Hotels continue to face problem until the number of tourist arrivals reach pre-pandemic era.
Hotel Hyatt Place, situated in Tahachal, officially opened its service to customers in November 2021. The second Hyatt franchise in Nepal opened 21 years after Hyatt Regency Kathmandu opened for guests. Hyatt Place opened its doors amid the COVID pandemic. In the initial months, Hyatt Place, like other new hotels, had no clue where the situation would lead its business to. Nine months down the lane, Hyatt Place has observed a gradual growth in customers and business alike. Another five-star property, Marriott Hotel Kathmandu, which also launched operations during the pandemic, has also witnessed a steady growth in business.
Achint Rastogi, Head of Sales and Marketing at Hyatt Place Kathmandu, said Hyatt’s new brand has been receiving an encouraging number of inquiries from the market due to Hyatt’s brand reputation. “In the first nine months of our operation, things have been growing gradually. We have been receiving guests mainly from the Indian market - both leisure and corporate travellers,” he added.
Hyatt Place Kathmandu is enjoying average room occupancy of around 55%, according to Akriti Pathak, Marketing and Communications Manager at Hyatt Place. “However, thanks to the Indian tourists and corporate community, we had around 70% occupancy in June. We also had full occupancy at times,” she said. “We are doing good events which have helped us, while people are fond of our restaurants and food beverages.”
Sumit Kumar Agrawal, Vice President of Marriott Hotel Kathmandu, shared that the situation for hotels is improving lately. “With COVID cases subsiding, we are having occupancy between 50-60%. Thanks to domestic guests, our restaurants and coffee shops are vibrant with good footfall, while foreign tourists are occupying the rooms,” he added. “Of late, hotels across the country are receiving inquiries and orders for events (conferences, seminars and ceremonies) - an encouraging number from the corporate sectors.”
The year 2022 has seen a gradual growth in foreign arrivals with the impact of coronavirus subsiding in Nepal. The number of foreign tourists is growing compared to the pandemic period and has added businesses to hotels in Nepal. However, hoteliers say they are yet to receive tourists from the western countries in sufficient numbers.
Sajan Shakya, general secretary of the Hotel Association Nepal (HAN) shared that hotels across Nepal observed an average occupancy of 30-40% in the spring season. The occupancy has declined to 20-25 % at this time, he informed.
According to Shakya, hotels mainly received Indian guests during the period while a nominal number of American and European tourists were also there. Tourists from the US and Europe are yet to come in a good number, he added.
Hotels and resorts in Nagarkot, Dhulikhel, Pokhara, Chitwan, and Bhairahawa have observed an immense growth in domestic tourist footfall, contributing around 30% of their business, says HAN. During weekends, hotels in locations reported almost 80-90% occupancy due to the huge inflow of domestic tourists.
The fact that many new hotels are coming up substantiates tourism is on a recovery path. Khem Raj Joshi of the Department of Tourism said around 30-50 star hotels are under construction in different parts of the country. These hotels are likely to open their doors by the next year, he said.
The department categories hotels based on the number of rooms, services, infrastructure, and amenities. The new hotels are rated generally within a year of commencing their operation, Joshi informed.
Of the five-star hotels in Nepal, Annapurna Hotel has shut its operation, while the department has revoked the 5-star rating of Hotel Everest due to its pending arrears. City Hotel Limited, or the Hyatt Place Kathmandu, is the latest hotel to receive a 5-star rating from the department. Likewise, the hotel, which has received a staggering Rs 2.5 billion investment, is also one of the new members to be associated with HAN.
According to Shakya, "HAN charges an annual membership fee of Rs 6,000 from its member hotels and collects Rs 15,000 from a new 5-star member hotel. There are currently 4,000 hotels listed with HAN with an average of 25 rooms. These hotels make available 100,000 rooms per day or 3 million rooms for a month. These hotels have a combined capacity of 72 million annual beds."
A leisure tourist visiting Nepal on average occupies hotel rooms for seven days, while trekkers stay for a minimum of 14 days. Likewise, a tourist visiting Nepal contributes to 10 jobs indirectly.
According to Shakya, hotels in Nepal need at least five million tourists annually for utilisation of their existing room and bed capacity.
As hotels are yet to recover from the losses caused by the pandemic, they are looking forward to the government to help them cope with the situation. When COVID was at its peak, the government had waived off 90% property tax for hotels. Likewise, the government had waived off such taxes by 50% in the last fiscal year. Hoteliers say that the government needs to continue such schemes to support them.
In its suggestions for the upcoming monetary policy, HAN has demanded that the government and Nepal Rastra Bank bring a refinancing scheme and increase the cap from 20 million to 50 million. Likewise, the association has also asked for extension of subsidised loans for two years.
“We have also sought help for small hotels, which are operating in rented properties, with loans of up to 10% based on their infrastructure valuation,” added Shakya.
However, Agrawal says that only 20 million refinancing for a big project like Marriot is not enough. “With the gravity of investment that we have put in our hotels, I think the government needs to increase the volume of the refinancing amount. We have raised this issue time and again. Unfortunately, our voices have not been heard,” he said. “Given our past experiences, we have concluded that the government doesn't take our suggestions for monetary policy seriously.”
Likewise, HAN has also demanded that the central bank allow banks to accept the currency of 500 and 2000 denominations from India.
All the source markets are yet to open up, and all international airlines connecting flights to Kathmandu are yet to resume flights at the pre-COVID level. All the businesses that are currently coming are bookings and reservations made in 2020. New hotels argue that the old hotels have benefited from their tour operators abroad, and Nepalese our operators are promoting them only.
“There is a price war going on among the hotels,” Rastogi of Hyatt Place Kathmandu said.
Marriott’s Agrawal echoed Rastogi and said though the situation is improving compared to the COVID situation, a fall in room price has been a difficult issue to cope with. “Presently there are not many American and European guests. Customers, mostly from South Asian nations, do a lot of bargaining. At the current pricing, even 90% occupancy will not help us meet our break-even point. If the price goes up to normal, then 60% occupancy will be enough to make some profit, he added.
The challenges for both Hyatt and Marriott are mostly market-driven. However, both the hotels believe that with the situation coming to normal, things will change for good from the coming September season when the market all around will open, and tourists from the US and Europe start to come in huge numbers.