With falling average tourists spending, Nepal needs to explore all possible ways to attract visitors who are ready to spend their money here to get exciting tourism and hospitality experiences.
--BY ASHIM NEUPANE
Despite the all-time high footfall of tourists in Nepal in 2017, reaching almost a million mark, the country hasn’t yet been able to register an impressive record in average daily spending. In FY2016/17, the average daily spending by tourists slid to USD 52 per capita from USD 68.57 in FY2015/16 which demands an urgent attention of stakeholders in tourism and hospitality so as to make tourists spend more in Nepal and attract more of high-spending visitors. The issues to be addressed in this regard have has become important considering that plans are underway to organise 2020 as the Visit Nepal Year and attract 1.5 million tourists by then.
Understanding Tourism Expenditure
Tourism is an economic activity where expenditures made by the tourists is its core economic measurement. Understanding the spending behaviour of tourists is critically important but tricky too as there are various determinants that vary from country to country. While there are individuals who look for traveling to different places and yet allocate limited budget and time, there are also people with sufficient leisure time who seek luxury and recreation and are ready to spend substantial budget.
Most of this propensity depends on their age groups, income levels, pricing of the services offered, range of activities the destination or country offers and the reputation of the host in the international tourism market, among other variables.
In case of Nepal, of the overall foreign tourist those aged below 30 years hovered around the range of 24 to 30 percent between 2012 and 2016. A section of these tourists who are commonly known as millennials have an impression that Nepal is for budget travelers who tend to spend less. According to tourism business experts, most of the millennials arriving here are backpackers who spend frugally. Such visitors spend less on luxury and usually seek low cost services in different aspects of travel including accommodation and food. In the view of increasing flow of such tourists, hostel facilities targeting low-spending foreign visitors have become quite popular in Kathmandu, Pokhara in the last few years where accommodation charges come as low as USD 7 per night. Such hostels allow accommodation of many people in a single room with bunk-bed facilities. No wonder why Nepal frequently makes it in the list of one of the cheapest destinations across the world.
While it is difficult to determine the average income level of the tourists arriving in Nepal, the per capital income (PPP) of the largest source countries is also an indicator to their spending capacity. In 2014, 2015 and 2016, India, China, Sri-Lanka, USA, Thailand and UK were listed as the largest source countries for Nepal’s tourism. Together, these countries accounted half of the tourists visiting the Himalayan nation for all the three years since 2014.
Among the countries, USA and UK are in the category of high income nations with their per capita income above USD 40,000. While the per capita income of China, Thailand and Sri-Lanka is in the range of USD 12,000 to USD 20,000, only India’s per capita income is below USD 10,000.
However, a quick look into the spending capacity of tourists from abovementioned countries may suggests a different picture. Among the Indian, Sri-Lankan and Thai tourists, a substantial number come for pilgrimage. In 2016, about 10 percent of the tourists visited Nepal for pilgrimage which was 12.5 percent in 2014. Other than quality accommodation services, pilgrims are unlikely to spend more. Similarly, there are a number of travelers who travel to multiple Asian countries in a single go from their home country. With number of things to do on their wish-list, such travelers are usually tight on budget and have a thin pocket left for Nepal.
For any tourism market, it is necessary to understand such dimensions, which should go beyond what is presented here and develop their tourism strategy accordingly.
Fresh Approach for Higher Expenditure
With Nepal’s potential in attracting different types of tourists, from high end to backpackers, Nepal needs to figure out steady ways to generate more dollar expenditure, whether by making backpackers spend their extra buck or by attracting more of high-end tourists.
The efforts of India in luring high spenders can be exemplary for Nepal. Nepal’s southern neighbour is evolving into a major destination for business travelers and medical and wellness tourists. With a boom in its sport economy particularly with the IPL cricket franchise, India is allowing more avenues for tourists to spend.
For Nepal as well, other forms of tourism like sports, medical and wellness tourism suits it capacity. Globally, sports are amongst the most popular leisure experiences which is conspicuously absent in Nepal. Although cricket is one of the favorite sports in South Asia including Nepal, there is a lack of a well-equipped international stadium to host international cricket tournaments here. Becoming a wellness destination for tourists seeking health benefits through wellness vacations is another tourism prospect for Nepal. Asia-Pacific countries are major players in wellness tourism with their traditional treatment methods including ayurveda, yoga, zen wellness, and other spiritual activities. On the other hand, a number of Asian countries like India, Singapore and Thailand are already emerging as medical tourism destinations for affluent western tourists. For Nepal, ensuring affordable and quality medical facilities and services may be a challenge but it is not unachievable.
Countries that look to bank on tourism for their growth should also understand the monetary value of cultural wealth. Nepal is known for its cultural diversity and richness, yet it hardly organises any modern-styled cultural shows. A regular Tharu cultural show is organised in Sauraha but it lacks a sophisticated approach, and charging high entry fee would be unfair.
Nepal can learn lessons from Japan that recently started a classical Japanese dance theatre show with a hope to create a new nightlife culture and to encourage high spending among tourists. The show is held twice daily and costs USD 43 per person. The night entertainment program, that bears an influence from Broadway Musicals in New York, offers tourists a taste of the Japanese culture. Perhaps, regular theatre shows with modern approach to performance on Newari jatras or other cultural events could prove money-spinning for Nepal. Meanwhile, Nepal has potential to become a gastronomic tourism destination to attract high spending tourists with its extensive food and drink culture.
Raj Gyawali, founder director at Social Tours, a travel and trek company, is of opinion that Nepal should shift its sole focus from promoting natural beauty. “The persistent focus on natural beauty hurts us. We need to focus more on the variety of experiences that exist and experiential products, for both the growth of tourism and building Nepal’s image,” he says. “Also focus on the people and their capabilities and not just their culture. Nepal has probably the best trained manpower in adventure per traveller anywhere in Asia which maybe pretty high in the world too. This is an achievement that we do not harp on.”
Perhaps what Gyawali expressed is true. And it may be the stepping stone for developing the image of Nepal as a high-end destination.
Expectations from high-end destination
Majority of tourism stakeholders believe that mismanagement in public services and lack of tourism friendly infrastructures is a major challenge in attracting high-end tourists. According to CN Pandey, chairperson of Nepal Association of Tour and Travel Agents, the miserable state of Nepal’s sole international airport gives tourists a sign of what they are about to experience in Nepal.
“High-end tourists look for convenience, luxury and enjoyment. They detest any sort of discomfort and hassles. Why would they choose Nepal and where would they spend on?” questions Pandey. “City roads are in worst condition. Our air is heavily polluted. The only international airport is mismanaged,” Pandey said, adding, “Such state would only lure backpackers and discourage high-spending tourists.”
Deepak Raj Joshi, CEO of Nepal Tourism Board (NTB), agrees that such poor infrastructures do not motivate high-spending tourists at all. He further adds that Nepal’s service delivery capacity is strong enough to cater quality services but it is Nepal’s airports and other tourism infrastructures that are disappointing. Indeed, a capital city that presents a gloomy outlook towards the construct of the city and its people is usually not the right taste for tourists who come with families for vacations.
On the other hand, once a country builds an image of a low-end destination, there is an expectation that services are cheap. As a result, low-end tourists flock in and make competition among service providers fierce and unhealthy. “Unhealthy competition between service providers is one of the causes behind the persistent low average daily spending in Nepal,” shares Joshi. “The unhealthy competition has led many tourism entrepreneurs to cut down their prices than what it should be, particularly accommodation. As a result, the number of tourists’ arrival has increased but the average spending has been declining,” says Joshi.
The government statistics and actual spending of tourists don’t match. “Tourists in Nepal are spending way higher than what the actual data shows. In number of regions of Nepal, tourists have to pay substantial fees to enter the area,” he said. According to Joshi, a single tourist has been spending almost USD 2,500 to USD 3,000 per visit to Nepal, most of which is spent in air ticketing. “It is why the average spending of a tourist is low in the data sheet,” he reasons.
Gyawali, agrees that Nepal gets large number of budget travelers, but is apprehensive about the accuracy of tourism data. “I have to guess it because there is no real data. I am wondering where that data comes from in a country where data is never accurate,” Gyawali says. One of the reasons behind such remarks towards the credibility of data is due to the existence of informal exchange of foreign currency that evades the national accounting system.
The way forward
“Our focus should be on attracting high-spending tourists rather than focusing on mass tourism. What’s the point of attracting more than a million tourists, majority of who comprise backpackers and low-spenders?” questions Suresh Singh Budel, CEO at Pacific Asia Travel Association (PATA) Nepal. Budel believes that Nepal holds enough potential with the country having sufficient standard hotels, stunning trekking trails and opportunities for other adventure sports to attract high-spending tourists. “The country needs policies that compel tourists to spend certain amount of money while visiting Nepal and promote infrastructures and amenities that stimulate their expenditure,” Pandey says.
As Nepal is already popular among backpackers, it is definitely time to look towards tourists with deep pockets. Nepal should adopt a tourism policy that embraces sustainable tourism and comprise high-spending as a core marketing aim rather than looking towards mass tourism only. Under similar intention, Bhutan strongly practices a policy of ‘High Value, Low Impact’ tourism, charging tourists more than $200 per day as tourism fee, that not only serves high-yield for Bhutan but reinforces its exclusive image and reduces the tourism impact on their culture.
Such policy may be viable for Nepal unless Nepal fully develops its carrying capacity. In the meantime, it would make more sense to package Nepal as a destination worth staying in and spending for, drawing more of high-spenders in tourism than the usual mass tourists and backpackers. And, while NTB looks forward to campaign the Visit Nepal Year 2020, it should also set itself an absolute target value for average tourist spending for its real performance measurement.