one of our largest businesses. We are undisputedly at the top of the Nepali automobile market. This has happened because of the products and services we are providing to our customers along with the rising confidence of Nepali consumers. Gradually, Nepalis are taking vehicles as necessities, not luxuries.
I hope that the government expands the cities. There is concern among people that there are too many vehicles in the country at present. I do not agree with that view. It is largely due to the congested cities. There is an eminent need of developing satellite cities to ease the congestion which would also facilitate the automobile business to grow.
The number of vehicle brands has increased regarding the pricing bracket. Has this affected the growth pattern of your business?
Our automobile business has a very good growth pattern. Nevertheless, the size of the market pie has increased as everybody is doing good business. Everyone is increasing their sales year-on-year. We are also doing the same.
How have last year’s events been of impact?
The earthquake slowed down the sales of vehicles early last year. Later the supply disruptions and scarcity of fuel severely hampered the automobile business.
Can you share some of your automobile business plans?
As Maruti is coming out with various new models every year, we are planning to divide our motor business into two segments. One will be the premium segment including vehicles like Ciaz, Baleno, S-Cross, Vitara Brezza and many more which will be added to Maruti’s portfolio. We will have a different infrastructure called CG Next Gen to cater to the segment.
Similarly, the other segment will include vehicles which we are selling currently and will be handled by the CG Motocorp. We will be aggressively embarking on expanding our service network which will be as per the Maruti’s own service standards. Our focus will be on customer oriented sales.
Who is your main competitor?
For our segment of vehicles, Hyundai is the main competitor.
How are your other businesses doing?
Our other businesses are doing well. We are in the top 5 in terms of edible oils. We are also in the lubricants business with Nepal Lube Oil which is a public limited listed company. It is the only company that has survived the effects of post-privatisation and distributes dividends up to 25 percent year-on-year to its shareholders. We also have Nepal Agro which produces starch and liquid glucose. We acquired the company from the Bhutanese owners. We are trying to scale up the company.
Education is one of the areas which we will be focusing on in the coming years. We already have about 2,000 students studying under our network. We are operating four campuses. We are running the CG Institute of Management (CGIM) affiliated to the Limkokwing University of Creative Technology, Malaysia. Another is the Pokhara University affiliated Excel International College and Premier College affiliated to Tribhuvan University.
How have you changed over the last 5 years in the way you run your businesses?
Earlier I wanted to get involved in every kind of business, but now I don't. Now I run businesses that I can do well in and take to the top spot. Similarly, I used to manage my institutions which I don’t do now. My colleagues are very capable and they manage things. We are not involved in organisational micromanagement. We work with system and process rather than guiding newcomers who come to work for us. While inducting them, we explain to them their jobs, roles and targets. I review their performance once a month for each business thoroughly and it is their job to hit the targets. I usually spend more time in planning and innovating and keeping my mind cool so that I can think constructively