• Marriott Corporation, building on the success of Marriott Kathmandu and Fairfield by Marriott, recently signed an agreement for a new Marriott property in Pokhara, signalling its continued expansion in Nepal.

• In early October, Annapurna Square Pvt Ltd, a special-purpose vehicle created for the redevelopment of Annapurna Hotel, signed a management agreement with ICT Group to operate the historic property under the WelcomHotel brand.

• On July 25, 2024, Hilton marked its foray into the Nepali market with the grand opening of Hilton Kathmandu, bringing the American brand’s renowned luxury standards to the capital.

• In April 2024, the Indian hotel chain Lemon Tree expanded its footprint in Nepal by launching the Lemon Tree Premier in Budhanilkantha, offering a new upscale accommodation.

• In late August, IHG Hotels & Resorts unveiled the Holiday Inn Resort Kathmandu Budhanilkantha, marking the first Holiday Inn Resort in Nepal and further strengthening the brand’s presence in the country.

• Sarovar Portico Birgunj, a four-star property managed by the Indian arm of European Louvre Hotels, Sarovar Hotels, commenced operations in the first week of October, adding to the growing list of international brands.

International hotel chains are racing into Nepal as the country’s tourism industry recovers from the unprecedented disruption due to the Covid-19 pandemic. As investments in Nepal’s hospitality sector increase, hoteliers are partnering with globally recognised brands to strengthen their position in the competitive market. In recent years, more international hotel chains have entered Nepal to capitalise on its growing tourism potential. Renowned names such as Hilton, Marriott, IHG, Aloft, Dusit International, along with Indian brands like Sarovar and Lemon Tree, have already established a foothold through partnerships with Nepali hotel developers.

This surge not only highlights the rising confidence in Nepal’s hospitality sector but also marks a turning point for Nepali tourism, promising world-class service while boosting both the country's international profile and local economy.

Entry of Major Players

Nepal’s hospitality landscape has transformed with the presence of over a dozen international hotel brands catering to a wide range of traveller preferences. Marriott has led the way, successfully operating three properties -Kathmandu Marriott, Aloft and Fairfield, while Moxy and Sheratong are currently under construction.

Ramada, under Wyndham Hotels & Resorts, brings accessible and welcoming accommodations to the scene. Vivanta, part of India’s Indian Hotels Company Limited (IHCL), offers a unique blend of luxury and local culture. Hyatt Hotels Corporation contributes to the upscale segment with Hyatt Regency and Hyatt Place, catering to discerning travellers. For a more immersive experience, Meghauli Serai by Taj Safari offers a luxury retreat paired with wildlife adventures.

The Dusit Thani Group has enriched Nepal’s hospitality offerings with Dusit Thani and Dusit Princess, bringing Thai-inspired elegance to the market. Radisson Kathmandu Hotel, a fixture in Nepal for nearly two decades, continues to cater to both business and leisure travellers. Hilton Hotels & Resorts has also made its highly anticipated debut in Nepal with the opening of Hilton Kathmandu.

InterContinental Hotels Group (IHG) has expanded its footprint with two brands — Holiday Inn Express and Holiday Inn Resort —serving different traveller segments. Meanwhile, the iconic Hotel Annapurna, formerly managed by India’s Taj Hotels, is undergoing a major transformation under ITC’s WelcomHotel franchise. This redevelopment will feature a 318-key five-star hotel, 30 service apartments, high-end retail spaces, and a convention centre, strengthening Kathmandu's appeal as a business and leisure hub.

"Our theme, ‘The Annapurna: Reviving from a Hotel to an Iconic Destination,’ captures our vision to merge heritage, luxury and modern innovation," said Shreejana Rana, executive director of Hotel Del' Annapurna Pvt Ltd.

ITC Hotels will oversee the operations and branding of the re-developed property, bringing its renowned hospitality and sustainability practices to Kathmandu.

More global brands are set to enter the Nepali market. They include Sheraton, Crowne Plaza (IHG), and Mercure (by Accor).

Desh Bandu Basnet’s AB Holding Hospitality is spearheading new projects, with plans to launch three luxury hotels in Kathmandu, Itahari, and Manakamana, including a Mercure in Kathmandu and a Ramada by Wyndham in Itahari.

Nepal’s history with international hotel chains dates back to the 1960s when Hotel Soaltee partnered with India’s Oberoi Group. IHG later managed Soaltee Crowne Plaza for 26 years until its exit in 2021. By the early 1990s, Nepal hosted three major chains: IHG’s Crowne Plaza, Sheraton, and Taj (IHCL). Two more brands, Radisson and Hyatt, entered Nepal in the 1990s. Despite a dip in interest during the Maoist conflict in the 2000s, international brands are once again flocking to Nepal’s burgeoning hospitality sector.

Confidence on Nepal

Nepali hotel entrepreneurs view the influx of international brands as a sign of growing confidence in the country’s tourism industry. They say that these global names bring valuable marketing exposure to local hotels through their vast international networks, while also serving as a magnet for foreign investment, attracting interest from other potential investors. The entry of such brands enhances global connectivity, expands business networks, and opens up significant growth opportunities for the local hospitality sector.

Most international hotel chains entering Nepal operate under management contracts, where they manage the hotel without direct capital investment in the country. In return, they typically charge a percentage of the hotel’s revenue or profit, often around three percent of net earnings. However, this arrangement can place financial strain on local investors, who must pay a fixed fee regardless of the hotel’s performance. Alternatively, some hotels operate under a franchise model, paying a fee to use the brand name, which offers a more flexible option for owners.

The arrival of international chains has been further fueled by the strong recovery of Nepal’s tourism industry post-Covid-19. In 2023, Nepal welcomed 1.014 million foreign visitors, a significant growth of 65.25% increase from 2022. This marked the third time that the country surpassed one million arrivals in a single year after welcoming 1.173 million tourists in 2018 and 1.197 million in 2019.

According to the World Travel and Tourism Council (WTTC), Nepal’s tourism sector generated Rs 327.9 billion ($2.5 billion) in revenue last year, supporting 1.19 million jobs both directly and indirectly. The WTTC forecasts that by 2024, this number will grow to 1.22 million jobs.

The surge in tourist arrivals has particularly boosted business for five-star hotels, especially those operated by international brands, with the MICE (Meetings, Incentives, Conferences, and Exhibitions) sector driving much of the growth.

R&R Hotels and Resorts Pvt Ltd, which operates Vivanta Kathmandu, reported a 44.59% increase in operating income in 2023, rising to Rs 332 million from Rs 229.6 million in 2022, according to rating agency ICRA Nepal. Similarly, Everest Hospitality & Hotel Ltd, owner of Kathmandu Marriott Hotel, saw a 66.66% jump in revenue, from Rs 1.02 billion in 2022 to Rs 1.70 billion in 2023, driven by higher occupancy rates and increased room rates.

Raising Standards and Competition

Hoteliers point out that international hotel brands play a crucial role in elevating Nepal's hospitality sector by implementing global standards in products, systems and processes. A key to their success is localization — blending local culture with international standards to create unique guest experiences.

According to Upaul Majumdar, Head of Practice - Tourism at Dolma Consulting, this approach not only streamlines operations but also boosts the industry's exposure to global practices. "These new international hotels are fostering professionalism among staff, setting competitive room rates and positioning Nepal as a global tourist destination," said Majumdar. "These brands must achieve high occupancy rates and profitability for hotel owners."

Prabin Bahadur Pandey, Vice President of the Hotel Association of Nepal (HAN), sees the entry of global hotel chains as a transformative development for Nepal’s hospitality industry. "These esteemed global brands bring advanced technology, refined operations and strict safety and quality protocols, raising the bar for local services," said Pandey.

In April 2023, Pandey's Shangri-La Hotels Group signed a management agreement with IHG Hotels & Resorts to develop four new properties in Nepal: InterContinental Kathmandu in Lazimpat, Hotel Indigo Pokhara in Gharipatan, InterContinental Resort Pokhara at Begnas Lake, and InterContinental Resort Chitwan in Meghauli.

Majumdar, who is instrumental in attracting international brands to Nepal, said that the limited supply of branded accommodations, along with high demand from neighbouring countries and established markets like Europe and America, has driven the influx of international hotel brands in Nepal. While international tourists remain the main focus, Majumdar also sees an increase in domestic travel contributing to this growth.

"With the rise of online travel platforms (OTPs) in Nepal, more Nepali travellers are booking stays. However, access to dollar cards, often required for international bookings, remains a challenge. Still, bookings on platforms that do not require dollar cards are on the rise," Majumdar explained.

Competing Globally: The Future of Nepal's Hospitality

Hoteliers agree that the growth of international hotel brands is essential for Nepal to compete globally. The challenge now is ensuring that these global brands effectively market Nepal as a premium destination. “The luxury segment is expanding worldwide, and Nepal must capitalise on this trend. The country’s natural beauty is a significant draw for luxury travellers. HAN, in collaboration with the Nepal Tourism Board, is actively promoting Nepal at B2B fairs and roadshows,” said Pandey.

Investment in five-star hotel chains is particularly vital, as these establishments generate the highest levels of employment and foreign currency earnings. The ongoing development of national infrastructure, such as roads and airports, will further support the sector’s growth. Majumdar adds that most investors interested in international hotel brands recognize the need to meet global standards, especially in the post-covid-19 environment, where health, hygiene, and operational protocols are critical.

Competing Globally: The Future of Nepal's Hospitality

Hoteliers agree that the presence of international hotel brands is vital for Nepal to establish itself as a competitive global destination. The next challenge is ensuring these brands effectively market Nepal as a premium luxury destination. "The luxury segment is expanding globally, and Nepal must tap into this trend. Our natural beauty is a key attraction for high-end travellers," Pandey said. "HAN, in collaboration with the Nepal Tourism Board, is actively promoting Nepal at B2B fairs and roadshows."

Investment in five-star hotel chains is especially crucial, as these properties generate significant employment and foreign currency earnings. The ongoing development of national infrastructure, including roads and airports, will further support the sector's growth. Majumdar says that investors in international hotel brands understand the need to meet global standards, especially in the post-Covid-19 era, where health, hygiene and operational protocols are critical.

Challenges Galore

However, integrating international standards comes with significant challenges, requiring substantial investment and collaboration with international consultants. "Adhering to these standards demands considerable investment and expertise, often necessitating collaboration with international consultants," Majumdar said. "Few Nepali architects and consultants are well-versed in global standards, making the partnership with foreign consultants essential but difficult."

Dolma Consulting is working to bring globally standardised, efficient, and sustainable hotels to Nepal, with a focus on maintaining the country’s pristine outdoor spaces, which account for 95% of its tourism appeal, he added.

Majumdar identified market access as another significant challenge. While many hotels inside and outside Kathmandu meet international standards, they often struggle to attract foreign tourists, relying heavily on online travel agents (OTAs) that charge high commissions. In contrast, online travel platforms (OTPs) offer global chains a more cost-effective model, with lower fees. Post-pandemic, the shift away from offline bookings has made it easier for hotels to enhance their online presence and user experience while reducing costs.

An international brand hotel with a strong business model typically breaks even within 10 to 12 years, excluding land costs, based on global benchmarks. According to Majumdar, an international budget hotel with 60 to 70 rooms may cost around Rs 300-400 million, while upscale projects like five-star hotels can cost Rs 1.8 to Rs 2 billion for over 100 rooms, depending on designs. For example, single-building projects like Holiday Inn Express in Tangal and the upcoming Moxy are less expensive to build.

Call for FITA Amendments

International hotel chains operating in Nepal have urged changes to the Foreign Investment and Technology Transfer Act (FITA), raising concerns over its restrictions on royalty payments. During a meeting with then Finance Minister Dr. Prakash Sharan Mahat in February 2024, hotel operators warned that the current royalty cap under FITA is discouraging global hotel brands from entering or staying in Nepal.

The operators highlighted that international hotel chains generally operate under royalty or technology transfer fee agreements. However, the existing 5% royalty cap set by FITA is significantly lower than global industry standards. This misalignment has made it challenging for Nepal to attract and retain these brands, they claimed.

They added that the current FITA Regulations are not in sync with international hospitality norms, creating barriers for foreign hotel chains considering the Nepali market. As a result, many brands are reluctant to establish a presence in Nepal under the existing legal framework.

(This report was originally published in November 2024 issue of New Business Age Magazine.)