A GLIMMER OF HOPE IN THE HOTEL SECTOR

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A GLIMMER OF HOPE IN THE HOTEL SECTOR

--BY TAMISH GIRI

On March 6, 2021, Tiger Palace Resort, situated in Taulihawa, Kapilvastu, opened its doors again almost after a year. Similarly, Hotel Ichchha in Simara, Hotel Barahi in Pokhara, Soaltee Westend Premier in Nepalgunj, and Chitwan Forest Resort in Sauraha also returned to operation. In the meantime, Hotel Annapurna in Kathmandu closed entirely, while Hotel Mechi Crown, the first deluxe category five-star hotel in Nepal, has recently opened its doors officially to guests.

With the threat of coronavirus outbreaks receding in Nepal in the last few months, hotels across the country are slowly resuming their operation. Hoteliers say that they can’t continue to close their businesses any longer due to economic hardship. Even with a meagre inflow of guests at the moment and the business outlook remaining grim leading to a situation where hotels are struggling to meet daily expenses, hoteliers are desperate to recoup the losses and avoid further risks to their investments.

Despite reopening, Tiger Palace Resort has hardly received any business; on March 9, the resort only had four rooms out of 102 occupied by guests. Likewise, Soaltee Westend Premier has hardly registered 20 percent occupancy rate after resuming operations six months ago. Similarly, the occupancy rate in star hotels in Kathmandu is also marginal at the moment.  

However, hotels and resorts in some popular destinations are seeing an uptick in tourism activities, thanks to domestic tourists. The Chitwan Forest Resort in Sauraha, for instance, has been registering 80 occupancy rate during the weekends, while it fluctuates between 30-40 percent in other days. Meanwhile, Hotel Mechi Crown situated in Dhulabari, Jhapa, which commenced its operations in August last year, is also seeing gradual increase in the number of guests.

According to Binayak Shah, 1st vice-president of Hotel Association of Nepal (HAN), the occupancy rate of all star hotels across Nepal currently is far too low making it hard for the companies to sustain their businesses. “Since January, room occupancy has improved but marginally, and hotels are struggling to make their ends meet,” he says.

Most of the hoteliers who talked to New Business Age said that they cannot even meet their operation costs in the current condition. Rajiv Thakur, resident manager of Hotel Ichchha, informs that the four-star hotel property situated in Simara, currently has an occupancy rate of 25 percent. The hotel resumed its operations in January as Covid-19 cases began to decline throughout the country. “Though the business is growing slowly, sales are not satisfactory at the moment. We are still struggling to meet our operation costs,” he says.

The situation has forced the hotel to offer heavy discounts on services to attract guests. According to Thakur, they are offering discounts of upto 40 percent on accommodation and 20 percent on food. “In the current state of business, we can only carry on for a year,” says Thakur.

The Soaltee Westend Premier, a five-star property owned by Soaltee Group, is also facing similar challenges. According to Nises Dhital, assistant front manager of Soaltee Westend, the hotel is struggling to meet the overhead expenses. “We need an occupancy rate of at least 50 percent to pay all our 120 staff and meet the operating expenses,” he says, adding, “Despite introducing packages like ‘stay 4-nights and pay for 3-nights’, the revenue has remained very low.”  

Hoteliers say that they need a room occupancy rate of 60 percent to meet their operational costs, and staff salary comprises a major portion of such expenses.

According to Shah, costs related to human resource of most of the old hotels in Nepal make up 40 percent of their total operating expenses. “This comprises of staff salaries, allowance, gratuity and social security contributions making the cost of human resource in the Nepali hotel sector the highest costing one in the Asia Pacific region. If we see the global hotel sector practices, staff salary should only be 15 percent of the total operating expenses,” he says.   

To cope with the difficulties created by marginal revenue and high expenses, most hotels have been forced to run their operations with a reduced staff size. Before the coronavirus outbreak, the Tiger Palace Resort, a water-themed resort in Taulihawa, used to operate with 275 regular and 75 casual staff; the number has been reduced to 90 at the moment.

The five-star resort, which is spread across 22 acres of land, has staff salaries along with electric and water bills as major expenses. “As we are in the primary stage of resuming services, we are operating with fewer staff, and the number will increase as the room occupancy grows. 60 percent occupancy is a must for us to meet our operating and overhead expenses including staff salary,” says Laxman Thapa, general manager of Tiger Palace Resort.

The Covid-19 pandemic has unleashed a colossal disaster for travel and hospitality sector globally. With the coronavirus outbreak still happening in many parts of the world including Europe, the United States and India, the major tourist source markets for Nepal, the outlook is bleak with the clouds of uncertainty continuing to surround recovery efforts. Hoteliers predict that it will take at least two years for the business to bounce back completely.

Tourist category hotels and resorts in places like Kathmandu, Pokhara, Chitwan, and many mountainous districts primarily rely on visitors from the western hemisphere along with Chinese guests.

However, for hotels and resorts in the Terai plains, Indian tourists are the main guests who come basically for religious tours, recreation in casinos, MICE (meetings, incentives, conferences and exhibition) and business-related visits.  The closure of the Nepal-India border has had a massive impact on the business of the Terai-based hotels. The major border points between Nepal and India remained closed for the most of 2020 and vehicular movement from the points are yet to resume.

According to Hari Pant, president of Hotel and Tourism Entrepreneurs Association Parsa, the indefinite ban on vehicular movement between the two countries has created a huge risk to the hotel sector in Birjung and other parts of the Parsa district. “Around Rs 6 billion has been invested in the hotels of Parsa with 2,500 people employed in Birgunj-based hotels alone,” he says.

Given the current Covid-19 situation in many parts of the world, hoteliers don’t expect international visitors in large numbers any time soon. To improve the business, some have introduced discounted packages targeting domestic visitors, while others have focused on promotional campaigns to attract premium tourists.

Soaltee Westend Premier, which has introduced the ‘stay 4-nights and pay for 3-nights’ package, is working to launch another package for domestic tourists. “We will be offering a three-night stay at our hotel in Nepalgunj, jungle resort at Bardiya and Pokhara,” mentions Dhital. According to him, Soaltee Westend is mostly receiving religious tourists at the moment. He says that if the government initiates inter-provincial flights, it will take domestic tourism to new heights. Currently, the Bharatpur-Pokhara flight is the only inter-provincial flight operating in the country.

In the meantime, hotels and resorts in Suaraha that have seen some sort of a rebound in their business in the last few months thanks to the increasing number of Nepali visitors, are also working on promotional campaigns to boost domestic tourism.

Deepak Bhattarai, president of the Chitwan chapter of Hotel Association Nepal and owner of Chitwan Forest Resort, informs that they are currently working on a video campaign to promote Sauraha. “So far, we have guests mostly from provinces 1, 2, and Bagmati,” he says, adding, “This upcoming campaign is aimed at attracting domestic tourists from all seven provinces.” According to Bhattarai, they will collaborate with provincial governments and local bodies to make the campaign a big success.

Meanwhile, Tiger Palace Resort is focusing on the premium tourist segment. “As we are a premium resort, we don’t want to compromise in terms of pricing. We have a huge customer base in India and are currently into digital marketing and promotional campaigns to attract high-end guests,” says Thapa.  According to him, business will bounce back once the Nepal-India border is opened and casinos are allowed to operate.  

Hoteliers are optimistic that sooner or later, they will start to welcome tourists. However, they want the government to provide the Covid-19 vaccine to all hotel workers to boost the morale of arriving tourists and ensure that Nepali hotels are safe to stay in.

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