Though there have been efforts made by tourism stakeholders the sector has not been able to witness growth as expected in the country. In fact, the government too had set a target to bring in a million tourists annually six years back but the plan still remains a dream as Nepal could bring in only 752,000 foreign tourists in 2016. Meanwhile, Monetary Policy for 2017-18 that was introduced recently has directed commercial banks to disburse five per cent of its productive sector lending portfolio to the tourism sector in a bid to encourage investment in the tourism industry. In this context, Sujan Dhungana of The Himalayan Times spoke to Shreejana Rana, executive director of Hotel Annapurna, to discuss the new provision envisioned by the monetary policy and key issues related to tourism and hospitality business in Nepal. Excerpts:
Recently, the central bank through the monetary policy has directed banks to lend at least five per cent of their annual productive sector loan portfolio to the tourism industry. Will this ensure growth of domestic tourism industry?
I cannot definitely say if it will ensure growth of tourism industry but it will certainly encourage it. Annually, the total loan floated by banks and financial institutions to productive sector stands at around Rs 2,000 billion. Based on the five per cent loan to tourism sector provision, the allocation will be around Rs 100 billion, which is a meaningful figure that can fund the growth of domestic tourism. Finance is always a constraint in our industry especially while developing projects in areas other than the well-known tourist destinations. As we have high potential for domestic tourism, we should encourage developing areas other than the key destinations that are popular with foreign tourists. But to get financing for such projects is difficult when there is no guarantee of returns. There is no lack of ideas and projects but financing these ideas, especially in the current economic climate, is difficult. We need feasible interest rates. The present ones are high and discouraging. It is encouraging that the government has tried to support tourism sector like the agriculture and hydropower sectors. The initiative taken by the government through the monetary policy is a good start.
Though the number of hotels in the country is rising, the flow of both foreign and domestic tourists has not increased simultaneously. What do you think are the setbacks for the tepid tourist flow in Nepal?
From a pragmatic point of view, it is unfortunate that so many new hotels were licensed to operate. Enough thought was not given to how the extra 10,000 rooms, 4,000 of them in star category hotels, would impact the existing industry. The number of rooms will double in three to four years but the flow of tourists is stagnant at about 800,000 per year. Interestingly, we have developed a tendency to point to the earthquakes of 2015 as the reason for the alarming reduction in the number of inbound tourists. The earthquake was a major setback but we need to remember that we were facing the same problem even before the quake. Political instability has been a major obstacle which has compounded with the lack of infrastructure. For instance, we need more international airports. Tribhuvan International Airport (TIA), which is the only international airport of the country, is one glaring example of how we lack in infrastructure. If we were able to increase the number of inbound tourists by air, TIA in its current state cannot handle the increased inflow. We need good connectivity by road and air between destinations we promote. The quality of the roads too are not up to the standard in most areas. Our cities are polluted, the sites crowded and dirty, their quality has degraded. The first city that tourists get the opportunity to see is Kathmandu when they travel by air, so Kathmandu is the place that sets the first impression. Now imagine what first impression a tourist would have if they were to get stuck in an endless traffic jam in a cloud of dust in the capital itself? Moreover, we lack basic amenities like clean toilets at popular tourist sites. Thus, we must invest in our infrastructure and also protect the environment. We cannot solve all our problems at once but we must start planning and make a start.
How do you think can the government and private sector facilitate to boost tourist inflow in the country?
First we need to realise we need each other. It is time to work together rather than take ‘us-vs-them’ stance. Both the government and private sector have their own individual strengths, which need to be synchronised. The tourism industry is a key revenue earner. The private sector has invested and should continue to invest in services such as hotels, transportation and other activities. We provide employment to semi-skilled and unskilled workers. But we need strategic thinking to further develop. It is not just about hotels and bringing in tourists. We need to focus on infrastructure, the environment, fiscal policies and taxation, among others. Also, we must rethink the way we promote Nepal. Our promotions tend to be done on an ad hoc basis at a relatively short notice. There should be a long-term vision in our promotions. Like how Malaysia has developed the campaign called ‘Truly Asia’ and India has developed ‘Incredible India’, we also need to think on how we want to position ourselves as a destination and the government has a chief responsibility regarding this. If we continue to promote ourselves as a cheap destination, we should not be surprised if we do not get the quality tourists we want. But again, we must keep in mind about what we have to offer. If we wish to attract quality tourists, we must be able to offer experiences that match.
It is said that a majority of star hotels are usually Valley-centric and limited to a few select cities. How does this impact the growth of the tourism industry in Nepal?
From the 70s through the 90s tourism was focused solely in Kathmandu. The international airport was here and so major investments in the hotel sector were made in the capital. To change this we have to change our policies and strategies, which I have already mentioned. We should all work on ways to develop new tourism regions and the infrastructure to get there. We also need to protect the environment and the ‘product’. If new regions are promoted, hotels and supporting industries will surely follow in these new destinations. A case in point would be Pokhara, Chitwan and Lumbini where investments have been made in hotels. Having said that, we have new hotels of star category coming up in cities like Butwal, Nepalgunj, Dharan (Bhedetar) and Biratnagar, which are being promoted as new tourist destinations in the country. Moreover, hoteliers are looking at constructing a chain of lodges in the Everest Base Camp area as well as Rara Lake. By 2020, many new destinations other than Kathmandu will see star hotels opening. Moreover, our new federal structure will enable tourism to spread throughout the country, offering tourists a diverse range of products. Right now, focusing on location of star hotels is rather like putting the cart before the horse. The hotels are there because that is where we encourage tourists to go or where tourists want to go.
The issue related to service charge between hoteliers and unions has not been resolved yet. What has been the progress on it?
I am happy to say that both hoteliers and unions sat for discussions in an environment that encouraged trust and open debate. We moved away from confrontational positions and concentrated on practical financial and legal issues. The days of ‘management versus employees’ should be confined to the past. We are a partnership which seeks to run our industry/company in a smooth and profitable way that benefits us all. This is not about winning and losing. While I cannot discuss the details right now, I can say that we are heading towards a win-win solution.
What are other legal reforms required in the country’s hospitality industry to achieve growth in this sector?
The reforms we hope for are the ones that we have been seeking for a number of years now. They are fundamental to our industry’s viability and success. Firstly, the tourism industry should be given priority with the industry status and should be recognised as a key contributor to our economy. Similarly, hotels must be politics-free workplaces. One of our biggest challenges is labour management, so both hoteliers and employees have to work together to find solutions that benefit us all. We have labour laws, which focus on unions and protect the interests of employees. But we must balance these with laws that protect the interests of the investor too.
– By Sujan Dhungana for THT