B K Shrestha, Managing Director of Oriental Hotels Ltd that operates Radisson Hotel in Kathmandu has been in the tourism industry for more than four decades. He is also the incumbent President of Hotel Association Nepal (HAN) and has served as Vice Chairman of Nepal Tourism Board (NTB). In an interview with Sujan Tiwari of New Business Age, Shrestha shared his comments on the existing situation of the Nepali tourism industry. Excerpts:
Looking at the profit reports of the hotel companies, it seems year 2013/14 was very good for Nepali tourism industry. But how is the situation this year?
The year 2013/14 was definitely a very good year for the tourism industry. We must have crossed 800,000 tourists. As far as this year is concerned, we may not touch that mark as the numbers of tourists have slightly reduced. We are trying our best from the Hotel Association Nepal (HAN) to promote the industry. As the president of HAN, I have declared that we must have 2 million tourists by the year 2020. But it cannot be achieved at once; we have to gradually try to increase the number year after year. This year, the tourist arrival may be slightly below 800,000. This is because the Nepal Tourism Board has become defunct and has not been able to do much for the sector. Also, the closing down of the casinos has also contributed to the lower number of tourists this year.
The improvement is said to be due to occupancy while the Average Room Rate (ARR) has not improved. What is the actual situation?
The market is always governed by supply and demand. If the demand is more than supply, the ARR will definitely increase. In the star hotels of Nepal, supply of rooms is more than the demand. This is the reason why ARR has not increased.
Investors seem buoyed by the prospects of hotel industry as indicated by the number of high profile hotels being planned. How is your assessment? Can Nepali tourism industry sustain all these hotels?
Tourism is the only industry in Nepal that can develop very fast and also sustain. This is because we have all the required resources for its sustenance. We have numerous mountains and natural resources that attract a lot of tourists. We have places like Janakpur, Lumbini and Pashupatinath that attract religious tourists. We have numerous options for adventure tourism. Given this, the arrival of 800,000 tourists is very low as compared to our tourism potential. We have two huge counties as our neighbours, and if we can attract only a small percentage of the tourist from there, we can have an overwhelming number of tourists. If we have proper strategy, planning and action, we can easily have two million tourists or even more. So I believe that the Nepali tourism industry can sustain all the new hotels that are coming up.
Despite the fact that tourists in Nepal come primarily due to its nature and its culture, the investors are not attracted to set up thematic hotels focusing on these aspects. What explains this in your opinion?
The concept of thematic hotels is gradually picking up in Nepal. I believe many investors are interested in building such hotels. There will some theme hotels in the market after three or four years.
What are the impediments to the development of hotel industry in Nepal? What problems is the sector currently facing?
There are some major hurdles in the development of the industry. The first is the lack of proper infrastructure, and that includes aviation, road transport and accommodation. If we can develop in these three areas, the industry can foster quickly. Also, the rules and regulations concerning tourism are very old and obsolete. The sector is still governed by decades old regulations. They have to be scraped and there should be new rules in their place according to the demand of the industry.
What do you suggest the government and the new investors in the hotel industry so that the investment thus coming in is not in jeopardy?
In every business, the risk is always there. So there is no way to guarantee that the investment is 100 per cent safe. However, there are certain things that can be done to minimize the risk to investment. The investors should devise good strategy and have proper knowledge of the sector before investing. Within five years, 2000 new rooms will be in the offing in star hotels. This means 730,000 room nights per year will be added. With efficient planning and marketing strategy, we will be able to sell all of these rooms. During the time of Maoist insurgency, the number of tourist arrival went as low as 150,000 a year. But after 2006, the number gradually increased. If we can further increase the number year after year, all the investment made in the sector can be secured.
What are the possible repercussions of the controversy in the Nepal Tourism Board (NTB)? Now that the government has again set up the Tourism Department, some people expect that the Board is now going to be phased out.
The controversy is now completely over. I don’t think there will be any further outcome of the controversy. The Board now should function efficiently with Private Public Partnership as it was originally intended to. In my opinion, NTB should not be phased out. The problem is not with NTB itself, the problem lies in the lack of good leadership and strong management. When I was the Vice Chairman of the Board, the management was efficient and we were able to do a lot for the betterment of tourism industry. The annual budget of NTB is quite big. This year’s budget is about 1.10 million rupees. If the budget is properly spent, the industry can greatly benefit from it.
One criticism against the hotels in Nepal, particularly the 5 star and 4 star hotels, was that they have very low retention of the foreign exchange. How is the situation now?
Out of the foreign exchange earned by the star hotels, 70-75 per cent of it is retained inside the country. The remaining is spent in various purchases of the hotels. In my opinion, this ratio is quite good. For even better retention, we are trying to make more use of local products as far as possible.
Standard hotels are cropping up also in some new areas of the country. And they are copying the trademark names of the already established hotels. What is Hotel Association Nepal doing about it?
A few hotels are trying to benefit from the established names and this is not a good practice. We are trying to discourage it. The Office of Company Registrar should bar them from using such names. We are informing the government to take action against such hotels.
In the past there were various issues of dispute between Nepali hoteliers and tour operators. How is the relationship now?
Hoteliers and tour operators have to work hand in hand as both the parties are working to promote tourism in Nepal. Unless there is cordial relation between the two parties, we cannot effectively promote tourism. We do have various discussions at times but I wouldn’t call that a dispute. There aren’t any issues between the hoteliers and tour operators at present and we enjoy a good relation.
Your hotel has been able to improve its business continuously over the years and this year you have been able to distribute 10% dividend to the shareholders. What is the secret of this progress?
If you look at our business 10 years ago, it was not doing well at all. The business was not good regardless of our efforts. I mean to say that there are external factors on which our business depends, and political instability is the biggest such factor. In the recent years, political situation is relatively better, and that is the reason behind the increased number of tourists in Nepal. This in turn has helped our business prosper. Other than that, the success of Radisson is the result of good strategy, marketing and teamwork.
What are the new plans of Radisson?
Just last year, we added a hundred rooms in our hotel and now we have 260 rooms in total. Our plans depend on the performance of tourism industry. If the industry situation gets better, we will have further plans of expanding our property. It all depends on Nepal’s tourism scenario.
Radisson has been giving responsibility of General Manager to the Indians or the foreigners. There were few Nepalis who have had that opportunity. How do you compare Nepali professionals with the foreigners to handle that responsibility? What are the difference and how?
Nepalis are very much capable of working as General Managers. The only difference between Nepali and foreign General Managers is that the latter have more exposure and experience, otherwise they are equal to Nepali professionals. It is not the fact that Nepalis can’t work as General Managers. We need young and energetic Nepalis who can work for us. We are not prejudiced towards Nepalis, however, we want best people to work for us. If you talk about me, I would prefer to hire a Nepali as a General Manager, but if he or she is not capable of that work, then I have no other option than to hire a foreigner. These days, the trend of hiring foreigners as General Managers is slowly declining as Nepalis are taking that position.
Is there anything you would like to add?
It is estimated that a foreign tourist needs manpower of 10 to 12 people in the country of his visit. That means a single tourist can provide employment to 10 to 12 people, or that can be even more in a country like ours. If we can develop our tourism industry, Nepalis will no longer need to go to foreign countries for employment. Tourism is one of such industries of Nepal that can significantly contribute to the country’s development. So the government and all stakeholders should be focused to develop the industry to its full potential.