According to preliminary statistics produced by the Tourism Ministry in coordination with Hotel Association Nepal, luxury hotels achieved an average occupancy of 58.85 percent last year, down from 62.76 percent in the previous year.

Out of the 678,535 room nights produced last year, only 399,318 were occupied. There are 10 five-star properties in Nepal, eight of them in Kathmandu and two in Pokhara.

Hoteliers said that apart from new accommodations, an increase in the number of price-conscious Chinese travellers who prefer budget to mid-range hotels was also another reason why luxury properties suffered a drop in occupancy.  

They added that Nepal had not been effective with regard to promoting destinations and packages, and that the drop in occupancy was a sign of bad times to come.

In the hospitality sector, an occupancy rate of above 40 percent is considered “survival”, and a rate higher than 50 percent is termed “fair”. An occupancy rate of above 60 percent is “good” and 70 percent and higher is considered “excellent”.

An average hotel occupancy rate of 60 percent or below is considered very worrisome for the industry, said BK Shrestha, president of Hotel Association Nepal. “A few factors like problems at the casinos and the poor performance of the Nepal Tourism Board with regard to marketing and branding of Nepal have affected occupancy.”

Casinos used to launch summer packages that kept hotels filled during the off season, and with their closure over taxation and permit issues, hotels are having a hard time keeping their heads above water. The country received 797,759 tourists last year, and their average length of stay was 12.57 days.

Meanwhile, five-star properties recorded the highest occupancy rates of 72.44 percent and 67.90 percent in October and November respectively in 2013.

They had reported highs of 81.19 percent and 86.96 percent occupancy in October and November respectively in 2012. Their revenues were likewise exceptional. The period October-November is the peak tourist season in Nepal.  

Five-star hotels produced a combined 57,629 room nights in October, but only 41,748 of them were sold. These hotels produced 55,770 room nights in November, out of which 17,902 were unsold. “Even during the country’s peak tourist season, hotels are not fully occupied,” Shrestha said.

Likewise, February saw the strongest growth with occupancy averaging 66.16 percent last year compared to 57.07 percent in the same period previously.      

Hotels had a hard time keeping occupancy above 50 percent in January and July. The lowest occupancy rate of 42.29 percent was recorded in July when hotels produced a combined 57,629 room nights out of which they sold 24,371.

Hotelier Yogendra Sakya said that one of the causes of over-capacity and low occupancy was the huge supply of new accommodation ranging from guest houses to home stays. “It’s worrisome that many people are trying their luck in the accommodation business,” he said.

Some hoteliers said that Chinese tourists had been emerging as a substitute for European tourists since a few years resulting in lower occupancy in the hotels as Nepal’s luxury properties have traditionally been dependent on European travellers.   

Annual tourist arrivals from China stood at 46,000 in 2010 which doubled to 86,000 in 2013, according to ministry stats.