Revival lessons for tourism and hospitality businesses

The steady increase in the number of positive cases and reported deaths in Nepal due to Covid-19, a disease caused by the SARS-nCoV-2 virus has now deepened the scale of future uncertainty and unpredictability in the country. The virus outbreak and the subsequent nation-wide lockdown has left many sectors in a mayhem, further exposing them to a series of vulnerabilities. Findings from the report ‘South Asia Economic Focus’ published by the World Bank revealed that the current socio-economic structure of the entire region is moving towards a backward plunge. With a halt in cross-border trade, increasing strain in the banking-financial sector and stock market, and closure of many businesses and manufacturing industries, the regional trade has fallen down to a meager range of 1.8-2.8 percent, down from 6.3 percent in the beginning of 2020. This most likely is the worst performance of the entire region in the last 40 years.

Given Nepal’s land-linked and least developed country (LDC) status, service industries like tourism, hotels, restaurants, and travel and leisure agencies are being hard hit due to the unprecedented lockdown. Tourism is one of Nepal’s largest industries, a massive employer, and an important source for foreign exchange reserves. The sector contributed around 8 percent to the national GDP during the pre-Covid-19 period. Similarly, with the Visit Nepal Year 2020 (VNY) campaign, the sector was confident in attracting more than two million tourists and achieving tremendous other opportunities. However, with the virus outbreak, halt in all inter-border and intra-domestic movements, stoppage in the issuance of on-arrival tourist visas and spring mountaineering expeditions, closure of the only international airport (Tribhuvan International Airport), and all other domestic ones; tourism and hospitality industries have been pushed to the brink of a severe collapse.

Current Scenario:

While the tourism sector was given much importance with the launch of the VNY 2020 campaign, the government was forced to call it off due to the rising scare of Covid-19. The campaign was aimed at increasing the sector’s contribution to the national economic growth from 8 to 10 percent; alongside increasing daily foreign expenditure from an average of NPR 5,280 (USD 44) to NPR 9,600 (USD 80). However, as the crisis turned into a global pandemic, the promising campaign was cancelled. Likewise, the NPR 65 million (USD 537,589) which was allocated for the campaign was reallocated to provide relief funds to hospitality businesses; yet the re-distribution has not produced any positive outcome or results.

Similarly, the impact of the lockdown has also brought harsh adversities on all business activities and sub-segment within the hospitality sector. Lack of customers amid the pandemic has rendered all- international hotel chains, domestic hotel chains, local hotels, motels, resorts, lodges, and home-stays to remain shut until the situation improves. A total of 1,300 star and tourist standard hotels, with bed capacity of over 41,000 per day have shut their operations since the beginning of the lockdown period. This has left the country’s hotel sector losing nearly NPR 1.80 billion (USD 15 million) per month. Likewise, more than 3,500 travel agencies and 2,600 trekking agencies across the country have closed their services due to high operating cost and no sources of revenue; leaving them with lost revenue equivalent to NPR 600 million (USD 5 million) per annum.

Correspondingly, more than 3,000 hotels have sent their staff home as they inch closer to bankruptcy. With little resources to pay them full salaries, hotels have decided to pay only 12.5 percent of the basic salaries to their employees and have asked the government to pay the rest through the social security fund. However, this decision has left 300,000 workers in the hotel and hospitality business with no or very negligible income support; alongside impacting another 700,000 workers in restaurants, casinos, and fast-food businesses.

Moreover, findings from Nepal Rastra Bank (NRB) suggest that banks and financial institutions had approved a loan amount of NPR 138.68 billion (USD 115 million) to hotels and hospitality sectors till mid-May 2020. However, with 95 percent of the overall sector’s operation closed, there’s little hope that the sector can reimburse the loan amount in full. All these indicate a shaky and rough road ahead for Nepal’s tourism and hospitality sector in its quest to re-bounce back to normalcy again.

Way ahead:

For the sector to bounce back once the operations resume, Nepal’s tourism, and hospitality industry has come up with new policies and concepts and rebooted its services, giving priority to cleanliness, hygiene, and sanitation standards. Hotels in Nepal can adopt Svenska Hotels’ (a chain of domestic hotels in India) approach to running hospitality businesses amidst the pandemic. By investing in both operating supplies and capital expenditure, Svenska was successful in implementing appropriate infrastructure to monitor and sanitize guests, staff, and material ingress in their properties. Similarly, by prioritizing the provision of sanitizers, gloves, masks, air purifiers etcetera they were able to minimize any future risks of contamination within their properties. This allowed Svenska to continue their operations with their teams staying at the hotel; alongside allowing others to work from there by providing infrastructure like high-speed internet, printing, scanning and video-conferencing solutions. They were also able to offer facilities such as outdoor catering, packed meals, takeaways and deliveries, both for corporate clients as well as local residents throughout the lockdown period.

Moving ahead, the government should reutilize the budget allocated for VNY 2020 for promoting its key highlights and destinations on virtual platforms. ‘Travel World VR’ is a leading application and distribution platform where virtual reality (VR) travel videos offer new ways of engaging travellers. It provides customers with the ultimate ‘try-before-you-buy’ experience and allows hotel owners to promote their accommodation via an interactive marketing experience supported by VR, augmented reality (AR) and 360-degree video. Through this, the app has bridged the solution for those with wanderlust during the lockdown period. Nepal Tourism Board (NTB) too can come up with such online modalities and partner with international service providers to promote Nepal’s rich culture, tradition, customs, and travel destinations via VR.

Furthermore, the government should prioritize domestic tourism. The trend of trekking, hiking, and reliving in local home-stays and resorts has been gaining momentum amongst local people, especially the youth in Nepal. Considering the border closure and ban in international travels, the government should come up with incentives to make local/domestic tourism more popular, fun and adventurous, while making sure that all health and hygiene standards are maintained. To do so, the government must focus on carrying out Covid-19 tests at major domestic destinations as an assurance to domestic tourists. Similarly, the government should also classify tourist destinations as red zones and green zones for more coordinated management and secure travel; alongside providing medical insurance and suitable relief packages to domestic tourists while traveling inside the country. Lastly, the government should also mobilize all trekking and mountaineering workforce to clean up mountains and renovate the trekking and hiking trails across the country; all the while providing employment opportunities to those who had lost their source of income due to the economic halt.