HOTEL projects have been attracting massive investments from both domestic and foreign investors in what could be termed an investment frenzy in the country’s tourism sector. In the last fiscal year, the government received investment commitments for 65 hotel projects that will add 3,036 beds to the country’s tourist accommodation capacity. This list dœs not include big projects, mainly four-star and five-star hotels. According to the Department of Industry, the planned undertakings have a combined investment pledge of Rs 7.11 billion, half of it from foreign sources. What makes the latest surge in investments remarkable is that the country’s established business houses that have been staying away from the hospitality sector are increasingly getting involved in tourism. Some of the country’s well-known conglomerates such as the Golyan Group, TM Dugar Group and Chaudhary Group are pouring billions into the hotel sector. The Nepal Hospitality Group (NHG), a subsidiary of the MS Group, has signed a management agreement with a subsidiary of Marriott International to open a four-star hotel dubbed Fairfield by Marriott Kathmandu. The proposed 10-storey hotel under construction in Thamel will have 108 rooms. The property is spread over two and a half ropanis of land. The investment is estimated to be worth Rs 650 million. The TM Dugar Group is planning to open a 40-bed hotel The Centurian Hotel in Biratnagar with an investment of Rs 50 million. Similarly, the Golyan Group has planned to open a 224-bed hotel in Kathmandu with an investment of Rs 750 million. A decade-long insurgency coupled with labour unrest had compelled a number of star hotels to shut down operations. Four-star properties like the Woodlands, Yellow Pagoda, Narayani, Blue Star, Sherpa and Durbar closed down. “There were no major investments in hotels till Jana Andolan II,” said Suman Pandey, one of the promoters of Chhaya Centre where a five-star hotel is being proposed. The investment boom actually started three years ago when the government decided to celebrate 2011 as Nepal Tourism Year. Against a backdrop of sustained growth in international arrivals, the government’s announcement worked as a catalyst spurring investments in the tourism sector that had declined during the decade-long Maoist conflict. “Nepal Tourism Year 2011 sent positive vibes to potential investors,” said travel trade entrepreneur Yogendra Sakya. The increment in tourist arrivals in the last few years has attracted substantial foreign investments in hotels and resorts. According to the Department of Industry, a total of 33 foreign investors have pledged investments in hotel projects with capacities ranging from 10-200 beds. These planned ventures have 100 percent foreign investment. There were 18 proposals for hotel projects that are joint ventures between Nepali and foreign investors. Among the foreign investors, Chinese tops the chart with investment proposals for 24 hotels. In the past, a number of hotels in Nepal were operated under franchises and chains. However, they began to disappear and the hotels found themselves increasingly at a competitive disadvantage. The Travel and Tourism Competitiveness Report 2013 published by the World Economic Forum (WEF) has ranked Nepal sixth in price competitiveness in the travel and tourism industry. According to the report, Nepal offers the second most competitive hotel prices in the world after Gambia. Nepal’s average room rate calculated for first class branded hotels over a 12-month period in 2011 was US$ 52.7. Travel trade entrepreneurs have blamed the devaluation of the Nepali currency against the US dollar and unhealthy competition as the cause for Nepal becoming a price competitive destination. Now, a number of international franchises and chains are back and some new brands are making their way into Nepal. With all things looking good, Sakya said that the government should become serious to promote Nepal. “There has been a significant rise in the number of hotels, and in such a scenario, if tourist arrivals go down, it will be another setback,” said Sakya. This will, in turn, force hotels to go for tariff under-cutting measures, which used to happen in the past, forcing a number of players out of the business.
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