The Rise of the Five Star Hotels 

Text by Avant Shrestha

Tourism has been a mainstay of income generation for Nepal. The country has great potential to become a top destination with targeted and strategic development of tourism products and focused marketing. Recently tripadvisor.com ranked the nation’s capital, Kathmandu at 19th out of 25 best tourist destinations in the world for 2019. Such accolades and recognition have not been overlooked by international businesses, and in recent years there has been an influx of large international hotel chains in the country. As of mid-2019, the number of five star hotels in Nepal has reached 15. 

The Visit Nepal 2020 campaign also focuses on attracting high spending tourists. Additionally, with the improvement in economic status of Nepalis, the local market today demands a higher quality of hotels and services in general.

1950’s saw Nepal open her doors to the world and the advent of the first hotels. In 1965, Hotel Annapurna was established as the first five star hotel in Nepal and a year later Soaltee Oberoi opened its doors to guests. The entry of five star hotels in Nepal’s hospitality landscape ushered a new era of tourism industry as more international standard hotels started to emerge. 

However, 80s and 90s experienced a gap in the emergence of five star poperties. As Abhinav Rana, Managing Director of Star Alliance Hospitality explains, “After Yak and Yeti during the 70’s, there was a long gap before the opening of the next five star hotel.”

According to Monika Scheiblauer, General Manager at Yak and Yeti, “The number of five star hotels and international hotel chains increasing in Nepal is a very good sign.” It signifies opportunity in Nepal.

Upaul Majumdar, General Manager of Soaltee Crowne Plaza, shares, “Political stability is a key factor for more hotel chains to penetrate the industry. After the end of years of political instability in Nepal and with the constitution in place, Nepal now has the opportunity to present its global face. It was just a matter of time before all these international chains and five star hotels started to come in. Plus, I guess for Nepal this is the right time and the right climate to make this investment,” he adds. 

Nepal is a growing economy and this surge was waiting to happen. Additionally, it is high time more effort is put towards attracting quality and business travellers with higher spending capacity. Scheiblauer explains, “I believe that a single tourist spends an average of $44 per day in Nepal, and it’s disappointing that it is dropping down even more. I think we should not only focus on the number of tourists but focus on how much can and will a tourist spend, and I think increasing number of five star hotels will be helpful in this aspect in the long run.”

Five star hotels are properties that offer their guests the highest levels of luxury through personalised services, a vast range of amenities, and comfortable accommodation. A little over a year ago as per a regulation amended by the Department of Tourism, the minimum number of rooms one to five star hotels are required to have has been reduced. As per the new provision, five star hotels can be opened outside the valley with 80 rooms. Earlier, the minimum was 100 rooms.

Tourism being a seasonal business in Nepal, a majority of the hotels are also focusing on the domestic market. Event venues and banquets in these hotels contribute a huge chunk to their revenue. All three interviewees agreed that during the off-season, they need to work creatively to attract guests. Scheiblauer claims, “I think there is a lot of potential for local businesses. In the hotel you not only sell rooms, you sell banquet space as well and there are dining options.” Majumdar adds, “It is during the off-season that you have to put your thinking cap on and start creating things. We try and provide some gourmet food experiences, conduct food festivals and host unlimited Saturday offers during the summer. You have to be innovative.” 

As the hospitality industry continues to expand so should the physical infrastructure to complement the industry. Infrastructure is undoubtedly an integral element of tourism supply chain. For example, proper management of physical infrastructure such as the hotel itself, transportation (roads), communication, toilets, water supply and electricity and service infrastructure such as banking facilities, transparent travel agencies and tour guides. 

Rana states, “Proper infrastructure such as accessible roads and air travel are the basis of hospitality. These are what we require. This is what will drive the tourism industry forward.”

There are various challenges plaguing the hospitality industry. Being one of the highest investment sectors, industry stakeholders are seeking incentives. According to Majumdar, “It probably costs the same amount to set up a five star hotel as it costs to set up a small industry, but that industry has huge production capacity and can generate huge amounts of money, but a hotel is dependent on multiple factors for guests to come in. We feel that this investment needs to get incentivised. There is no incentive or subsidy right now.”

Additionally, hotels severely suffer from supply chain making the cost of doing business more expensive. There is also the issue of lack of skilled manpower. Majumdar explains, “There is a lack of trained quality manpower. We have international hotels coming up, but we have not seen many international hotel schools established in Nepal. Plus, whatever number of hospitality students Nepal produces, most prefer to go abroad. They are not really trying to work in Nepal. As a hotelier I always find there’s a gap in talent availability.”

Rana, however, is hopeful that we can retain our workforce. “When Marriott and Aloft opened and Hilton is coming up, it would be unwise to think that we do not have opportunities here. I think they would definitely like to pay as per international regulations. Therefore, with these five star hotels coming in, it would definitely help pull up the standard of pay, job satisfaction, work environment, professionalism and at the same time increase guest satisfaction.”

Figures reported by Hotel Association of Nepal in late 2018 show that star-rated hotels including five star hotels had room occupancy of around 60%. With Visit Nepal Year 2020 fast approaching, such figures are bound to increase.

Rana says, “It depends on Visit 2020’s contribution and vision. For example, in Thailand, on average they come up with a new destination every decade. But in Nepal, we always promote the same thing with no change in marketing strategy.”

Scheiblauer feels that Nepal focuses too much on the mountains which is accessible only for a short period every year. She says, “Before I came to Nepal, I knew only Mount Everest and the Himalayas. It was only when I came here I realised what a beautiful culture Nepal has and the numerous temples to see and experience. I think we have to promote this much more because then you have a wide range of tourists which you can attract instead of only focusing on trekking and mountaineering.”