Tourism

TOURISM TOURISM

Tourist arrival has taken a massive plunge with the onset of the second wave and the lockdown that ensued. While the number of tourist arrivals in 2021 has improved compared to 2020, it is still down by 80%–98% from the pre-pandemic level. The first four months of 2021 saw a gradual pick up in the inflow of international tourists; however, the nationwide lockdown that was imposed in May 2021 due to the onset of the second wave brought down the arrival number by a striking 98%.

TOURISTS ARRIVALS

International tourist arrival continues to dwindle amid the

pandemic: COVID-19 has been a huge blow to the tourism industry with lockdown and safety measures substantially reducing the number of incoming tourists. As per the Nepal Tourism Board (NTB),221 around 61,049 international tourists arrived in Nepal over the last seven months. While the inflow of tourists seemed to gain momentum in March 2021 (14,977) and April 2021 (22,450), the number has plunged significantly from May 2021 (1,468) onwards. In June 2021, during the nationwide lockdown, the number of arrivals went down to 1,143, while July 2021 saw a slight pick-up with the number reaching 2,991. The decline in tourist arrival is largely due to the imminent threat of a third wave of COVID-19 in Nepal.

Figure 14. Tourist arrival from January to July in 2019, 2020 and 2021.

A majority of the international tourists arriving in Nepal are from India, who accounted for 1,105 (37%) tourist arrival in July 2021. Similarly, the United States accounted for 819, the United Kingdom for 185, and Turkey for 165. Twenty-five thousand Nepali citizens also returned from foreign countries in July 2021. On the other hand, around 25,034 people left the country during the same period, among which 21,877 were Nepali citizens.222

TOURISM INVESTMENTS

Relief for the tourism sector: The Sustainable Tourism for Livelihood and Recovery Project (STLRP), initiated by the joint effort of NTB and United Nations Development Programme (UNDP), aims to provide relief to individuals working in the country’s tourism industry. The project is expected to mobilize a sum of USD 2.05 million (NPR 244.2 million), with NTB contributing USD 1 million (NPR 199.1 million) and UNDP USD 1.05 million (NPR 125.06 million), in a span of two and a half years. Around 5,000 workers in the tourism sector are estimated to benefit from the project through the creation of short-term employment. Furthermore, NTB is planning to generate employment for more than 2000 people by partnering with local governments across the country.223

Foreign investment in tourism:

China was again the biggest foreign investor in Nepal for Fiscal Year (FY) 2020/21 and the largest share of its foreign direct investment (FDI)—USD 125 million (NPR 14.9 million)—went to the country’s tourism sector.224 According to the director general of the Department of Industry, Chinese investors have been showing a keen interest in Nepal’s hotel and restaurant industries. The total investment pledges in tourism amounted to USD 153.7 million (NPR 18.31 billion) for 101 different projects; the sector received the highest amount of investment.225

USD 67.2 million investment in a

five-star hotel: The first member hotel of the Hilton Hotel chain is currently under construction in Naxal, Kathmandu with an investment of USD 67.2 million (NPR 8 billion). Shankar Group is overseeing the construction and the five-star hotel is expected to be completed by the end of 2022.226

POLICIES AND REGULATIONS

Monetary policy prioritizes tourism

businesses: On August 13, Nepal Rastra Bank (NRB) publicized the monetary policy for FY 2021/222. Similar to the previous fiscal year, the policy has largely focused on reviving COVID-19 affected sectors by helping them gain easier access to financial resources. Stimulus packages and credit programs entail loan refinancing, rescheduling, and restructuring as well as liquidity maintenance through flexible monetary policy. One of the sectors that will be benefiting from the targeted credit programs is the tourism industry, which has undertaken a massive blow from the pandemic.227

PROGRAMS, EVENTS AND CAMPAIGNS

The way forward for the NTB:

During a virtual session organized by the NTB on June 28, 2021, regarding the board’s budget for FY 2021/22, the former governor and former tourism secretary urged the federal government to extend financial assistance in the form of grants to the NTB to help revive the tourism sector, which has been hit hard by the pandemic. Other experts also advised the board to align its annual budget with that of the federal, provincial, and local levels and to carry out programs and activities by making the best use of limited resources. According to an expert, by revisiting the past programs, the current budget and tourism promotion programs could be formulated in a coordinated manner with the three levels of the government. Budget catered to promote domestic tourism was also suggested as a rational move given that the prospect of immediate increase in international tourist arrival is still bleak.228

Likewise, tourism experts and entrepreneurs stressed the use of digital marketing for the recovery of the sector. They pointed out the need for Nepal to keep people in foreign lands constantly updated about the country’s tourism activities. They also emphasized the indispensability of vaccination in bringing health security and revitalizing tourism activities.229

HOSPITALITY INDUSTRY UPDATES

Hospitality sector in Province 2 experiences COVID impact: Amid the ongoing pandemic, over 25,000 people working within the hospitality industry have lost their employment in Province 2. Almost 5,000 hotels across the eight districts of the province have been compelled to cease their operation in compliance with the lockdown protocols. As a result, the industry has been incapable of paying wages and retaining their staffs. Even basic expenses such as rents, electricity bills, and water bills have been difficult to cover given the closure of businesses. One of the business owners cited that using the hotel premises as quarantine centers could not only help hotels sustain but also curtail the cost incurred by the

state in establishing new facilities from scratch.230 In Nepal, the hospitality industry as a whole had been thriving prior to the COVID-19 crisis, and it was employing around 0.24 million people. But with the COVID-19 surge, restriction on movements, and lack of tourist arrivals, the subsector is witnessing a deep plunge.

OUTLOOK

The re-emergence of new coronavirus variants has kept the tourism industry at a perpetual standstill. With the looming threat of the third wave, the prospect of speedy recovery for Nepal’s tourism sector has dampened. That said, the arrival of festival season in the next quarter could lead to a surge in domestic tourism during the long public holiday. Furthermore, September to November is generally the peak tourist season given the favorable climate during this period for trekking. Last year, airlines and hotels had offered special packages to promote domestic tourism around the same period. The same can be expected for the upcoming quarter, which could stimulate the tourism industry through increased domestic tourists.

However, even the revival of domestic tourism will largely depend on the country’s capacity to contain the third wave. Judging from the slow responsiveness of the government during the first two COVID-19 outbreaks, it is improbable that the spread of the Delta variant would be controlled in time. Hence, even the partial restoration of the tourism sector in the next quarter through domestic tourism, if it were to happen, will likely be temporary.

Meanwhile, substantial investment pledges in tourism combined with the stimulus packages announced in the recent monetary policy could help the sector cope with the third wave in the upcoming quarter.

59NEFPORT ISSUE 46 – SEPTEMBER 2021 4 MARKET

REVIEW