Print Edition - 2014-11-12 | MONEY
Have cash, will dash
- Investments in hotels soar as the country’s tourism industry rebounds with a vengeance
Nov 11, 2014-
Nepal will be injecting more than Rs 150 billion into the development of tourism and airport infrastructure in the next five years reaffirming the belief that tourism will remain one of the most promising sectors of the economy in the near future.
The surge in investment activity is indicative of a positive market sentiment and growth outlook. Industry insiders say that apart from a positive international tourist arrivals outlook, the burgeoning middle class and higher disposable incomes have also aided the growth of domestic travel.
Lack of aviation infrastructure continues to hurt Nepal’s tourist arrivals, which could hit the 3-million mark if the country gets a new international airport and cuts down its overdependence on Kathmandu’s Tribhuvan International Airport (TIA). Currently, Nepal receives 800,000 tourists, and their contribution to the country’s GDP stands at a meagre 2 percent.
Realizing that investments in the development of tourism infrastructure ensure an efficient gateway for visitors, the government is currently undertaking two regional international airport projects in Bhairahawa and Pokhara respectively with a combined investment of Rs 31 billion.
Heartened by the launch of the two regional international airport projects, the government has moved to revive the stalled second international airport (SIA) project in Nijgadh, Bara district. The SIA scheme envisions building a modern airport in the southern plains 175 km from Kathmandu as an alternative to congestion and winter fog at TIA, the country’s sole aerial gateway.
As per the study, the proposed airport will be able to handle 15 million passengers annually and even accommodate the super jumbo Airbus 380 after the first phase of construction.
The estimated investment for the first phase, according to the feasibility study, would be $600 million. In the second phase, the airport would be expanded to accommodate 30 million passengers annually. By the end of the third phase of construction, the airport would have a parallel runway enabling it to handle 60 million passengers annually.
Nepal relies heavily on air services to bring in international visitors, with 75 percent of the tourists arriving by air. An additional international airport will also provide a boost to domestic air traffic.
“Obviously, there has been encouraging investments in airport infrastructure,” said Mohan Krishna Sapkota, spokesperson at the Ministry of Culture, Tourism and Civil Aviation. “Once these projects are online, they will address the major bottlenecks that Nepal’s tourism has been facing for a long time.”
The proposed Gautam Buddha regional international airport in Bhairahawa, the birthplace of Gautam Buddha, will come into operation after three years, and it will be a major hub for Buddhist pilgrims, he said. Likewise, the new international airport in Pokhara will come into operation after four years. “The SIA project has also gained momentum.”
Besides launching the new projects, the government has started upgradation of TIA. Around Rs 10 billion is being spent to improve TIA, and there are plans to rehabilitate its 47-year-old runway. The occurrence of cracks in it has frequently disrupted flights.
Air transportation is important for a landlocked country like Nepal as it serves not only to spur trade and growth in the tourism industry but also to improve people’s mobility. And a strong national flag carrier indeed plays a crucial role in the overall economic development.
After a bumpy flight through much of the past two decades, Nepal Airlines Corporation (NAC) has set a course towards revival.
The venerable carrier has invested more than Rs 14 billion to make an impressive rebound. By mid-2015, NAC will possess eight new aircraft including two Airbus 320s. The ailing carrier currently has two ageing Boeing 757s to serve its international route and three small-sized aircraft to serve domestic routes. Two of the three aircraft were recently gifted by China.
“On an average, the ministry has been pumping Rs 8 billion into airport and other tourism infrastructure development. Out of the total investment, Rs 1.5 billion has been set aside for trekking and other infrastructure development,” said Sapkota.
The ministry is also drafting a Tourism Strategy Plan that aims to spend 60 percent of the total budget allocated to the ministry on infrastructure and 25 percent on marketing and branding of Nepal’s tourism, he said.
The private sector is also pouring money into the aviation sector. The aviation industry has seen two start-up carriers this year—Himalayan Airlines and Sourya Airlines. Sourya Airlines is scheduled to start domestic operations with Bombardier CRJ 200 jets, while Himalayan Airlines, a joint venture between Tibet Airlines of China and Nepali investors, plans to start commercial operation soon.
Likewise, Goma Air has put its new 19-seater aircraft into service. The plane will serve short take-off and landing airfields, including tourist sectors like Lukla and Jomsom, with its Czech-made LET410 UVP- E20 aircraft. It plans to buy another aircraft in five months. The helicopter sector has also been growing at a fast rate on the back of tourism and development activities.
Anil Manandhar, general manager at Shree Airlines, said they had bought three helicopter and plan to add two more by 2015.
“We have invested Rs 1.20 billion in the new choppers,” Manandhar said, adding that their confidence reflects the growth of the tourism industry. “As there has been growing demand for rescue and sightseeing, we have come up aggressively in the market,” he said. Shree is the largest rotor-wing operator in the country with nine choppers. Simrik Airlines has also added two helicopters, while Manang Air plans to add one chopper to its current fleet of two choppers.
Among the various sectors in the tourism industry, an exciting trend is happening in the hotel business. More that Rs 15 billion has been spent on the development of big and small hotels in the past few years, and another Rs 30 billion is projected to be spent by 2018. According to the Department of Tourism, 24 new star and tourist standard hotels are being built across the country. Kathmandu will have three more international hotel chains giving more choices to high-end international travellers visiting Nepal.
According to officials, two five-star hotels, the 218-room Sheraton Kathmandu Hotel on Kantipath and the 221-room five-star deluxe hotel in Nagpokhari, Naxal under the banner of Marriott International, are expected to come into operation by 2018. A 10-storey four-star hotel with 108 rooms in Thamel, the Fairfield to be managed by Marriott Kathmandu, is also scheduled to be completed and come online by the end of 2015.
Chhaya Centre, a business conglomerate, has started constructing a five-star hotel-cum-shopping complex in the tourist hub of Thamel with an investment of Rs 3 billion.
Some of the country’s well-known conglomerates such as the Chaudhary Group, Vaidya Organization, Shanker Group, Golyan Group, TM Dugar Group and Laxmi Group are investing billions in new hotels. “A more conducive environment has attracted massive investments in the hotel industry,” said Prabesh Aryal, executive director of Hotel Association Nepal.
“Apart from Kathmandu, investors have started developing hotels in most of the cities across the country.” Pokhara, Chitwan, Nepalgunj, Dhangadhi, Jhapa, Itahari, among others have seen a significant development of big and small hotels.
According to Aryal, the surge in investments is not only due to positive arrival trends but also due to Nepal’s burgeoning middle class and higher disposable incomes. For example, tourist hotspots like Pokhara and Chitwan are largely occupied by domestic visitors these days.
“In fact, greater wanderlust among Nepalis has led to higher demand for hotel rooms across the country.” But there needs to be balanced growth in terms of international tourist arrivals, he said. “It will become a big problem if there is surplus accommodation against travel demand.” As riding in cable cars has become an extremely popular activity in Nepal, the government and private investors have poured big money into the sector.
The Tourism Ministry has conducted pre-investment and pre-feasibility studies for cable car projects in different places in Nepal in a bid to attract the private sector and FDI.
Thankot-Chandragiri and Budhanilkantha-Shivapuri cable car lines in Kathmandu, Phulchoki-Godavari in Lalitpur, Phewa Tal-Sarangkot in Pokhara, Dhunche-Gosainkunda in Rasuwa, Kalinchok Bagwati-Suspa Bazaar in Dolakha, Rani-pauwa-Kagbeni in Mustang, Pathibhara in Taplejung and Swargadwari in Pyuthan have been proposed to be built under the public private partnership model.
Second International Airport Rs 60 billion
Regional International Airport, Pokhara Rs 21 billion
Regional International Airport, Bhairahawa Rs 10 billion
Tribhuvan International Airport Rs 10 billion
Nepal Airlines Rs 14 billion
Domestic Airlines Rs 4 billion
Hospitality Industry Rs 30 billion
Cable Car Rs 8 billion
Trekking Infrastructure Rs 1.5 billion
Published: 12-11-2014 10:11