COVER STORY (Spotlight Weekly)

TOURISM
Between Hope And Despair

Tourist arrivals last month hit their lowest mark in a decade. Is this decline a reason to worry about the future of tourism or is it just a temporary phenomenon? Amid the gloom that has descended on the industry after some airlines scaled back their flights to Nepal, there also are some signs of hope. The nation needs to make vigorous attempts to transform this glimmer into gain. If Nepal succeeds in cashing in on the international media coverage it has received during these past few weeks and takes advantage of the Chinese government’s selection of Nepal as an outbound tourist destination, our tourism sector can hope to regain much of its luster. But does the country have the political will to match its entrepreneurial zeal?

By KESHAB POUDEL

Sanu Kancha Shrestha, an administrative assistant at a travel and tour office, is worried about his future. As someone who considered himself a privileged employee until now, Shrestha is uncertain about how to cope with the days ahead. "My manager has already warned me that I may lose my job if things do not improve in the coming season," Shrestha said.

Tourists : Walking safely down the street

There are many others in the tourism industry, including hoteliers and executives, who share Shrestha’s anxiety about the future of Nepal’s tourism industry. Although normalcy has returned to the country after the mysterious killings at royal palace, some Indian, Spanish and Italian groups have cancelled their reservations for June and July. Moreover, the decision of some airlines to reduce their flights has created a new sense of panic in the tourism sector. Rumors of political instability and the fact that tourist arrivals last month recorded their lowest level in a decade have sent shock waves among employees at hotels, airlines, trekking and travel workers.

At a time when many remain alarmed by the bleak scenario of the Nepalese tourism industry, there are some indicators of recovery. If Nepal takes timely steps to benefit from the publicity the country has received in the international media and finalizes the agreement to cater to the Chinese tourists, this bleak scenario could soon give way to hope.

If tourist arrivals from January to May are any indication, Nepal’s tourism industry has good prospects. "There is no reason to worry about the future as the decline in tourist arrivals in June was only a temporary phenomenon. Nepal’s tourism sector will get back on the right track as usual," says Prasiddha Bahadur Pandey, a leading tourism entrepreneur.

Chinese Tourists

Nepal may have good opportunity to boost its economy by tapping the Chinese tourist market. China’s burgeoning middle class, eager to see the world, is flooding Asia’s tourist spots. Relaxed regulations, rising income levels and increased leisure time have produced a boom in the Chinese travel industry. Millions of ordinary Chinese go abroad every year. The numbers are set to explode, creating a phenomenon that will likely change the face of tourism in Asia and beyond.

According to the World Tourism Organization, the number of Chinese holidaying overseas will soar from the current 10 million a year to 50 million by 2010 and to 100 million by 2020. This will make China the leading source of tourist world-wide, and will provide an important boost for many Asian countries like Nepal.

China started letting its people out slowly but today the door is opened pretty wide. Travel visas were first granted for Hong Kong and Macau in the mid-1980s, and they went mostly to the wealthy and well connected. Then came Thailand, Singapore, Malaysia, the Philippines and North Korea. Last year, Australia and New Zealand were added as destinations. Japan and Nepal were recently identified the latest outbound countries for Chinese.

According to tourist arrivals and expenditure figures, the average Chinese tourist in Thailand outspent his counterpart from Malaysia, South Korea, Taiwan and remarkably even Japan. The Chinese also spent more per head than visitors from any European country.

As Nepal is sandwiched between two Asian giants, India and China, its tourism industry has the opportunity of exploiting both markets. As Indian tourists are one of the mainstays of Nepal, the arrival of Chinese tourists will come as yet another advantage.

At a time when tourism infrastructure, including hotel beds, airlines and travel agencies, is growing, Nepal has to attract more foreign tourists. When the northern neighbor is willing to send its tourists to Nepal, our policymakers need to take immediate matching steps.

Nepal has many attractions for Chinese tourists, including Buddhist temples and vast scenic wonders. The Ministry of Culture, Tourism and Civil Aviation is yet to finalize documents to pave the way for the arrival of Chinese tourists.

"We will finalize the proposal as soon as the ministry prepares the draft," a senior official at the ministry says. "We need to do more home work before signing the final agreement with the Chinese government. It will take another couple of years before Chinese tourists start flowing in."

As the ministry does not have a full-time minister, few expect it would be able to prepare a final proposal soon. This has irked those in the industry. "I don’t understand the reason behind the delay in signing the final agreement with China," says an exasperated tourism entrepreneur on condition of anonymity. "The Chinese want to give something to us but we are snubbing their offers. As a recipient country, it is our duty to take the initiative."

Tourist Arrivals

According to data analyzed by Nepal Tourism Board, the first five months of this year were satisfactory despite the unfavorable situation, including strikes, bandhs and violent activities. In January 2001, 25,905 tourists visited Nepal, 32.65 percent more than in the previous year. February and March also witnessed 10.79 and 10.25 percent increase in tourist arrivals. In April, arrivals declined by 5.52 percent over the previous year. May was also satisfactory, as the number of tourists increased by 5.75 percent.

The arrival of Indian tourists also increased over four of the five months recorded. In January, February and March, Indian tourist arrivals increased by 25.84 percent, 18.22 percent and 0.84 percent respectively.

In April, the numbers declined by 4.70 percent in comparison to the year 2000. May saw a 12.62 percent increase in the arrival of Indian tourists. On average, tourist arrivals over the five months saw an increase of 9.14 percent. The total number of tourists was 156,411, including 35,040 Indians. In 2000, 144,099 arrived, of which 32,105 were from India.

Arrivals suddenly declined by more than 50 percent in June following the killings in the royal palace. "At a time when the country suffered from such a tragedy and hostile publicity by the international media, how could have one expected better numbers that month?" asks Birendra Bahadur Basnet, managing director of Buddha Air. "Moreover, if the country’s mainstream political parties work to restore peace and stability, things can pick up."

In the first two weeks of June, Tribhuvan International Airport wore a virtually deserted look. By the third week, there was a gradual recovery. As the behavior of leaders of political parties, hotel union workers and other groups are unpredictable, no one is certain about the future. Although Prime Minister Girija Prasad Koirala has already called for a moratorium against any kind of bandh for 10 years in his 14-point national consensus agenda, no party has made that pledge.

Reduction of Flights

The decision by some airlines to reduce the frequency of their flights to Nepal indicates that Nepal’s market is still unstable. Indian Airlines, Singapore Airlines and a few other airlines have already scaled back their flights to Kathmandu. Some airlines have started flying smaller aircraft.

Nepal’s image as a safe tourist destination is also gradually eroding because of the escalation of Maoist violence in various parts of the country. Although the Maoists have not attacked tourists, they are most active in some of the popular tourist destinations. The security concerns of tourists is understandable.

For their part, the Maoist leadership in a recent statement indicated that they would not target foreign tourists. If other mainstream political parties make a commitment that they would not organize destructive acts like bandhs, the situation will definitely improve. "In a situation when everyone is expressing their concern for tourism, there is nothing to worry for the coming season," says Pandey.

As the Chinese government has already declared Nepal as an outbound destination, the country’s tourism industry may benefit from it. Because of inefficiency and negligence on the part of Ministry of Culture, Tourism and Civil Aviation, Nepal risks missing a big opportunity.

When foreign airlines are reducing their flights, Royal Nepal Airlines, the country’s only flag carrier is mired in controversy. Because of intervention from different sectors, the airline has not been able to step in the space made by foreign airlines.

"There is a need to strengthen the national flag carrier by making it more reliable and efficient," says Pandey. "How can one expect a tourist boom without having a reliable and efficient national airline?"

As RNAC is mired in controversy over the leasing aircraft one after another, Nepal’s tourism industry is forced to rely on foreign airlines. Until a few years back, RNAC carried more than 40 percent of tourists to Nepal, a proportion that has fallen by many points. Apart from regional airlines flying in tourists, a big chunk of what tourists spend goes to the neighboring country.

Foreign Currency Earnings

According to the economic survey of 2000, Nepal earned Rs. 16,160,780,000 equivalent to foreign currency in fiscal year 1998\1999. However, the first six months of 1999\2000 saw a slump. The first six months of 2000\2001 was satisfactory. There are more than 100 star hotels, 700 non-star hotels. There are more than 33,000 beds, which are increasing at a rate of 8.6 percent each year. Nepal has sufficient infrastructure to cash in on tourists in two main cities, Kathmandu and Pokhara.

Current occupancy levels at the hotels are drastically low, at an average of 20 percent. "Nepal will see more tourists in the months of July and August as the government and tourism entrepreneurs have already taken initiatives to attract Indian tourists," an industry analyst says.

The mountaineering sector employs more than 10,000 people. According to the GEFONT, a trade union organization, the number of people working in the sector is estimated to be 100,000. If indirect employment is included, that figure crosses 400,000. As the main source of foreign currency and the top employment generating industry, any disturbance in the tourism sector will rock Nepal’s economy. At a time when exports are shrinking, the decline in the tourism sector will hamper the total foreign currency reserves.

Tourism has seen one of its worst phases following the hijack of Indian Airlines flight from Kathmandu in December 1999.

Indian Tourists

Indian tourists occupy more than one third of total tourist arrivals. Following the hijacking, the governments of Nepal and India imposed some restrictions to the Indian tourists. The requirement for Indian tourists to carry passport or an official identity card has disrupted the flow of visitors from that country. The bandhs, political instability and negative publicity about Nepal also have kept Indian tourists away. The widespread publicity generated by anti-Indian activities triggered by slanderous remarks attributed to Indian film star Hrithik Roshan — which he has consistently denied making — also contributed to a decline in Indian tourists.

Despite hostile media publicity against Nepal, Indians continue to visit the country, which shows the positive outlook common Indian citizens have towards Nepal. "I am hopeful that the situation will improve in the days ahead," says Narendra Bajracharya, president of Hotel Association of Nepal.

Nepal Tourism Board has launched a vigorous marketing drive in India. As a result, Indian tourist arrivals slightly increased in the first quarter of 2001."If political parties do not call any violent activities like Nepal bandhs, we may have more Indian tourists in July and August," an industry watcher says.

For small-time travel agents, business is getting tough and it is becoming difficult to survive. Plenty of hoteliers and tourist outfits are cashing in on the sheer volume of Indian tourists coming in.

"Normalcy has already returned and tourist arrivals will gradually improve," said Tek Bahadur Dangi, Director of Tourism Marketing and Promotion Department at Nepal Tourism Board. "The board is planning to go on a campaign to woo more tourists."

Losing venture

The beauty of the tourism industry lies in the spin-off it generates for other sectors, such as vegetable growers selling products to establishments catering to tourists. But for now, the related income is largely being generated in Nepal’s neighbors. Local farmers simply cannot meet the demand, so tomatoes and other foodstuffs are brought in daily from India and Thailand. Fish and lamb are also usually imported.

The hotel industry officials claim they use local products as much as they can. However, hotels often have to serve Basmati rice from India because the local variety is not good enough. About 95 percent of the foodstuffs used by most non-star hotels are locally grown. The tourism industry has raised the incomes of many Nepalese such as hotel employees, tour guides, taxi drivers, restaurant workers, souvenir vendors and book sellers, among others.

Nepalese tourism industry is standing at a crossroads where new opportunities beckon and old habits refuse to go away. It is up to political parties, trade unions and other related organizations to help create the stability the tourism sector needs to thrive on.

'Indian Airlines' Decision Doesn't Seem To Be Based On Market Trends'

— TEK CHANDRA POKHAREL

TEK CHANDRA POKHAREL is one of the renowned tourism entrepreneurs of the country. A former president of Nepal Association of Travel Agents, Pokharel spoke to SPOTLIGHT on various issues related to the present situation in the tourism sector. Excerpts:

How do you see the ongoing trend in the tourism sector?

Well, it is not as bad as it is being projected. Definitely the number of tourists has declined in the month of June, but a recovery is under way. As our base is very small, any kind of disturbance can easily affect us. When you have such an unimaginable event occurring in the country, how can you expect better results in the tourism sector. We were in a period of great shock and horror.

You mean the decline in tourist arrivals is not that serious?

If you see it in terms of percentage, the decline is sharp. But in terms of actual number of visitors, it has not been so serious. A few thousand tourists may have stayed away during that period.

Then why are foreign airlines reducing their flights?

Only Indian Airlines has officially reduced the number of its flights. Qatar Airways and other airlines have not reduced any flights. The decision of Indian Airlines does not seem to be based on market trends, especially since it is a government-owned airlines.

What does Nepal need to do now?

When Indian Airlines has cut down its flight, Royal Nepal Airlines has to cash in. Unfortunately, we are not able to capture the market left by Indian Airlines. We have to make efforts to seize the opportunity given by Indian Airlines.

Can the national flag carrier do this?

The national flag carrier has got a good opportunity to grab the market. Last time when Indian Airlines suspended all of its flights for six months, Royal Nepal Airlines could not capture the market. We are losing the opportunity because we have been unable to do political maneuvering with India. If we have management skills and economic vision, we would have changed our fate. Instead of going with requests to foreign airlines officials, we would have our own efficient airlines. Our national flag carrier has the experience and manpower to grab the opportunity. RNAC needs to be strengthened through non-political and efficient management.

'Chinese Tourists Will Transform Nepal's Tourism Sector'

— BIRENDRA BAHADUR BASNET

BIRENDRA BAHADUR BASNET, managing director of Buddha Air, is a energetic aviation entrepreneur. Basnet to spoke to SPOTLIGHT on various issues related to the tourism sector. Excerpts:

How do you see the ongoing trend in Nepal's tourism sector?

After the massacre in the royal palace, the tourism sector has seen unexpected damage. When the country was in collective trauma, how could you expect the tourism sector to be unaffected. International media coverage of the tragic event has introduced Nepal globally. If we cash in on this coverage, we can reap benefits.

Will the tourism sector be affected for a long time?

I don't think so. It was just a short-term phenomenon. Even the violent demonstrations were controlled within a few days. Normalcy has already been restored in society. Because of all kinds of situation, tourist arrivals plummeted in the month of June. I don't think the tourism industry will suffer a long-term effect.

What is your general impression about the performance of the tourism sector?

The data of Nepal Tourism Board speak for themselves. The number of tourists were higher in the first five months of the year. Despite the Maoist violence and frequent political disruptions, the sector gathered pace. As Maoists have never targeted the tourists, no one feels any kind of threat. After the royal palace killing, the Maoist movement also received worldwide coverage. As the Maoists are a political force, they must be treated politically.

Have political parties realized the importance of tourism to the national economy?

Unfortunately, policy makers have not included us in the tourism sector. Airlines and hotels are real sources of foreign currency. We are selling products. When travel agencies are put under tourism, why are airlines denied such rights? The government has The government may suffer short-term loss, but it will have long-term benefits. I have received unconfirmed reports that some airlines even do not have money to pay monthly salary to employees. How did such a situation appear. Even dollar passengers increased last year when the overall tourist arrivals was unsatisfactory.

What is your impression on competition?

Look, we are still flying passengers for 1992 prices. I have repeatedly requested government officials to reevaluate the air fare, but some airlines operators have opposed my idea. Because of seat saturation, prices is coming down. But the prices of other facilities at the airport, insurance and fuel have gone up by 400 percent since 1992. The airlines sector must have the facilities acquired by tourism industry.

How do you see the decision of Indian Airlines to reduce the number of its flights to Nepal?

It is natural for them to reduce their flights at a time when there is the lowest flow of tourists. The months of June, July and August are regarded as off season. I think the decision will be temporary. We hope the flights will increase during the season.

What impact will the national airlines face from a decline in tourist arrivals?

If there are no tourists, our airlines will have to close down. Our fare to Nepalis is cross subsidized by the fare foreigners pay. If anything goes wrong in the tourism sector, many other industries will also close down. Foreign goods shops, book stores and handicrafts outlets will be among the first to close down.

At a time when the Nepalese government is worrying about the decline in the number of foreign tourists, why is it not making any effort to take advantage of the opportunity given by Chinese tourists?

China has already cleared Nepal as an outbound tourist destination for its nationals. This is very important for a country like Nepal in a situation when overall tourist arrivals have declined. Our government is said to be working to finalize the document to allow Chinese tourists into Nepal. If we successfully take advantage of this opportunity, Nepal's tourism would be able to take a new direction. The arrival of Chinese tourists will transform the present situation. Nepal is going to be the cheapest destination for Chinese tourist.

Do you see any attractions for Chinese tourists in Nepal?

Yes, there are many attractions for them. Nepal is the birthplace of Lord Buddha and many Chinese would like to visit Lumbini. The Chinese know a lot of things about Nepal, including the Pagoda-style temples and thankas. The Chinese will also have experience of South Asian flavor when they visit Nepal.

Have you received any cancellations for the coming session?

Of course, the month of June was bad but I think the coming season is going to be good season for us. Actually, the month of June was Indian season but they were scared by the negative publicity made by Indian media. This is basically Indian season.

'Nepal Should Cash In On International Publicity'

— PRASIDDHA B. PANDEY

PRASIDDHA B. PANDEY, managing director of Shangrila Hotel, is one of Nepal's young hotel entrepreneurs. Pandey spoke to SPOTLIGHT on various issue related to tourism. Excerpts:

What does Nepal need to do to encourage tourists?

If the government wants a positive impact in the tourism sector, it must announce some drastic steps. First of all, the government must announce the visa-free program for tourists to show that it is really sincere about encouraging tourists. Secondly, the government must accept the open sky policy in international sector. The airlines should be given free access to fly to Nepal from those destination where Royal Nepal Airlines does not have any flights. Thirdly, the management of the RNAC should be handed over to the other airlines or parties on a lease basis.

Are you satisfied with the existing tourism policy?

There is nothing to be satisfied as there are many lapses in the policy. We have made many efforts in the development of agriculture sector and hydropower but we have been unable to benefit. Although tourism has played an important role in the national economy, it is yet to receive any priority like in agriculture and other sectors. If we focus our efforts on the tourism sector, we can attract 1 million to 2 million tourists a year and can earn up to $2 billion a year. There is high profit in the tourism sector. The rate of return is high in tourism.

Why has not tourism gone ahead?

We have to see the history of the past four decades before evaluating the overall performance of the tourism sector. Had the government spent huge amount of money like in other sectors, the position of the tourism sector would have been far better than now. If the government invests more money in the sector, the tourism industry will bring much needed change. If we see the history of past four decades, we cannot find a situation when the tourism industry was on the verge of total collapse. Of course, it faced many ups and downs in its history but it does not have history of closing down. In the industrial sector, many industries have closed down but tourism industry is surviving. There are 500-700 travel and trekking agencies, 600-700 hundreds hotels, two dozens of airlines.

How do you see the role of the private sector?

The private sector has already completed its task by investing huge amount of money in the tourism sector. The private sector has invested in the hotel industry, resort, airlines, travel agencies and trekking agencies and other. Private sectors have proved that they are much more ahead than the government. The government has to back the private sector.

Do you mean more focus to the tourism sector?

Yes. Tourism needs support and focus from all sectors. We are now in a position to employee more than 1 million people. I think tourism is only tool for the development. If the government has taken small steps, the situation will change.

What do you mean by small steps?

First of all, the government has to hand over the management of Royal Nepal Airlines to some private parties like in the case of national banks. There are best of best international management groups which can operate the airlines successfully. If we are able to bring 1 million tourists, every citizen will reap benefits from it. The government has to take steps to push the tourism sector.

Do you see any advantage for tourism?

Yes, we have greater opportunity to develop Nepal as a prosperous country. We are sandwiched by two biggest country of the world. If we are able to lure the investment from the both country, Nepal will have a different future. We need to develop offshore banking system. We have to capitalize our position. We need to have to find a place for survival.

Do you see any possibility of the tourism sector recovering soon?

In this time, Nepal needs to be vocal. We have to get benefits from the international market. After the royal palace killings, Nepal has many sympathizers in the world. If we take the initiative, our country will definitely benefit.