Experts Views on The Hotel Boom in Nepal

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“We have enough hotels to accommodate 2.5 million guests”

Binayak Shah, General Secretary, Hotel Association Nepal (HAN)

Binayak Shah
General Secretary,
Hotel Association Nepal (HAN)
 
Visit Nepal 2020 is less than a year away. How prepared are the hoteliers?
Hoteliers are very much prepared; today we have enough hotels to accommodate 2.5 million guests in term of rooms, beds, food and entertainment. Eventually, by combining all categories of hotels, i.e. stars hotels, resorts, lodges, guest houses and even the homestay facilities, we have the strength in numbers to make Visit Nepal 2020 a grand success. According to the number of tourist arrivals in 2018, which was recorded at 1.2 million, we only require fifty percent of our rooms to host the current inflow of tourists. We can host twice that number. 
 
As a major stakeholder, what role will HAN play in making the tourism campaign a success? What supporting strategies have been formulated and implemented by HAN in this regard?
HAN has a vital role to play in making the campaign successful because tourists spend fifty percent of their time in hotels during their visit to Nepal. They spend their time in the hotel for food, accommodation and entertainment. They utilise the other fifty percent of their time in activities of their interest like sightseeing, treks, tours and mountaineering. 
 
We are working hand in hand with the government. The problem we are currently facing is the implementation process of the government, which is quite slow. Many rules and regulations need to be implemented for making the campaign successful. We met Suraj Vaidya, the coordinator of Visit Nepal 2020 campaign many times. During our discussion with him, we noticed that his hands are tied, and he is not allowed to function freely, because he needs to follow the rules and regulations set by the government as per the public procurement Act. 
 
According to this Act, we should compulsorily have three quotations even for the purchase of items worth a thousand rupees. This has delayed the progress of the campaign. Many promotional campaigns need to be conducted immediately but have been delayed due to this. The momentum of the campaign has slowed down significantly after the demise of the tourism minister. The country is yet to appoint a new minister, and the secretary has been changed as well, which has further slowed the progress.  
 
The Nepali hotel industry is currently witnessing a pouring of investment like never before with many new hotels and resorts opening in different parts of the country and international hotel chains coming in.  What are the reasons behind the attraction of investors in the sector?  
Investors invest their money in sectors of the country that offer a good scope of profit. The potential of the tourism industry is enormous in Nepal because it is located between India and China, which are the fastest growing economies of the world, and the number of outbound tourists of both countries is tremendous. Chinese tourists are the most frequent foreign travellers in the world, and the number of Indian citizens travelling abroad has increased in recent years. The only thing that is obstructing us from benefiting this potential is the infrastructure of our country. Our airport is already congested, and we do not have proper road linkage with India and China. However, development and construction works are going on. But it is likely to take some time because the pace at which the government works is inadequate.
 
With the increasing numbers, there are also concerns about the sustainability of hotels. How can hotels become sustainable in the long run? 
The sustainability of hotels depends on marketing strategies. A hotel requires a strong marketing policy. Also, the country has embarked on federalisation, we now have seven states, and the states are witnessing the growth of hotels because of the demand for additional rooms, restaurants, banquets and seminar halls. As per the available figures, over a hundred new hotels of various categories are in different stages of completion. Some of them are in the licensing process, some are under construction, and some have already started their operation. So, hotels must cash in on the tourism opportunities to sustain their business.   
 
The last decade was a difficult period for the Nepali hotel industry. How is the situation now for hoteliers?
The hoteliers have good business prospects here, but due to the poor infrastructure of the country, they are facing problems. Bringing in millions of tourists is not hard, but our infrastructure restricts our ability to do so. The infrastructure here is weak, the airport is congested, the roads are torn up and there is smoke, noise and air pollution everywhere. Foreigners will not prefer to visit Nepal in such a situation.
 
International tourists prefer to travel to countries with good infrastructure and a pleasant environment. Still, a sizable number of tourists visit our country because they love to be here, so we have to work on our infrastructure to let the hoteliers make most of the potentiality here.  
 
What significant challenges exist for hoteliers in Nepal at present? 
We have multiple challenges in the sector; firstly, the supply of hotels is more than the demand.   Secondly, the government’s rules and regulations are a major challenge for us. The execution of laws by the government is poor; they hardly implement them. Look at the situation of our international airport. We could have developed it very well, but due to poor execution, we have failed. The working process of our bureaucrats is slow; money is not the major problem here. 
 
The Asian Development Bank has invested a considerable amount of money for the expansion of the airport. The airport supposed to be completed on June 2018 has only achieved ten percent of the expansion target so far, and ninety percent of the job is yet to be done. The progress is stalled because of the slow and lousy bureaucracy of the country. The vision of our leaders is commendable, but the execution and implementation process is not up to the mark.
 
Politically the country has improved a lot, we now follow a federal structure, but our bureaucratic system is still lagging. On top of that, the situation is worsened by rampant corruption.  
 
How many hotels will come into operation in the next five years?
Kathmandu alone will have five thousand international standard rooms. An equal number of rooms will be set up outside Kathmandu in Nepalgunj, Bhairahawa, and Butwal. New hotels will be established in Janakpur, Birgunj and the eastern part of the country. Because of the federal structure, the provincial capitals will require more hotels.    
 
 How many people are being employed in the hotel sector currently? How many job opportunities will be created in the Nepali hotel sector in the next five years?
Ascertaining the actual number will be difficult. It is the government’s responsibility to do that as they are the concerned authority for recording it, but they have not computed the data well. However, as per our studies, the domestic hotel sector has been providing employment to one million workers, and 30 percent of them are female. The Hotel sector provides the highest number of employment opportunities for the female population in Nepal. Because many new hotels are coming into operation, an additional one million employment opportunities will be created in the sector in the coming five years. 
 
What is the role of hotels in increasing the length of tourists’ stay in Nepal?
Hotels need to provide comfort and services that are equivalent to the money charged, along with good ambience and facilities. And we are doing exactly that - hotels in Nepal are competing with international hotels. We offer contemporary standards like that of international hotels, which is why tourists repeatedly visit us. Talking about increasing the length of stay, tourists do not come to stay inside their hotel, but rather to enjoy the activities. In the previous budget, the government has pledged to identify a hundred new tourist destinations across the seven provinces.
 
There are many activities for tourists to engage in, which we need to develop well. At present only Kathmandu, Pokhara and Chitwan serve as the major hubs for tourism, and we need to go beyond that. All provinces have prioritised tourism development, and eventually, they will develop the infrastructure. The state government is working vigorously for, and we are working hand in hand with them. I can assure you that in the coming three years, the average length and average spending of tourists in Nepal will be higher than today.
 

 

“For Visit Nepal 2020, our emphasis is on professional service, quality, standards and training to set a benchmark for the industry.”

Shreejana Rana, Executive Director, Annapurna Group of Hotels

Shreejana Rana
Executive Director, Annapurna Group of Hotels
 
Visit Nepal 2020 is now less than a year away. Are the country’s hotels ready to play their role? How?
All hotels in the country are promoting Visit Nepal Year 2020 in one way or another, and we are making sure that not only the agencies but also our guests are made aware of the campaign, especially those guests who visit
Nepal often.
 
The hoteliers are concerned about extra rooms and how we were going to fill them. The government’s target of two million visitors is an ambitious figure, but with all parts of the hospitality sector and government agencies working together, we are optimistic that we will reach this figure. A great deal of work has been done in updating our products in terms of services, restaurants, heritage sites, etc. in preparation for the upcoming year. 
 
What long-term impact do you think the national campaign will have on the Nepali tourism industry and the hotel sector in particular?
Marketing is integral to the success of any product and even more so in the hospitality industry. The Nepal Tourism Board (NTB) has been very enthusiastic about its campaign and has been marketing it rigorously. With effective and continuous marketing strategies, the campaign is bound to make a lasting impact on the Nepal tourism industry and hotel sector. A national campaign such as Visit Nepal Year 2020 does not end when the year is over. The momentum will undoubtedly carry on positively beyond 2020. We are all aware that it is not enough to bring visitors into the nation: we need to make their experiences amazing so they will want to visit again. 
 
A national campaign like this also has the positive effect of encouraging different aspects of our industry such as restaurants, hotels and trekking agencies as well as different communities to work together for the betterment of each other. Also, this will continue not only until 2020 but also beyond that. Community and industry must stand together to benefit our nation – and this includes not only lasting benefits in Nepal but also with India. We have agreed with India to develop and promote the Ramayana/Buddhist circuit jointly. This exciting initiative will promote our rich religious and cultural heritage.  
 
How is Annapurna Group of Hotels preparing for the Visit Nepal 2020 campaign? 
With over 50 years of experience in the hospitality industry, we are confident we will look after our guests well and ensure that they have a pleasant and memorable stay. For Visit Nepal 2020, we will be emphasising professional service, quality, standards and training that will be a benchmark for the industry.
 
With our three properties - Hotel Annapurna in the best location in Kathmandu, Fish Tail Lodge with its unbeatable view of the Macchapuchhre and Fewa Lake, and Jagatpur Lodge, the epitome of luxury in the jungle - we are in the unique position to be able to offer our guests a one-window opportunity to experience the extraordinary diversity of culture, flora and fauna that makes Nepal so unique. 
 
What are the new services you are planning for the Visit Nepal 2020 campaign?
As mentioned earlier, we have three properties in three unique locations in major tourist hubs of the country. 
 
We are always in the process of updating our products. Recently, we revamped the Annapurna gym and introduced sauna and steam services at the hotel. Our enthusiastic employees handle guests’ requests with great care and ensure that they see it through. Service truly is personal at the Annapurna Group of Hotels. Besides this, we will be offering special packages for the Visit Nepal 2020 campaign. 
 
The group already owns Hotel Annapurna, Fish Tail Lodge and Jagatpur Lodge. Are you planning new properties in other tourist hubs?
These are plans that every hotelier has, and certainly, we do too. However, in the current context, I want to focus on our existing three properties. Our newest addition, Jagatpur Lodge, has been a challenge primarily due to the poor roads and connectivity.
 
I have learnt my lesson - I will not expand unless I am 100 percent confident about the existing infrastructure and business scenario in any proposed new location. Moreover, I am confident the government will prioritise infrastructure in the coming years. 
 
What is the average occupancy rate at your properties and how do you expect it to grow in 2020?
Average occupancy rates fluctuate depending on the season, not only at our properties but also throughout the industry. However, as previously mentioned, naturally we expect the occupancy rate to rise in 2020. We have been working on updating our products in terms of our services, restaurants, heritage sites, etc. in preparation for the upcoming year. 
 
It has been 54 years of the operation of Hotel Annapurna. What are the reasons behind its success?
From the day we opened in 1965 to now, we at the Annapurna have never lost sight of the fact that we are here to make our guests feel comfortable and special. The consistency of service is paramount. While we, like the rest of the hotel industry, have had many ups and downs, we have benefited from having operated the Annapurna for over half a century. I emphasise on personalised service, standards, quality and training at all times. However, I also realise that now it is time for the property to undergo a major refurbishment and we are planning for that.  
 
We believe firmly in the need to continually invest in our product, from technology to rooms and services—and, most importantly, our employees. Employee training programmes must be ongoing, not a case of showing them once and leaving them to it.
 
It is just as important to monitor and mentor them, to help them achieve their full potential and to identify and encourage future leaders. In the hospitality industry, there is never a time when we can say we have done it all: there is always room for improvement. We are always looking for new avenues to add to the guest experience. As the first five-star hotel, we have a unique position in our industry. I would like to see that legacy shine through the coming years.
 
What strategies have you implemented to sustain the business in the difficult years?
Our existence and success are intertwined with the promotion of our hotel and tourism industry. We work on providing the best services and product to our guests. We emphasise on personalised service, quality, standards and training at all times. Adapting to current scenarios and expectations is an ongoing endeavour. We strategise, identify and get to know our target groups. To be effective we work with local experts, customising special packages and our product accordingly. In difficult years, we must position our rates carefully. However, I firmly believe that a rate war is not the answer. Whether in good times or bad, we at the Annapurna walk the talk of providing the best service in an unbeatable location for all three properties in our group. And we ensure this fact is disseminated well in the market.  
 
How competitive is Nepal’s hotel sector?
Like any sector, the hotel industry is competitive. With an increase in the number of international chains arriving in the country, all of us are motivated. To give you an analogy, while we have made significant additions to our room inventory, there is genuine concern that there are too many hotels chasing the same slice of the pie (number of tourists) while the pie has not increased in size. All of us are hopeful that Visit Nepal 2020 will address this situation. 
 
What significant challenges exist for hoteliers in Nepal? 
As I mentioned previously, the major challenge for hoteliers is that our hotel industry is intertwined with the promotion of tourism industry. We need to improve infrastructure, marketing and connectivity. Our product must be able to compete against a variety of attractive tourist destinations and hotels in our region and globally. Standardisation of services also remains an issue, but things are on an upswing. NTB’s initiative of reviewing our hotel quality standards is a welcome step. Thanks to the support from the Ministry of Culture, Tourism and Civil Aviation, policies on paper are becoming a reality. It is not enough to have the roads and airports in place or to have our heritage sites developed and operating at global standards. Our product is the majesty of the Himalayas, the wonder of our natural world, the splendour of our architectural heritage and the joyous mix of ethnicity that makes us who we are. We must protect, preserve, and build on them. 

 

 

“We are bringing the Thai multinational hospitality chain Dusit Thani in Nepal”

Ramesh Hamal, Managing Director, Omstone Asia, Former President Non-Resident Nepali Association (NRNA) Thailand

Ramesh Hamal
Managing Director
Omstone Asia
Former President Non-Resident Nepali Association (NRNA) Thailand
 
How satisfied are you with the current trend of foreign investment in hotels?
Nepal has enormous potential in the tourism industry, everyone knows that, but it remains to be seen how successful the implementation process will be. Although we have strong potential in the sector, we do not have any successful business models of big chain hotels. In my view, Nepal should focus on bringing high-end tourists, which will be good for both the economy and ecology of the country.
 
This will not only result in the growth of the national economy but also reduce pressure on the infrastructure. Likewise, the number of premium hotels and international hotel projects focusing on high-end tourists has increased in the recent past. 
 
Do you think so many hotels will sustain economically in the long run?
Tourism is one of the most prominent sectors in Nepal and has been for a while. Despite having good potential, the sector is hampered by many problems; lack of proper infrastructure is the primary one. We lack quality infrastructure, which is a significant ingredient to drive tourists into the country. Similarly, we cannot complete our projects on time, which is a major challenge for the country’s development.
 
We are inadequate in project execution because of which we are lagging in infrastructure development. Apart from project implementation, the cost of doing business here is tremendously high. If the government does not realise and recognise these problems, and solve them in time, it will be hard for the country to receive foreign investment in the infrastructural sector because the cost of doing business is extremely high compared to other nations. The price of input material is high, because of which the cost of constructing a ‘star’ hotel room in Nepal is thirty-five percent higher compared to China. The cost is thirty-five to forty percent higher than that of India as well. 
 
We can do many things in this regard, primarily; the government should focus on promoting quality tourism. Because of the trade imbalance between import and export with a 20:1 ratio, the economy of the country is at high risk of collapsing. Tourism helps us to export our services without passing them to the customs, which also aids in the collection of foreign currency. The income from tourism does not only go to the tangible sectors of business, but its benefits also filter through to society. 
 
The number of tourists has increased in recent times, but the average length of stay has declined continuously. What types of tourism packages can be introduced to encourage tourists to stay longer?
We need a diversity of events to enhance the length of stay. We lack in promotional activities. Since we are in the experimental phase of federalism, the country is yet to stabilise correctly. However, the present length of stay is satisfactory; 12.5 days is considered a reasonable duration. The country must focus on quality tourism and on encouraging tourists to spend more money on overall activities. Increasing the ‘per day spending’ of tourists has to be our primary goal. We should target tourism goals similar to Bhutan. We need to adopt cohesive planning, coordination and fast-forward the implementation process to achieve the target. 
 
What is the role of hoteliers and tourism entrepreneurs?     
Firstly, the role of hoteliers and tourism entrepreneurs is to take the risk of investment, and the government should work towards alleviating that risk. The private sector should work for the promotion of the tourism market abroad. They should conduct events to promote the diversity, culture and landscape of the country around the world, which I think they are doing.
 
Lastly, we often focus on international tourists but neglect the domestic ones, who are also a critical part of the tourism business. The average spending of local tourists is higher than that of foreign travellers in Nepal. The stake is divided 57 percent and 43 percent, which means domestic tourism is equally essential. Domestic tourism is also developing; quality places around Kathmandu and Pokhara have high potential for domestic tourism.
 
Unfortunately, we are suffering a significant challenge, which has been affecting tourism as well as other sectors. While we all demand benefits, facilities and rights from the government claiming ourselves as a part of the nation but we don’t bother about our responsibilities, liabilities and duties.
 
We demand people pay us while they visit the rivers, roads and resources near us claiming it as our separate identity. People are trying to loot others; they should consider it as a part of Nepal rather than identifying resources and landmarks separately. Maybe due to the lack of understanding, even the government has kept such policies for some projects. The clause made by the government for hydropower companies to compulsorily allocate ten percent share to locals is a mistake. It is not good because it has caused obstruction in many projects; in such a situation, locals can cause hindrance to the project’s progress. Investors certainly want locals to participate in their projects, but they should not be forced to do so.
 
What new hotel development trends have you observed in Nepal?
There is continuous innovation in the hotel sector because the number of Nepalis that travel abroad has increased in recent years. These individuals visit, learn and research about hotels during their visit and try to implement the ideas they picked up upon their return to Nepal. Furthermore, we are currently living in an era of social media, which has made the flow of information faster, and the learning capacity of people has become sharper.
 
Big brands are initiating their hotel projects here, which is a positive development because it will add professionalism to the hospitality sector. Many hotels in Nepal are owned and run by family members that do not belong to the hospitality sector and the service provided by such hotels can be unprofessional.
 
We are bringing the reputed Thai multinational hospitality chain Dusit Thani in Nepal. Likewise, Marriott has already arrived, and Starwood is also coming. This is fantastic for the country. These brands have their chain across the world, and they themselves will promote the tourism of Nepal. 
 
How have you observed the trend of new five star hotels starting operation in new locations?
This is the part of quality tourism as I had explained before. I think we are on the right track in this regard because these new five star resorts and hotels will generate good foreign currency, without putting further load on the infrastructure of the country. 
 
Investors have complained about the lack of government support for the sustainability of the project. 
 
We have not received adequate and sufficient support from the government, which is our major problem. For ages, we have been in this situation, lacking sufficient development because of the government failing to give us the needed support and direction. According to my experience, governments in other countries present its strategies and plans to show the course of development for the future.
 
The investors, witnessing this blueprint, decide their development plan. This drives both local and foreign investors to achieve the infrastructure goal, but the situation and process is the reverse in Nepal.
 
Here, entrepreneurs are exploring the destination and are establishing the infrastructure themselves. Our condition is similar; we have identified Namo Buddha in Dhulikhel as our project destination. Likewise, others are developing their projects in other places that they explored themselves. This is why we are facing difficulties; the government has failed to show direction. Entrepreneurs are a small group of people with limited resources compared to the government. 
 
Please tell us about Dusit Thani.
Dusit Thani is a well-renowned management group of a premium hotel chain.  The group is known for its theme, which is closely associated with Buddhism and fundamentalism; it is also the foundation stone of their projects.
 
They are not religious but Thailand is a Buddhist country, and their way of life is associated with it. We have brought them here, and they can play a vital role in promoting Nepal’s image in the world. They have operated their chain of hotels across the world, and it is a significant achievement for us to have them here.  We are investing over fifteen million dollars in establishing a hundred-room hotel of a five-star luxury category in Dhulikhel Municipality. The hotel will likely start its operation from the second quarter of 2020.

 

 

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