September 18, 2024
KATHMANDU – Hoteliers reported subdued demand for banquets, one of the key revenue-generating activities, in the last fiscal year as the windows for auspicious dates for many ceremonies and rituals were limited.
In previous years, events predominantly drove the demand for hotels, and guests attending these events tended to spend more on hotel food and beverages, booking a record-high income for luxury hotels.
When banquet demand dipped, the spring season bailed out most luxury hotels, helping them fill their room nights, eventually resulting in higher revenues and profits. After three better-than-expected spring months (March-May), the monsoon came with record rains and brought never-ending disasters.
In recent years, people have preferred to hold weddings, bratabandha (an initiation ritual for boys), and other religious ceremonies in luxury hotels rather than in ‘party palaces’.
“Last fiscal year, the auspicious dates for many ceremonies and rituals were limited, affecting hotel revenue,” said Binayak Shah, president of the Hotel Association Nepal, the apex body of the hotel industry in Nepal.
This year, too, in Mangsir, the critical wedding month, there is only one auspicious date for marriage: November 23.
“No banquets are available for that particular date.”
Most hotels listed on the Nepal Stock Exchange said their banquet business was subdued, but spring arrivals rescued them.
“Had it not been for the plane and bus crashes, there would have been tremendous growth in tourist arrivals based on the bookings hotels had received,” said Shah.
Before the monsoon, hoteliers were all excited.
According to the fourth-quarter company analysis report of Soaltee Hotel Limited published by the Nepal Stock Exchange, the hotel enjoyed the highest profit among all listed hotels. The hotel posted a net profit of Rs601.07 million last fiscal year, up 8.30 percent compared to the previous fiscal year.
According to the report, Soaltee’s total revenue stood at Rs2.49 billion in the review period.
Soaltee said that tourism activities in the fourth quarter (mid-April to mid-July) have grown notably, helping its business grow.
According to the Nepal Tourism Board, the country received 111,376 tourists who came to Nepal by air in April. Similarly, the country received 90,213 and 76,736 tourists in May and June, respectively. The total number of tourists in the three months was 342,924.
“The growth in April, the season for trekking and expeditions, was phenomenal that no one had expected,” said Shah. “Everyone was excited about the future.”
But trouble started: a record number of accidents and crashes took place, one after another, putting Nepal’s tourism in the doldrums. “The cancellations in the aftermath of the crashes and bus accidents, according to our estimates, were over 25 percent,” said Shah.
Taragaon Regency Hotel Limited, too, celebrated the spring arrivals.
The hotel posted a net profit of Rs518.26 million in the last fiscal year, up 28.17 compared to the same period in the previous fiscal year. Its income grew by 28.17 percent to Rs1.73 billion during the review period.
The company, which owns the luxury five-star hotel under the brand Hyatt Regency Kathmandu, said in its financial statement that the growth of foreign arrivals in spring was a key reason behind its increased occupancy.
The hotel said in its analysis that the country’s political situation has improved.
However, the hotel said that challenges remain as there has been fierce competition in the hospitality industry due to the rise in five-star properties. “We have kept our business afloat in the competitive market. As this competition may rise, we have moved to add infrastructure and utilise the unused lands.”
Taragaon said there is a shortage of skilled manpower in the country as people are leaving to go abroad. The hotel said that they have to face legal complexities in organising concerts, festivals, and entertainment shows, which are the preferences of today’s generation.
The hotel said that the new luxury tax imposed by the government may discourage domestic tourism as it has increased costs. The budget for the previous fiscal year levied a 2 percent ‘luxury tax’ on services provided by five-star or above hotels and resorts.
Oriental Hotels Limited, which operates the five-star Radisson Hotel in Kathmandu, however, has seen its net profit slowed in the review period to Rs122.30 million. The hotel’s net profit in the previous fiscal year was Rs160.92 million.
The hotel said its income marginally rose to Rs1.21 billion in the review period. The slowdown in its net profit resulted from low banquet sales in the last fiscal year.
“There were a limited number of auspicious dates for many occasions, including ceremonies and rituals, in the last fiscal year, which led to subdued demand for banquets,” the hotel said.
However, the hotel’s report said improved tourist arrivals during the spring helped boost occupancy rates.
The hotel said that rising food inflation and stagnant room rates contributed to the slowdown in profit.
The hotel said in its analysis that geopolitical risks such as war and military-related tensions in various parts of the world may impact tourist arrivals and demand. Hoteliers say that the Israel-Hamas conflict and Russia’s war on Ukraine could further dampen arrivals.
City Hotel Limited has posted a net loss of Rs204.73 million in the last fiscal year.
The net loss has come despite the hotel’s total earnings rising by a robust 14.25 percent to Rs582. 39 million in the last fiscal year.
City Hotel, which owns the Hyatt Place, came into operation on November 15, 2021.
The hotel said it has been planning to upgrade to Hyatt Centric from the first quarter of the next fiscal year. It has upgraded its banquet capacity to 600 people from 400 and expects a business boost.
Chandragiri Hills Limited has posted a net profit of Rs223.38 million, double its previous net profit. The company operates a cable car in Kathmandu.
The growth in the high-end hotel segment, according to hoteliers, has been good, but hotels having less than three stars have been struggling in the aftermath of the plane crashes and bus accidents that have killed many foreigners.