Tourism Facing A Hard Time

Despite the increase in the number of tourist arrivals, Nepal’s tourism sector has been passing through an uncertain period<br>DEBESH ADHIKARI

June 26, 2012, 5:45 p.m. Published in Magazine Issue: Vol.: 06 No.-02 June. 22-2012 (Aashar 08, 2069)<br>

Yogendra Shakya, Nepal’s prominent hotelier and co-chair of Nepal Tourism Year 2011, held the view that Nepal had a great possibility to lure the tourists. With his vision and dedication, Nepal’s image as a tourist destination was restored after receiving close to a million tourists.

However, the progress made by Nepal in the tourism sector is now under stress. With the vacancy of the chief executive officer of Nepal Tourism Board unfulfilled, tourism promotion activities have already been hampered.

The process for appointment of the Chief Executive Officer was stalled because of a case pending in the apex court. Despite priority, the petition is yet to enter the hearing process.

Along with this, trade unions continue to threaten hoteliers, making the hotel business more unstable and prone to shutdown. With the demise of the Constituent Assembly, the frequency of  general strikes is likely to increase.

Less than six months after jubilant closing of Nepal Tourism Year 2011, Nepal’s tourism sector is facing hurdles one after another. The decision of the government to shut down the resorts and hotels inside Chitwan National Park  is another setback to Nepal’s tourism sector. Although Nepal is still maintaining the growth of tourism, it is likely to affect the overall situation at any time unless the government takes any major initiative.  The motion of high growth drastically fell in May and cancellation for June has already created havoc.

HAN’s Delegation

Looking at all these bleak aspects, a hoteliers  delegation led by Hotel Association Nepal president Shyam Sunder Kakchyapati met prime minister Baburam Bhattarai  and put forth their demands asking not to shut down the Hotels and Resorts inside Chitwan National Park. Their demand is that the news of shutting down the hotels and resorts from inside the National Park will badly tarnish the image of Nepal in the international market. The delegation also handed over a five-point list of demands.

Outgoing president Prasiddha Bahadur Pandey also fought tooth and nail with the parliamentary committee’s decision to shut down the hotels inside Chitwan National Park. Due to pressure of HAN, the hotels, which invested huge amount of money and supported the conservation efforts inside the park, got a temporary relief.

Under the recommendation of the Committee of Natural Resources of dissolved Legislature Parliament, the government is considering to shut down all the hotels and resorts based inside the park from end of June.

Along with the demand of Chitwan, HAN’s delegation has several other demands. Suffering from a series of decisions of the government and political instability, Nepal’s tourism sector, which had bounced back last year, seems to be heading towards the downward trend.

Along with these, Hoteliers seek subsidies and tax exemption. Although the tourism industry is regarded as a major foreign currency earner, it is yet to receive facilities from the government. Entrepreneurs have  also asked the government to announce special facilities, including tax exemption and subsidies, for the hotel industry in the budget for the fiscal year 2012/13.

Submitting a charter of demands to the government, HAN also asked the government not to impose any new tax, considering the bad situation that the industry is going through at the moment.  “We have also requested the government to lower VAT rate for the hotel sector or redeem three percent of the VAT paid by hoteliers taking into consideration the sector´s contribution in foreign exchange earnings and employment generation,” Madhab Om Shrestha, executive director of HAN, said.

HAN has also demanded that the government waive off penalty and interest accrued on pending VAT dues of the hotels. The association has also proposed the government to do the needful in issuing loans at subsidized rates for hotels. “As we are celebrating the year 2012 as Visit Lumbini Year, we have proposed to the government to issue gratis visa to foreigners for the next two years,” said Shrestha, adding that it will be a great promotional gimmick for Nepal in international arena. The association has also urged the government to exempt income tax on foreign exchange earnings.

The hoteliers have also expressed serious concerns on lack of effective promotional campaigns in international arena and mismanagement at Tribhuvan International Airport (TIA). They have also requested the government to set up a travel desk in all Nepali missions abroad for tourism promotion.

In a bid to encourage hotels to embrace green energy, hoteliers have asked the government to provide duty waiver on imports of green energy technology.

The delegation of Hotel Association Nepal put forward the following eight major demands:
1. The hotels and resorts inside Chitwan National Park should be given continuity
2. The implementation of decision giving tourism as national priority industry
3. Board member of Nepal Tourism Board should be directly affiliated to tourism related organizations.
4. Legal provision to restrict strike, shut down and other illegal activities inside the hotel premises.
5. Labor Act should be revised making it conducive to tourism sector
6. Reduction of Value Added Tax from 15 to 10 percent.
7. Initiative to provide five new aircraft to Nepal Airlines under a lease.
8. Undisrupted supply of petroleum products to tourism industry.

Nepal is Cheapest

Nepal has possibility to bounce back given the improving internal environment. Nepal is one of the cheapest traditional holiday destinations in South Asia, said basing its assessment on World Bank data. The website has compared travel costs across South Asia based on six major factors of tourist spending — hotels and restaurants, groceries, alcohol, clothes, entertainment and transport.

According to, hotels and restaurants in Nepal are 3 percent more expensive than in India. However, in comparison to Bangladesh, Sri Lanka, Bhutan, the Maldives and Pakistan, prices in Nepal are lower.

Hotels and restaurants in the Maldives are 62 percent more expensive than in Nepal. Despite high inflation, the tariff of five-star hotels is around US$ 70-80. “This indicates that Nepal can be considered to be the cheapest destination,” said Shakya. It was only last year that hoteliers had hiked the room rates marginally.

According to travel trade entrepreneurs, tourists coming to Nepal spend 60 percent of their total budget on their air ticket and the rest in Nepal.  “In fact, Nepal is very cheap to stay, eat and entertain compared to other South Asian countries, but transport, particularly air transport, is very high among the nations due to poor performance of the national flag carrier,” added Shakya.

As foreign travelers have no choice of direct air connectivity, air travel costs become higher while coming to Nepal. Similarly, surface travelling is also expensive in Nepal due to a well organized syndicate system by transport operators and high gasoline prices. The website has showed that transport costs in Nepal are higher than in all the South Asian countries except the Maldives.

Given Nepal’s low cost compared to other destinations, Nepal is now a favorite for Indian tourists. According to Indian tourism entrepreneur, holiday destinations closer home in Asia are increasingly being favored by Indian tourists as they look to lessen the burden of weaker rupee against dollar on their leisure trips, according to travel service providers.

"This quarter, destinations like Bhutan, Cambodia, Myanmar, Sri Lanka, Nepal, the Philippines, Singapore and Vietnam contributed a healthy 40 per cent growth from the Indian outbound travel," TUI India Senior Vice-President Sunil Hasija said.

According to Pearl International Tours & Travel (PITT) Executive Director Arjun Seth macro economic conditions like inflation, slow industrial and service output, paralysis in economic reform, fuel prices and the depreciation of the rupee by 20 per cent in India have impacted travel to exotic locations.

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