Analyzing the impact of COVID-19 on the hotel industry in Nepal

Imprint

Shribatsa Shah, Hirak Dasgupta, Sanchari Debgupta. Analyzing the impact of Сovid-19 on the hotel industry in Nepal. Cardi-ometry; Issue 22; May 2022; p. 244-250; DOI: 10.18137/cardi-ometry.2022.22.244250; Available from: Сovid-19

1    Introduction 1.1    Growth of the hospitality and tourism sector in Nepal

Nepal is home to some of the famous mountain ranges in the world. The extraordinary diversity of the 244 | Cardiometry | Issue 22. May 2022

country and its rich culture are some of the major attractions for tourists from all over the world. Known as the birthplace of Lord Gautam Buddha, Nepal is host to UNESCO heritage sites such as Chitwan National Park and Sagarmatha National Park alongside landmarks like World Peace Pagoda and Pashupati-nath Temple. Because of its geographical diversity, the country has attracted numerous mountaineers, rafting enthusiasts, trekkers, and religious tourists worldwide [1]. The tourism industry has been one of the major contributors to the economy of Nepal. It contributes to 25% of the GDP of Nepal. His study mentions the ‘Nepal Tourism Master Plan’ initiated by the Nepal government in 1972 to promote this sector. In addition to that, from 1976 to 1981, the Government of Nepal launched the ‘Nepal Tourism Marketing Strategy’ [2].

1.2    Hotel industry in Nepal

The evolution of the hospitality sector in Nepal can be traced back to the 1950s. Since then, it has laid the foundation for the international hotel chains in the country. As tourism has had a significant contribution to Nepal’s economy, the ‘Tourism Master Plan’ in 1972 initiated by the government of Nepal has emphasized the need to establish a hotel industry to boost the tourism industry in Nepal. The government has introduced numerous training and skill enhancement programs in the Hotel Management and Tourism sector in the country. [3] In 1974, the establishment of the Tara Gaon Committee, formerly known as Tara Gaon Culture and Tourism Center, was instrumental in promoting the hotel industry in Nepal. One of the major contributions was the setting up of the Hyatt Regency Hotel of Kathmandu. However, it was the private sector of the hospitality industry in Nepal, which majorly contributed to establishing hotels like Dwarka Hotel, Soaltee Oberoi Hotel, and Del’ Annapurna [4]. These hotels led to an unprecedented transformation in the modern hospitality sector of Nepal. Based on the norms set by Industrial Enterprise Act (1992), the hotel industry was prioritized to receive incentives and duty concessions on imported commodities. Further, they are also entitled to receive prior benefits on electricity, water supply, and communication equipment for smooth functioning. Also, the government mentioned that the hotel industry would receive incentives for the operation of their services in rural areas specified by the government [5].

The hotel industry is one of the significant sectors in the tourism industry. United Nations and World Tourism Organization have established a Standard Classification of Tourism Activities (SICTA) to specify the requirements and classify the industry in primary, secondary and tertiary sectors. According to SICTA, the primary requirement to promote tourism is to meet the required criteria of the number of hotels and beds. It is noticed that there has been a constant growth in the number of hotels and beds throughout the years [6].

1.3    COVID-19: start of the pandemic

As imposed by the government, many countries are in partial or total lockdown due to the COVID-19 pandemic, which has severely affected the hospitality sector as tourists are refraining from traveling. Although some countries started relaxing the lockdown rules, the immediate increase in the number of cases led to the re-imposition of lockdown. Since many countries and localities became dependent on hospitality over the years, any restriction on tourism will affect them severely. According to a report published by Statistical, there was a forecast of a loss of 75.8 million jobs in the tourism sector worldwide [7]. Individuals working in the hospitality sector fall under the category of low-wage earners compared to other industries. Their earning is on ‘paycheck-to-paycheck basis. Due to their low educational level, they had limited employment opportunities, barely much savings to fall back during COVID.

As COVID-19 continues to spread across the globe, hotel occupancy rates have declined considerably. According to the president/CEO of the World Travel and Tourism Council, Gloria Guevara, the hotel industry worldwide is fighting to survive the crisis, and nearly 50 million jobs are in danger [8]. Reduction in tourism has affected the hotel industry and further has slowed down economic activities. When it comes to external threats, the hotel industry has faced several types of unforeseen threats such as epidemics, terrorist threats, and natural disasters over the years. Such a threat compels the hotel industry to rethink its strategies and adopt various measures to combat such a crisis. When it comes to factors concerning health, for example, epidemic, the foremost concern of tourists will be regarding the safety of their health. Therefore, researching strategies to control such circumstances should be of utmost importance for the hotel industry and researchers [9]. According to Choi, Hoffman et al., Zemke et al., hygiene and cleanliness are two major factors that influence a customer’s decision to avail of a service. Therefore, the hotel industry should focus primarily on the hygiene factors to bounce back from this crisis and regain customer’s confidence, observed Jiang and Wen. The hotel industry should also focus on providing quality health facilities and proper sanitization in order to attract tourists

1.4    Purpose of research

The purpose of this research is to understand how the COVID-19 pandemic has affected the hotel industry of Nepal and how the stakeholders are planning to frame policies in order to sustain in this time of a global economic crisis [10].

2    Review of literature 2.1    Global scenario

Sigala conducted a study to understand how COVID-19 has affected the tourism and hospitality sector. They reviewed empirical literature and tried to explore fundamental values and assumptions, which are important for the tourism industry, and how the policymakers can frame policies to help the transition of such sectors during COVID times. The paper also discusses innovative technology and its implementation to guarantee safety and a healthy environment. Kumar conducted a study focused on the importance of the tourism sector to the Indian economy as it significantly contributes to India’s GDP. He emphasized the effects of coronavirus on the stakeholders associated with the hotel industry. He indicated the chances of fewer job opportunities, as companies looking for cost-cutting strategies will lead to a higher number of layoffs and staff reduction. This paper further discussed necessary strategies to be taken by the government to revive the hotel industry. A study was conducted by Tsionas on how the tourism and the hospitality sector can cautiously begin to function considering various factors associated with the same. Findings suggest that it is possible to a certain extent for a hotel to function while earning ‘nonnegative profit’; however, the same would vary from hotel to hotel. To operate in the same level of profit as the pre-COVID period, it would require operating at nearly 33% of its capacity. Due to COVID, there would be various constraints, which will circumvent a hotel to function to its max- imum potential. However, if a hotel fails to operate at nearly 33%, government aid should be implemented to boost the overall profitability. Jiang and Wen conducted a study to understand how the marketing style and management in the hotel industry are changing due to COVID. They analyzed multiple studies done on hotel marketing and ‘hospitality service trends.’ They highlighted the necessary approaches required in order to ensure safety and welfare during such a crisis [11]. The hospitality sector requires adapting with various preventive measures in order to overcome the current crisis. The findings of their study brought out the importance of aligning strategies of hotels with factors like the safety of the consumers, wellness of customers, contactless service, etc. A study was conducted by Nicola et al. to examine the socio-economic effects of COVID-19 by discussing the effect of coronavirus on different industries such as education, manufacturing, medical, food, tourism, real estate, and agriculture. The demand in the manufacturing sectors has drastically decreased. In contrast, there is a considerable increase in demand for food and medical products. The study found a significant fall in the hotel industry globally. Since February, revenue generated by the hotel industry in the United States fell by 11.6%, an estimated loss of $1.5 billion. The hotel industry of the United States is seeking financial aid of approximately $150 billion to revive from the crisis. The hotel industry in China has reported a massive drop-in occupancy rate by 89%. The hotel industry in Germany reported a decline in the occupancy rate by more than 36%. Hotels in Italy have been one of the worst victims of COVID-19, as it has reported an occupancy rate of 6% only. However, London’s hotels have suffered from lesser magnitude. This city has managed to maintain an occupancy rate of 47% during such a crisis [12].

The impact caused by COVID-19 with the previous pandemics the world has experienced compared to Gössling, Scott, and Hall and further pointed out how this pandemic could bring a change in the economy and tourism. Their study referred to the survey conducted by the Norwegian Tourism Organization, which shows businesses such as hotels, car rentals have experienced a cancellation of about 41% by March 5, 2020. By March 26, 2020, there was a 75% estimated reduction in hotel and restaurant staff. As the hotel industry has faced a major impact of COVID-19, these sectors consider different possibilities and opportunities to revive from this crisis. A study conducted by Krishnan et 246 | Cardiometry | Issue 22. May 2022

al. predicted that by 2023, the hospitality sector might completely recover from the ongoing pandemic. They surveyed experts to understand the recovery of the hotel industry in the United States. The study implies that the situation in the US might improve because the virus has been contained, and travel restrictions (domestic and partially international) will be lifted respectively by June and July 2020. However, if the pandemic continues, then recovery may be delayed until 2023 or beyond. The researchers suggested that the economy class hotels are expected to revive from this situation faster than the luxury class hotels. The occupancy rates recorded in May illustrate that luxury class hotels and economy class hotels of the United States have an occupancy rate of 15% and 40%, respectively. The occupancy rate of hotels has decreased, leading to a reduction in their earnings. According to the report, the general manager of Goldfinch Hotel, Mumbai, revealed that the hotel is partially operational and is currently facing de growth of 80%. The owner of Roseate Hotels and Resorts mentioned that the occupancy rate is currently not more than 10%. Multiple hotels are teaming up with delivery services as well. Hyatt and Hilton have intended to make revenue by home delivery of food items by joining forces with Zomato and Swiggy. New Delhi Aero city has initiated paid quarantine facility in cooperation with the government [13]. The report also emphasizes that the hotel industry in India will not begin its recovery phase before October 2020. It might even prolong till the end of 2020. According to a report published in Economic Times (2020), the hotel industry should adopt numerous health safety measures and sanitation techniques to encourage tourists to check in to hotels. The hotels should initiate practices such as checking fever at the entrance, provide sanitizer, thorough sanitization of rooms and hallways; staff should be wearing surgical gloves, masks or face shields, etc. Federation of Associations in Indian and Tourism Industry (FAITH) has also demanded the PM for financial aid to help restore the hotel industry from this crisis caused due to COVID-19. It also discusses how technological advancement can help to boost hygiene and no-contact services in hotels. Such practices can be possible by installing machines in the entrance for self-check-in through QR codes; create mobile apps to operate several services and facilities. In conclusion, this paper gives an insight into how the hotel industry can overcome this crisis and operate under a controlled environment [14].

2.2    Performance of hotel industry post covid-19 in Nepal

Nepal faced a complete lockdown on March 24, 2020, after a second case was detected, leading to a suspension on national and international flights, which resulted in cancellations of hotel bookings by tourists, followed by sudden unemployment and loss of income thousands of households in the country. There was a drastic fall in tourism of 2% in January 2020 compared to the previous year. Due to the pandemic, the GDP of Nepal has faced a potential loss of US $460 million. It has also led to the cancellation of the ‘Visit Nepal Campaign.’ A study was conducted by Ulak on the outbreak of coronavirus COVID-19 and discussed its impact on Nepal’s tourism industry. The study also focused on the necessary steps taken by the Nepal government in order to combat the situation caused by the spreading of coronavirus by providing intensive care units, isolation and quarantine facilities, PPE kits, and other medical facilities with the help of the Ministry of Health and Population and with the contributions from the World Bank and WHO. The author has conducted a review by collecting data from various published journals and information drawn from media sources. Findings emphasized the immense impact that travel restrictions have had on the country’s economy due to COVID. According to a report published in Economic Times (2020), the hotels in Nepal have completely shut down from March 21, 2020. The hotel staff has been asked to stay on leave until further notice to reduce their pay [15]. Prohibition of on-arrival visas and mountaineering expeditions, implemented by the Nepal government, has affected tourism. Consequently, the hotel industry in Nepal is facing severe challenges in its functioning. A report published in The Kathmandu Post (2020) highlights how the hospitality sector of Nepal has faced a severe attack from the pandemic. The hotel industry is seeking financial aid from the government in order to sustain itself during this pandemic. The impact of coronavirus has been grave, and it is unlikely to recover from the crisis even after the lockdown is lifted [16]. Predictions indicate that the hotel industry will need at least two years to bounce back from this crisis. It will only happen when the tourists are confident about visiting Nepal. However, the hoteliers are optimistic about the idea of the government’s help to revive this crisis [17].

3    Research objectives

• a.    To understand the growth of the hotel industry in

Nepal pre COVID-19

• b.    To study the challenges faced by the hotel industry in Nepal due to COVID-19

• c.    To explore the strategies adopted by hotel industries in Nepal in order to sustain during and post the pandemic

4    Research methodologies 4.1    Formulation of questionnaire

Based on the literature review, the following factors were identified, and questions were framed accordingly: • Growth of the Hotel

• •    Number of Employees

• •    Financial Performance of the hotel (This included the growth of revenue over the years and change in revenue during and post COVID-19)

• •    Strategies and Challenges (This included major challenges faced by the hotels and what strategies they are planning for the revival of the same)

4.2    Sample size and sampling technique 4.3    Data collection

Since the study wanted to get inputs from employees of the hotel industry (mainly the ones who are part of the decision-making authority), the sample size was targeted to be 12. These hotels fall under a mixed category of 5 stars and three stars. They were approached for data collection over telephone and e-mail. The sampling technique used was Non-Random and a mix of Snowball and Convenience Sampling [18].

Questionnaire (Annexure 1) was floated to 10 hotels by e-mail. Out of the 10, only 6 responded. A separate e-mail asking for consent (Annexure 2) to put the details in the paper was also sent to the respondents from these 6 hotels. The respondents requested to keep there and the hotels’ names confidential [19].

A personal interview was conducted with the First Vice President of the Hotel Association of Nep al (HAN), Mr. Binayak Shah. His responses on the following factors were recorded.

• •    Loss of Revenue

• •    Revival Strategies

• •    Revival Period

4.4    Analysis

General information about the respondents and hotels is put in a tabular form, and key points as mentioned by the respondents are highlighted. The interview responses of the 1st Vice President of HAN on losses and strategies are also highlighted [20].

5    Results and discussion 5.1    General information

Table 1

Details of the hotels and respondents

Respondent	Hotel	Designation	Year of Establishment of the Hotel	Number of Employees
R1 (Ram Kumar Banjara)	HI (Airport Hotel)	Manager	2010	70
R2	H2	Guest Relation Agent	1998	350
R3 (Pancham Lama)	H3 (Pokhara Grande)	Director Sales and Marketing	2007	170
R4	H4	Front line	1998	350
R5	H5 (Radisson Hotel, Kathmandu)	Guest Relations Officer	1998	400
R6 (Ashutosh Acharya)	H6 (Godavari Village Resort)	Sales and Marketing Manager	1995	102

Source: Primary data collected by the authors

5.2    Financial performance

The annual growth of revenue for the hotels ranged between 7% and 20%. According to all the respondents, their hotels had a good performance till pre-COVID times with foreign and local tourists visiting. When it comes to during and post COVID performance, some said that their hotels were performing “bad” [R2] or

“not good” [Airport Hotel] on the financial front ; for some, it has come down to the point of “utilizing crisis fund” [R5] One of the respondents, Mr. Pancham Lama from Pokhara Grande said that they are “hopeful at the moment” [R3] about improvement in revenue figures.

5.3    Challenges

Respondents were asked to choose from the list of challenges and add any other information they would like to share. All of them mentioned “Loss in Revenue (due to cancellation of bookings)” as a common concern. “Retaining Employees” was the second challenge mentioned by two respondents [R2, R5, and R6]. For some, “Maintaining Goodwill” [R4] was considered another challenge that could come in the way of their reputation. According to Ashutosh Acharya (R6), the hotel was still operational for a month post COVID, where people visited due to conferences and À la carte. Almost all the respondents thought it would take a minimum of two years or more for the hotel industry in Nepal to get back to normalcy [22].

5.4    Strategies

Except for two, [R4 and R6], all other respondents expressed that government aid is expected to revive the hotel industry. “Financial Support” [R1, R2, R3, R5], “Reduction in Taxes” [R2], “Providing Minimum Salary during the Pandemic” [R5], “Subsidy and Loan” [R3] were some of the requirements that they are expecting from the Government. When it came to government regulations, all of them were aware of the rules. However, one of them specifically mentioned the importance of “Practical Training” [R5] to make the staff well-versed in the new norms of functioning. Another respondent expressed concern over the “Changing Norms due to Inevitable Circumstances .” However, there was a concern from one of the respondents who expressed that they are not expecting any government help since they did not get any during the crisis that followed the natural disaster.

As per the respondents, “Preventive Measures” [R4], “Following Safety Protocols/Following Safety Measures” [R2, R3, and R6], “Following Government laid Protocols” [R1], “Upgrading the Service Standard of the hotel” [R3], and “Assuring Safety within the Premises of the Hotel” [R5] and “Giving Minimum and Exciting Offers” (R5 and R6) were the strategies that they plan to adopt in order to ensure a decent footfall of the customers post the pandemic.

5.5    Interview with Mr. Binayak shah, 1st vice president of hotel association of Nepal (han)

Interview conducted with the 1st Vice President of HAN focused on understanding the loss of revenue faced during COVID-19 lockdown and the strategies designed to revive this industry.

5.6    Loss of revenue

According to him, the entire airline, tourism, and hotel industry incurred a combined loss of approximately 41 billion NPR (Nepalese Rupee) . He mentioned that it would take a minimum of two years to revive the hotel industry in Nepal. UNWTO also reported the same

5.7    Government policies

According to Mr. Shah, talks will provide 50 billion NPR and a 5% interest rate for working capital. Expectations are there for a subsidy, and a minimum salary should be paid to the people working in this sector. He also mentioned government policies in allowing for paid holidays and travel facilities for civil servants to contribute to the revival policy.

5.8    Strategies

Promoting domestic tourism and religious tourism have gained priority as part of the strategy for revival. Nepal is a hub for religious places like Halesi Ma-hadev, Pasupatinath Temple, Manakamana Temple, Muktinath, Lumbini, etc. Thus, investing in safe travel to these places can lead to an increase in footfall of people.

6    Conclusions

The study used individuals working in the hotel industry to understand better how this sector has been battling the lockdown period and what policies can help bring it back to a normal state. According to most, there has been a huge loss in revenue for the entire hospitality sector in Nepal after the pandemic. The struggle is ongoing, just like other countries that are highly dependent on tourism and hospitality. Government aid is one of the most important sources of any crisis management. For the present scenario, government intervention is necessary. Likewise, for a country like Nepal, where the hospitality sector con- tributes significantly to its GDP, government intervention and government aid can be a major source fund, which will help to manage this crisis. The individuals working in the hotel industry in Nepal expect subsidies and government help in providing minimum salary to avoid job loss for employees. Tourism being one of the primary sources of income for the economy of Nepal, providing safe travel facilities to religious places and domestic tourism should be an important agenda for the Nepal government. One of the primary targets of visit Nepal 2020 was increasing the number of hotels and hotel beds to promote and accommodate an increasing number of tourists, which is impacted due to the pandemic. These hotels had to face a decline in revenue due to loss of bookings. Like some of the hotels trying to attract customers again by providing minimum offers, the rest focus on ensuring safety and hygiene within the premises since customers will be more inclined to avail a service, which will ensure the safety regarding their health. Due to COVID-19, the health and hygiene factor will be extremely important. As seen from the responses of most of the respondents, this is one of the major targets to regain customers’ confidence. Since most do not see the hotel industry reviving any time before 2021, it is now of utmost importance that policies be implemented, keeping in mind the requirements of hotel service providers and the customers.

Statement on ethical issues

Research involving people and/or animals is in full compliance with current national and international ethical standards.

Conflict of interest

None declared.

Author contributions

The authors read the ICMJE criteria for authorship and approved the final manuscript.