Hospitality sector eyes strong growth as tourists return
Hoteliers say they need at least 2.5 million tourists to achieve a 70 percent occupancy in hotels that have mushroomed in the hope of stable government.
A large number of hotels have opened outside the Kathmandu valley in recent years.
By Sangam Prasain
Most of Nepal’s luxury hotel operators have swung back into profit, boosted by a recovery in tourist arrivals after the Covid pandemic.
The Soaltee Hotel posted a net profit of Rs263 million in the first half of the current fiscal year that ended mid-January, according to its second-quarter company analysis report published by the Nepal Stock Exchange.
The report shows that Soaltee’s net profit increased by 6.64 percent year-on-year.
In terms of revenue, the hotel earned a record Rs1.05 billion in the review period, up 9.44 percent.
The hotel said in its analysis that the robust growth in tourist arrivals in the September-November period helped it boost the revenue. “There has been a significant rise in tourists from India and China,” it said. “The arrivals figure shows that tourism has recovered to pre-Covid levels.”
Nepal welcomed over 1 million tourists between January and December of 2023, following China’s border reopening and record arrivals from India.
According to the Nepal Tourism Board, the country’s tourism promotional body, the arrival numbers crossed the million mark, for the first time in four years.
This is the third instance that Nepal has received over a million tourists.
The rise in tourist arrivals has cheered the Pushpa Kamal Dahal-led administration at a time when other economic indicators are poor and the country is witnessing a massive out-migration due to the lack of decent job opportunities at home.
Arrivals crossed the coveted one-million mark for the first time in 2018, with 1.17 million foreign tourists streaming into the country.
In 2019, the number rose slightly, to 1.19 million, following better flight connectivity with several Chinese cities.
Then the Covid pandemic started in early 2020, bringing arrivals to a standstill.
Taragaon Regency Hotels Limited also saw a double-digit growth in its revenue in the first six months of the current fiscal year. Its income grew by 14.39 percent to Rs714.21 million during the review period.
The company, which owns the luxury five-star hotel under the brand Hyatt Regency Kathmandu, said in its financial statement that its net profit in the review period rose by 71 percent to Rs181.62 million.
“Nepal’s tourism sector is gradually recovering,” the hotel said in its report. It, however, said that challenges remain as there has been fierce competition in the hospitality industry due to the rise in five-star properties, but quality tourism [those spending higher] has not increased.”
According to the Tourism Department, the country now has 18 five-star properties. Nearly a dozen five-star properties are in the pipeline.
Hotel The Kingsbury in Jhapa, Soaltee Westend Premier in Nepalgunj, Hotel Central Plaza in Kohalpur, Hotel Ichchha in Simara, Hotel Lhasa International in Lazimpat, Akama Hotel in Dhumbarahi have been granted the five-star status by the department.
Basanta Raj Mishra, chairman of the Temple Tiger Group, said luxury hotels are doing exceptionally well due to their marketing efforts abroad. The 1 million tourist arrivals figure is good but not sufficient to satisfy all hotel occupancies.
“Our observation shows that in Kathmandu, the occupancy rate is 40 percent while outside Kathmandu, it is 26 percent,” he said. “The occupancy in luxury or five-star properties that have done aggressive marketing on their own, however, is exceptionally high.”
According to Mishra, hotel numbers have grown better than expected because the arrival numbers are still small.
“We need at least 2.5 million tourists annually, which will ensure 65 percent occupancy in all hotels.”
“For this, the government’s existing policy intervention is inadequate. We need to increase air connectivity and bring the new airports in Pokhara and Bhairahawa into full-fledged operation to realise the numbers and ensure equitable distribution of tourists in the hotels across the country,” he said.
A large number of hotels have opened outside the Kathmandu Valley in recent years.
Hotel Mechi Crown in Jhapa has been granted five-star deluxe status, the country’s first deluxe property.
Insiders say that while revenue has surged for five-star properties, businesses at other establishments have not grown as expected.
Oriental Hotels Limited, another five-star property listed on the Nepal Stock Exchange, has seen its income rise by 24.61 percent to Rs560 million in the first half of the current fiscal year.
The hotel said in its analysis that geopolitical risks such as war and military-related tensions in various parts of the world may impact tourist arrivals and demand. Hoteliers say that the Israel-Hamas conflict and Russia’s war on Ukraine could put a dent on arrivals.
The company, which operates the five-star Radisson Hotel in Kathmandu, said in its financial statement that its net profit jumped by 46.24 percent year-on-year, to Rs53.48 million.
Newly listed Chandragiri Hills Limited’s total income rose 12 percent to Rs400 million in the review period.
The resort said in its financial statement that its net profit increased 22 percent to Rs62.84 million in the second quarter.
“There has been a significant recovery in tourist arrivals,” the resort said in its analysis. The resort fears that political and policy instabilities could affect tourism growth.
Another five-star property, City Hotel Limited, however, posted a net loss, despite a healthy growth in its total earnings.
The hotel’s total earnings rose by 24.98 percent to Rs278.51 million in the second quarter of the current fiscal year. Its net profit plunged by 10.93 percent to Rs117.99 million in the second quarter.
City Hotel, which owns the Hyatt Place, came into operation on November 15, 2021.
The hotel said it has been planning to upgrade to Hyatt Centric from the first quarter of the next fiscal year.
It said that the ongoing economic slowdown, high interest rates and imposition of the luxury tax on hotels are key challenges.
Travel restrictions and an economic slowdown triggered by the Covid pandemic delivered a wallop to Nepal’s luxury hotels, decimating revenues and profits since 2020.
The government enforced a lockdown on March 24, 2020, and continued it until July 21 that year. Although hotels were allowed to operate by following health safety protocols, tourist numbers fell to rock bottom. All meetings and conferences were restricted which resulted in their complete closure.
On September 23, 2022, Nepal eased travel restrictions by dumping the seven-day quarantine requirement and started issuing on-arrival visas to all vaccinated foreign travellers in a bid to bring its virus-ravaged tourism industry back to life.
Hoteliers say that the Yeti Airlines plane crash of January 2023 hit tourist movement briefly. After the resumption of flights from different Chinese cities to Kathmandu in March, arrivals have surged.
Source : Kathmandu Post
