The Nepali hospitality sector, which was reeling under the impact of the Covid-19 pandemic, experienced a strong resurgence in the last fiscal year. Financial statements of six hospitality companies listed on the Nepal Stock Exchange (Nepse) show a significant rise in revenue for fiscal year 2023/24. As global tourism rebounds from the effects of the pandemic, Nepal once again reached the one-million mark in tourist arrivals in 2023, welcoming 1.014 million foreign visitors. This marks the third time that Nepal has received over 1 million tourists in a year -- 1.173 million in 2018 and 1.197 million in 2019. In 2023, the number of foreign visitors to Nepal grew by 65.25% compared to 2022.

With the increase in foreign tourist arrivals, five-star hotels have experienced a significant boost in business, driven mainly by the MICE (meetings, incentives, conferences and exhibitions) segment. Four of the six companies listed on the bourse are five-star properties. They include Soaltee Hotel Limited, Taragaon Regency Hotels Ltd which operates Hyatt Regency Kathmandu, Oriental Hotel Ltd aka Radisson Hotel Kathmandu and City Hotels Ltd which operates under the Hyatt Place Kathmandu brand name. 

Cable car operators Chandragiri Hills Ltd and Kalinchowk Darshan Ltd are also listed on Nepse. Of them, Chandragiri Hills also operates a deluxe on the top station of its cable car. 

Laxman Gautam, director at the Nepal Tourism Board (NTB), acknowledged that the tourism sector made significant recovery post-pandemic. "This growth is just the beginning given Nepal's tourism potential. However, sustaining this growth is going to be a big challenge. We must introduce new tourism products to encourage tourists to visit Nepal repeatedly," he said. 

Gautam added that the entry of several international hospitality brands in recent years underscores the sector's vast potential. “However, to fully capitalise on this potential, we must diversify our tourism offerings," he added.

Revenue on the Rise

Soaltee Hotel Limited reported a profit of Rs 601.077 million in fiscal year 2023/24, up from Rs 545.15 million in 2022/23. As one of the country's oldest five-star properties, Soaltee achieved a 10.66% revenue growth in the last fiscal, with revenue rising to Rs 2.49 billion. In 2022/23, the hotel had mobilised a revenue of Rs 2.24 billion.

Harish Kumar Bhatta, director of sales and marketing at Soaltee, said the hotel reported a significant increase in the number of guests, corporate events and residential weddings all of which contributed to business growth during the review period. "The year 2023 was a strong year for the hotel industry, with a substantial rise in Indian tourists," Bhatt said, adding that India emerged as the top tourist market for Nepal as well as for Soaltee.

Taragaon Regency Hotels Limited, which operates the Hyatt Regency Hotel, posted a profit of Rs 518.26 million in FY 2023/24, up from Rs 404.33 million in FY 2022/23. The hotel's revenue increased by 11.19% last fiscal year, rising from Rs 1.34 billion in FY 2022/23 to Rs 1.49 billion in FY 2023/24.

Oriental Hotel Ltd, which operates the five-star Radisson Hotel, saw a decline in profit in the last fiscal year. As one of the largest hotels in Kathmandu, with 260 rooms, the company reported a profit of Rs 122.30 million in FY 2023/24, down from Rs 160.92 million in FY 2022/23. Despite this drop in profit, Oriental Hotel experienced modest revenue growth, with income rising to Rs 1.15 billion in FY 2023/24, up from Rs 1.09 billion in the previous fiscal year.

Similarly, Chandragiri Hills, which operates a cable car and a five-star luxury resort in Kathmandu, recorded a profit of Rs 223.38 million in FY 2023/24, up from Rs 112.03 million in FY 2022/23. Kalinchowk Darshan Ltd posted a profit of Rs 26.66 million in FY 2023/24, down from Rs 30.86 million in the previous fiscal year. 

However, City Hotel Ltd, which operates the Hyatt Place Hotel in Kathmandu, reported a loss of Rs 204.73 million in 2023/24 -- a slight improvement from 2022/23 when it reported a loss of Rs 272.22 million.

According to CareEdge Ratings Nepal, the average occupancy rate of Hyatt Place was low at around 26% in 2022/23 but improved to 55% in 2023/24. "The hotel’s operations are continuing to improve, as evidenced by an occupancy rate of 66% in the first half 2024,” the rating agency said. “The anticipated completion of the banquet hall expansion, which will add capacity for an additional 250 guests, along with the hotel’s transition to Hyatt Centric and the opening of an on-site casino, is expected to boost the hotel’s revenue in the near term.”

Unlisted Hotels' Impressive Performance

The performance of unlisted hotel companies has been equally impressive. Data from credit rating agencies shows that these properties experienced a significant revenue growth in 2023.

R&R Hotels and Resorts Pvt Ltd (R&R), the owner and operator of Vivanta Kathmandu, a 4-star hotel in Jhamsikhel, Lalitpur, reported a remarkable 44.59% surge in operating income for 2023. According to ICRA Nepal, R&R achieved an operating income of Rs 332 million in 2023, a substantial rise from Rs 229.6 million in 2022.

Hotel Barahi Private Limited, which operates a 4-star hotel in Lakeside, Pokhara, and another in Thamel, Kathmandu, saw its income rise to Rs 236.25 million in the first half of 2024—surpassing its total income for the entire 2023. The company’s revenue increased to Rs 228.6 million in 2023, from Rs 117.4 million in 2022.

Hotel Mystic Mountain Pvt Ltd, which operates a four-star, 72-room resort in Nagarkot, 30 kilometres east of Kathmandu, reported operating income of Rs 330 million in 2023, up from Rs 252 million in 2022. In fiscal year 2023/24, the hotel achieved an average occupancy rate of approximately 73% and an average room revenue of Rs 6,300. The resort’s occupancy was 60%, while average room revenue was Rs 3,900 in 2022.

"The increased revenue, coupled with relatively stable operating profit margins, has enhanced the company’s net profitability, debt coverage indicators, and liquidity position," rating agency ICRA Nepal said.

Everest Hospitality & Hotel Ltd, which owns Kathmandu Marriott Hotel, saw a significant 66.66% increase in operating income in 2023. The company’s revenue was Rs 1.70 billion in 2023, up from Rs 1.02 billion in 2022. This growth was primarily driven by higher occupancy rates and increased average room rates.

According to CareEdge Ratings Nepal, Hotel Marriott’s occupancy rate rose to 67% in 2023, up from 53% in 2022, while the ARR surged to Rs 17,104 in 2023, compared to Rs 13,572 in 2022.

Industry Challenges

Despite the positive trends in the hospitality industry, hoteliers say challenges remain. Sumit Agrawal, Vice Chairperson of MS Group, which owns two Marriott franchises in Nepal, expressed disappointment with the current room occupancy rates compared to last year. “Despite expectations for growth, occupancy levels have remained stagnant. We have seen a significant 10-12% decline in room bookings and occupancy rates compared to the same period last year, especially during the spring season,” he said. “This decline occurred despite only a slight increase in room prices.”

Stating that the average room rate at Marriott is around $150, Agrawal questioned whether the national average could be as low as $100-110 given the circumstances. This lower average, he argued, does not accurately reflect the true value and quality of the accommodations offered.

According to industry insiders, the revival of the hospitality sector is driven not only by the increase in tourist numbers but also by pent-up demand for leisure and social events as well as business travel. The sector's recovery has been bolstered by rising bookings for weddings and a notable uptick in MICE activities.

However, Nepal's hotel industry is fragmented, with numerous organised and unorganised players across various regions. The number of hotels is high in Kathmandu Valley which creates intense competition, leading to competitive pricing of rooms and services. This competitive environment is reflected in the relatively subdued, though rising, average room rates (ARRs), despite the tourist numbers returning to pre-Covid levels in 2023.

Optimism for 2024

With global tourism returning to normalcy, Nepali tourism entrepreneurs are optimistic about 2024. The country’s economy is projected to grow by 3.87% this fiscal year, with accommodation and food services -- sectors closely linked to tourism -- expected to lead with an impressive 21.84% growth, the highest among all 18 economic sectors in the country.

In the first seven months of 2024, tourist arrivals in Nepal reached 647,615 returning to the pre-Covid levels. In the same period of 2019, Nepal had welcomed 632,469 tourists. This marks a 21.22% increase in foreign tourist arrivals compared to the first seven months of 2023. While the hospitality sector is seeing an increase in visitor numbers, there has been only a marginal improvement in their spending and average length of stay of foreign tourists. According to the Nepal Tourism Statistics-2023, the average stay of tourists slightly increased to 13.2 days in 2022 from 13.1 days in 2021. The average length of stay in 2021 was 15.5 days, the highest in ten years. Additionally, the average daily spending of tourists rose only slightly to $41 per day in 2023, compared to $40.50 in 2022.

(The new report was origianlly publihsed on the September, 2024 issue of the New Business Age Magazine.)