Though Nepal is nestled between India and China, it shares few of the drivers that propel two of the most thriving and talked-about economies of the world. Its economic USP is the tourism and hospitality business, of which it has historically managed to garner a not-inconsiderable share – and not without good reason. Home to eight of ten highest peaks in the world, this Himalayan nation has always been a regular paradise for spiritual seekers and adventure seekers from across the world.
Despite decades of political instability and civil wars, the birth place of Lord Buddha and home to numerous sacred Hindu sites has managed to hold its own as a tourist destination. The hospitality industry in Nepal has by no means been optimally capitalized upon, and there is still considerable potential for tourism development basis its unique natural and cultural heritage.
Even apart from the spiritual connection, the Himalayas are a perpetual favourite among foreign tourist and adventure enthusiasts, and Nepal is a highly preferred destination for high-adrenaline activities such as mountaineering, rafting, canoeing and hang gliding.
Since tourism is its primary economic driver, Nepal’s tourism policy has been framed in a manner that seeks to maximize national productivity, create more employment opportunities, boost foreign currency inflows and generally project the country as a more dynamic player in the international arena. Needless to say, this is a lot to expect just the travel and tourism industries to deliver on.
Nevertheless, it cannot be denied that Nepal’s tourism industry is its largest source of foreign exchange and revenue. In other words, a lot depends on annual tourist arrivals and hotel room occupancy. In this respect, Nepal has witnessed a fairly healthy trend over the past few years.
Tourist arrivals to Nepal have seen a Compound Annual Growth Rate (CAGR) of 10% during the period from 2003 through 2012, to reach 803,092 by the end of 2012. India, China, Sri Lanka, USA and the UK are the top five feeder markets for Nepal in terms of international tourist arrivals. However, with the bilateral transit treaty between India and Nepal, India remained the largest tourism generator, with 165,815 arrivals in 2012 accounting for 21% of the total arrivals.
Happily for Nepal, the fact that a number of world-class hotel brands are entering the country over the next few years will also catalyse employment generation, particularly for trained hospitality professionals.
Sharp Focus On Kathmandu
Kathmandu, apart from being Nepal’s largest city, is also the national capital and the political and cultural hub of the country. As a matter of fact, it was the opening of the airline network between Kathmandu and other parts of Nepal and the as the rest of the world that became a game-changer for the country’s tourism and hospitality industry.
Tourist arrivals in Kathmandu have maintained an upsurge since mid-2009, and the city’s tourism and hospitality sector has witnessed significant investments. Domestic as well as foreign investors have been displaying a lot of confidence on the heels of the growing tourist influx into Kathmandu and increasing demand for quality hotel rooms. The hospitality segment is expected to grow significantly over the next couple of years.
In the Kathmandu hospitality market, the Revenue per Available Room (RevPAR) has increased at a CAGR of 11% (from Rs. 3,661 to 5,048) during the period 2010-13. This can be attributed to strong growth in demand from the leisure travel segment, which has not flagged despite the uncertain political environment and limited increase in branded room supply over the last decade. Interestingly, Kathmandu’s market RevPAR growth rate is expected to see a decline going forward, due to an anticipated 44% increase in branded rooms supply by 2021.
Despite the need to deliver on better economic benchmarks, Nepal continues to face numerous issues. Lack of adequate infrastructure, ongoing deficiencies in road connectivity and a less-than-favourable air safety record still hinder the growth of the tourism sector. Also, political uncertainty coupled with prolonged flash protests and strikes results in a large number of tourist cancellations.
The Nepal government is taking measures to address these concerns, especially in terms of tightening the country’s aviation regulations to align with the recommendations from the International Civil Aviation Organization. Efforts to modernize its airports and establishing monitoring stations to improve visibility and communication are already in the pipeline.
However, it seems doubtful that Nepal will be able to address its deficiency in road networks without the active involvement of neighbouring countries. The United Nations’ ambitious proposal to connect all Asian countries through a ‘Asian Highway Project’ had been floated in 1959. 32 countries, including Nepal, are signatories to this project. This can turn out to be a major game-changer for the Nepal tourism and hospitality industry.
Apart from that, a lot depends on how quickly Nepal’s government manages to lend the country’s a ‘must visit’ image. Considering its excellent geographical attributes, it definitely has potential to become the Switzerland of the East in the future.
Author : Mandeep Lamba, Managing Director – Hotels & Hospitality, JLL India