Hospitality sector thriving with opportunities abound
the HRM
Nepal’s hospitality sector has been drawing substantial investment and has rapidly emerged as one of the country’s most dynamic and fast-growing industries. Nepal’s abundant natural beauty, cultural heritage, and diverse landscapes, combined with its rich historical and spiritual significance, have made the country a popular global tourism destination, spurring the growth of a world-class hospitality industry. This growth aligns closely with the Nepali government’s strategic focus on tourism, with numerous policies and initiatives aimed at elevating Nepal’s standing as a preferred travel destination. As a result, Nepal’s hospitality sector has attracted significant interest from international investors, and many globally recognised hotel brands, such as Sheraton, Marriott, Moxy, Hilton, ITC, Radisson, IHG Hotels & Resorts, Taj, Lemon Tree, Hyatt and Fairfield by Marriott, have now established a presence in Nepal.
The government of Nepal has prioritised the tourism sector, seeing it as a pillar of economic growth, job creation, and cultural exchange. In recent years, it has put substantial effort into attracting more foreign tourists, building partnerships to bolster tourism infrastructure, and creating a favourable climate for domestic tourism to flourish. This proactive approach has been instrumental in enhancing Nepal’s international image and creating a sustainable tourism ecosystem that benefits both local communities and the national economy. The presence of esteemed international hotel chains has contributed immensely to building Nepal’s image as a premium tourist destination, which, in turn, has reinforced the government’s tourism goals and attracted further investment.
While the Covid-19 pandemic temporarily halted the realisation of these ambitions, the Ministry of Culture, Tourism and Civil Aviation (MoCTCA) has since renewed its focus on long-term growth. It has set an ambitious vision to welcome at least two million tourists annually and create one million jobs within the sector. This vision underscores the government’s commitment to making tourism a cornerstone of Nepal’s economic development and demonstrates the vital role the hospitality industry will play in supporting this vision.
In response to the anticipated influx of tourists, both the public and private sectors have made significant investments to expand the country’s hospitality facilities. The recent construction of two additional international airports – one in Pokhara, Nepal’s tourism capital, and another in Bhairahawa near Lumbini, the birthplace of Lord Buddha, a revered symbol of peace and compassion – is expected to be transformative. These airports are strategically located to improve access to major tourist attractions and are seen as essential infrastructure projects that will further integrate Nepal into the global travel network. Additionally, the private sector has been investing heavily in hospitality services, from luxury hotels and eco-friendly resorts to adventure tourism facilities, aimed at enhancing the quality and diversity of tourists’ experiences and encouraging longer stays.
Historically, the popular ‘Golden Triangle’ of Nepal – Kathmandu, Pokhara and Chitwan – has seen the most concentrated development of hotels and resorts. However, with the opening of Gautam Buddha International Airport, new hotels and resorts have been established in response to the anticipated surge in visitor numbers. These new facilities are no longer confined to traditional tourist destinations like Pokhara, Kathmandu, Lumbini and Chitwan but are increasingly spread across the entire country. This broad geographic distribution of new hospitality facilities supports equitable regional development and creates opportunities for local communities, ensuring that the economic benefits of tourism are shared widely across Nepal.
The Department of Tourism reports that Nepal now boasts a diverse range of accommodations catering to various tourist needs. Presently, there are four luxury and deluxe hotels, 26 five-star, 37 four-star, 40 three-star, 52 two-star, and 53 one-star hotels in operation. The continuous development of the hospitality sector is evidenced by 265 hotels and resorts currently in the process of obtaining Initial Environmental Examination (IEE) approval for expansion or new construction, which is a testament to the sector’s growth potential and the demand for high-quality accommodations across the country.
Additionally, the Department of Tourism highlights the operation of two luxury resorts, Gokarna Forest Resort and Chandragiri Hills Resort in Kathmandu, alongside three deluxe resorts: Aagantuk Resort in Banepa, Barpipal Resort in Pokhara, and Lumbini Green Resort in Chandrauta, Kapilvastu. Furthermore, there are 107 other resorts currently operating across the country, offering visitors a range of options from eco-friendly retreats and wellness spas to adventure-focused lodges. This extensive network of resorts and hotels not only elevates the experience for international travellers but also bolsters Nepal’s appeal as a multifaceted tourist destination, catering to different tastes, preferences and budgets.
With these developments, Nepal’s hospitality sector is positioned to become a critical driver of economic growth, cultural exchange and regional development. The integration of world-class amenities, the expansion of infrastructure, and the commitment to sustainable and inclusive tourism signify a bright future for Nepal as a leading travel destination.
Hospitality Sector: From History to Recent Times
Nepal’s journey as a welcoming host for travellers has deep roots, dating back to the 1960s, when it gained popularity as a haven for hippies. This influx of curious, free-spirited visitors marked the beginning of tourism in Nepal, and soon, a dedicated hospitality sector began to emerge. Bahadur Bhawan, located in Kantipath and now housing the Election Commission, is widely regarded as Nepal’s first hotel, serving as a foundational establishment in the country’s nascent hospitality industry. Back then, infrastructure was modest; as hoteliers recount, until the coronation of King Birendra in 1975, Kathmandu hosted only a handful of hotels. During the coronation, there was a scramble for accommodations as the available hotels were insufficient to cater to the many royal guests attending from around the world. This event underscored the need for development within the hospitality sector and highlighted Nepal’s potential as a desirable destination.
Over the decades, Nepal’s tourism industry has grown at a steady pace, but sustaining a yearly influx of one million tourists has remained a challenging target. Despite these challenges, Nepal’s hospitality sector has proven remarkably resilient, enduring even during times of political instability and insurgency. The sector weathered many storms, bolstered by a strong foundation and the commitment of those invested in tourism. Following the peace accord of 2006, there was renewed optimism in Nepal’s hospitality industry, with stakeholders anticipating a surge in tourists and significant advancements in hotel and hospitality services. This optimism was tempered by the reality that it would take another 13 years to reach the desired milestone. Finally, in 2019, Nepal welcomed 1.2 million tourists, a record-breaking achievement that reflected the dedication and hard work of the entire industry. However, just as Nepal’s tourism was reaching new heights, the Covid-19 pandemic disrupted this upward trajectory, as global travel restrictions and lockdowns temporarily halted the inflow of international travellers.
During these challenging periods, domestic travellers played a critical role in sustaining Nepal’s hospitality industry. When international tourism was severely limited during the insurgency and later due to the Covid-19 pandemic, domestic tourism provided essential support. This local support not only helped the industry survive but also revealed the potential of domestic tourism as a stable contributor to the sector. With this base, Nepal’s tourism industry has been able to embark on a gradual path to recovery, though it remains one of the hardest-hit sectors following the pandemic. The pandemic underscored the need for adaptability and resilience, highlighting both the vulnerabilities and opportunities within Nepal’s tourism and hospitality sectors.
Despite Nepal’s strategic location, surrounded by two of the world’s largest populations in India and China, the country has so far struggled to tap into the large numbers of outbound travellers from these neighbouring nations. According to Shashi Kanta Agrawal, Chairman of Marriott Hotels in Kathmandu, the current state of the industry has been disappointing in this regard. Agrawal pointed out that in order for Nepal’s hospitality sector to recover fully and thrive, occupancy rates of at least 75% are necessary. However, in 2024, occupancy has not exceeded 35%, even during peak tourism seasons, reflecting a gap between potential and reality.
In addition to these challenges, Agrawal voiced concerns over the government’s system for maintaining tourist data, an essential factor in understanding and planning for the sector’s growth. He noted, “While other destinations have experienced encouraging growth in tourist arrivals, Nepal has yet to see a comparable increase. One reason is our data maintenance system, which is flawed. Non-Resident Nepalis (NRNs) holding foreign passports are counted as international tourists, but their economic impact is relatively low, as most NRNs stay with family when they return.” This misclassification of tourists affects Nepal’s understanding of actual international tourism flows and impacts the assessment of the industry’s economic potential.
A review of tourist arrivals over the past decade reveals a gradual return to pre-pandemic levels in recent years. In 2023, Nepal welcomed 1.01 million tourists, and by October 2024, arrivals reached 941,000, according to data from Nepal Tourism Board. This data suggests that Nepal’s tourism industry is on an upward trajectory, gradually regaining the momentum it had before the pandemic. Mani Raj Lamichhane, Director of Nepal Tourism Board, remarked on the positive trend, noting that tourist arrivals have been steadily increasing since 2022, following an all-time low in 2021, when arrivals plummeted to a mere 150,000.
As Nepal’s tourism and hospitality sectors continue their recovery, there is hope that with strategic initiatives, stronger partnerships, and improved infrastructure, Nepal will be able to tap into its immense tourism potential. The gradual reopening and rebuilding efforts, along with the support of both international and domestic travellers, are paving the way for a more resilient future for Nepal’s hospitality industry.
Contribution to the Economy
The contribution of Nepal’s hospitality sector to the economy is often underreported. In 2023/24, the National Statistics Office (NSO) estimated that the accommodation and food services activities, which include hotels, resorts, and restaurants, contributed 2.14% to the economy, amounting to Rs. 122.36 billion. Among all sectors categorised for calculating the country’s Gross Domestic Product (GDP), hospitality, classified under accommodation and food services activities, has recorded the highest growth at 21.8%. The broader tourism sector, encompassing various facets beyond hospitality, is estimated to contribute around 6.7% to the national economy.
Tourism and hospitality play a crucial role in earning foreign currency, creating jobs, and establishing a value chain for locally produced agricultural goods, handicrafts, and industrial products.
Boundless Opportunities
The growing number of outbound travellers from neighbouring countries, primarily India and China, presents boundless opportunities for Nepal, if leveraged with the right strategies and tools. Currently, India and China are Nepal’s largest sources of foreign tourists. As per arrival data from the first 10 months of 2024, Indian tourists make up 29% of total arrivals, followed by Chinese tourists at nearly 9%. However, Nepal has yet to fully capitalise on the potential of these high-yield neighbouring markets. China’s outbound travel is projected to reach 128 million in 2024, with estimates suggesting it could reach 200 million by 2028. Similarly, the number of outbound Indian travellers reached 28.2 million in 2023, surpassing pre-pandemic figures. According to Badri Prasad Pandey, Minister for Culture, Tourism and Civil Aviation, Nepal should aim to attract at least five million tourists annually by 2030, aligning with the increasing numbers of outbound travellers from neighbouring countries.
To draw in more tourists, Nepal must focus on effective economic diplomacy, destination promotion, and creating attractive packages that include visa facilitation. The Ministry of Foreign Affairs (MoFA), through its diplomatic missions abroad, has been engaged in tourism promotion alongside investment and trade efforts. However, diplomatic missions often face constraints due to limited funding and other challenges, such as a lack of direct flights with key source countries, high airfares, and negative perceptions due to frequent air and road accidents. Additionally, the European Union’s blacklist of Nepali airlines has adversely affected the influx of European tourists. As of October 2024, tourists from Europe account for just 17.77% of total arrivals.
Tourists also compare costs and packages with other destinations, which is why Nepal needs to offer competitive packages. While Nepal’s breathtaking natural beauty, cultural diversity, unique climate, and warm hospitality are unmatched worldwide, competitive pricing is necessary to attract travellers. Deepak Raj Joshi, Chief Executive Officer of Nepal Tourism Board (NTB), noted that tourism sector development requires a multidisciplinary approach, with collaboration among stakeholders, including the private sector, being essential to achieving desired growth.
“Other Asian countries, such as Vietnam, have successfully grown their tourism industry, welcoming 18 million tourists in recent years from just 2.1 million in the early 2000s. Nepal must learn from the experiences of others and create a conducive environment for tourism growth,” said Binayak Shah, President of Hotel Association Nepal (HAN). He emphasised that functional actions are necessary to leverage Nepal’s potential in this sector.
With its abundant natural beauty, Nepal can promote various tourism activities tailored to the preferences of visitors from key source countries. Experts have consistently highlighted Nepal as a premier destination for travellers worldwide, and this potential can be tapped through competitive packages and visa facilitation. Nepal has frequently been ranked as a top travel destination by prestigious publications, newspapers, magazines, and global tourism organisations. For instance, Time Magazine recently recognised Burhan Wilderness Camps in Bardiya as one of the world’s ten greatest places in 2024.
In addition to mountaineering, Nepal’s wildlife tourism is increasingly popular. However, strict regulations around tourism within protected areas require effective coordination to allow seamless access for tourists to these attractions, according to tourism entrepreneur Bharat Basnet.
NTB has reported that international tourism promotion activities, which had been on hold due to the Covid-19 pandemic, have now resumed, with destination promotion efforts actively underway in prospective source countries. The presence of global hotel and hospitality brands also plays a crucial role in promoting Nepal as an attractive tourism destination. Private sector organisations contribute to these promotional efforts. Recently, HAN promoted the Ramayan Circuit, spanning from Janakpur to Ayodhya in India, organising a meet for travel and tour operators alongside hotel and hospitality businesses. As a result, in June 2024, HAN, together with NTB and the Embassy of Nepal in Beijing and the Consulate General in Chengdu, hosted a week-long Nepal Promotion and Sales Meet across various Chinese cities.
Challenges
Inadequate public infrastructure is hindering the growth of Nepal’s tourism sector, much like other industries. Seamless road connectivity, trekking trails, air connectivity, as well as road and air safety are critical needs. However, Nepal’s poor road conditions and lack of safety measures have negatively impacted the sector. A series of fatal bus accidents involving Indian tourists, along with delays in evacuation, have discouraged tourists from visiting Nepal. Furthermore, there is a lack of safety protocols and standard enforcement. With the rapid expansion of the hospitality sector, there is also a shortage of skilled human resources.
Poor Public Infrastructure
Poor infrastructure dampens the aspirations of tourism entrepreneurs. Weak roads and trekking trails often result in accidents. Additionally, with the growing impact of the climate crisis, Nepal has yet to develop resilient structures or implement disaster risk reduction measures. Despite having completed two international airports – Pokhara and Gautam Buddha International Airport (GBIA) in Bhairahawa – Nepal has struggled to operate them efficiently. With the enforcement of a winter schedule and the partial closure of Tribhuvan International Airport for maintenance, some international airlines have recently started operating from Bhairahawa.
The government has encouraged tourism entrepreneurs to develop hotels in Bhairahawa alongside the new international airports. However, investors have struggled to see returns due to the limited number of international flights from GBIA. Although the government has recognised the importance of an international airport in Nijgadh and designated it as a project of national pride, it has been unable to execute the project. More than a decade and a half ago, the government announced plans to build a second international airport in Nijgadh alongside the Kathmandu-Terai Expressway to relieve pressure on Tribhuvan International Airport.
Skilled Human Resource Crisis
The lack of skilled human resources is another significant challenge for Nepal’s hospitality sector. With the hospitality industry thriving in top labour destinations like the Middle East and Malaysia, talent retention has become a major issue for Nepal’s hospitality industry. While the sector provides apprenticeship opportunities for students and those interested in skill development across various areas, such as culinary, administration, management services, and finance, there remains an urgent need to prioritise skill-building initiatives. High levels of skill are essential for delivering quality services while maintaining standards.
Umbrella organisations, including the Federation of Nepalese Chambers of Commerce and Industry, Confederation of Nepalese Industries, Federation of Contractors Association Nepal, Federation of Nepal Cottage and Small Industries, and Hotel Association Nepal, have joined forces to develop occupational standards and conduct Technical and Vocational Education and Training (TVET) for workers with the support of the International Labour Organisation (ILO), according to Sajan Shakya, Spokesperson for Hotel Association Nepal. These efforts in skill development and quality service delivery are crucial for the growth and success of the hospitality sector.
“Poor connectivity dampens tourism sector”
Binayak Shah, President, Hotel Association Nepal
Nepal is advantageously located between India and China, both populous countries, yet we lack adequate connectivity due to the absence of direct flights to various cities in India and China. Despite recently bringing two new international airports into operation, there remains a significant shortage of international flights. Meanwhile, Tribhuvan International Airport is dealing with air traffic congestion and has now implemented a daily 10-hour closure for maintenance, which will continue for the next six months.
This situation will have severe consequences for Nepal’s tourism sector, as international airlines have drastically raised their fares. Tourists will likely compare destinations, and if 60% of their budget goes to airfare, they may question why they should choose Nepal. Although authorities are aware of these challenges, no action is being taken. As a result, we cannot attract tourists even when there is interest. I must stress that public infrastructure, particularly connectivity, is the backbone of the tourism sector. The government has encouraged private sector investment in hotels and resorts alongside the construction of new international airports in Bhairahawa, yet many investors in Bhairahawa and Lumbini are now blacklisted, with their collateral assets up for auction due to their inability to service debt.
The government’s inability to operate Gautam Buddha International Airport has caused a significant erosion of wealth for those who invested in the hotel and hospitality sector. The government should act to protect these investments.
Another factor contributing to the negative publicity is unsafe roads and airspace. When hosting promotional events, we are frequently questioned about road and air safety. In October 2024, for instance, the flow of Indian tourists dropped by 13% following a series of road accidents involving Indian passengers on land routes. Indian agents we work with are now hesitant to send tourists, seeking assurances of safety from our authorities.
“NTB is exploring all means and collaborating with stakeholders to leverage the tourism potential.”
Deepak raj Joshi, CEO, Nepal Tourism Board
On the supply side, there has been substantial investment in the hotel and hospitality sector. I’m confident this will yield strong returns in the long term, though it may be challenging in the short term. The investment has been made by investors in line with national priorities, and it’s crucial for the government to safeguard these investments by ensuring adequate returns. Failing this, investor confidence could wane, negatively impacting the country’s tourism sector.
Nepal Tourism Board (NTB) is making every effort to attract foreign tourists while also boosting domestic tourism, enabling entrepreneurs to achieve some returns for sustainability. Investment in the hospitality sector has increased significantly over the past decade, with numerous new projects completed and others nearing completion. However, promotion and marketing efforts in the international market were interrupted due to the Covid-19 pandemic, though we have resumed them recently.
In line with its objective to position Nepal as a desirable tourism destination, NTB is actively supporting private sector businesses that are launching new products tailored to the interests of potential source countries. Recently, we promoted Nepal at the World Travel Market (WTM) in London, the world’s largest travel platform. India, China, Bangladesh, and the Middle East, as well as our traditional markets in the United States, Canada, and Australia, are all of significant importance. We are gradually conducting promotional activities in these major markets, both in B2B and B2C formats, and emphasising digital promotions under B2C to reach potential travellers.
While we face limitations with public infrastructure, neighbouring countries have significantly improved cross-border infrastructure. Given the potential for increased tourist flow from India, substantial investments have been made in hotels and hospitality in border towns and nearby hill stations from east to west. By promoting tourism activities in these Indian border towns, we can increase tourist traffic from India and third countries entering Nepal by land. We are working closely with relevant agencies, including security and immigration, to reduce entry hassles via land routes.
Tourism is a multifaceted sector that cannot develop in isolation; it is interdependent with multiple sectors. While hotel, travel, and transport bookings are now digitised, easy access to destinations still depends on convenient visa processes. We have yet to implement an e-visa system or online visa fee payments, but NTB has been coordinating for their establishment, and we hope this system will be operational soon.
Road conditions at major tourist destinations like Pokhara, Chitwan and Lumbini are poor, and we have been urging relevant authorities to complete these critical routes on schedule. NTB is also promoting government incentives for international carriers to operate flights to the newly constructed Bhairahawa and Pokhara airports. While tourism activities in conservation areas attract many tourists, conducting seamless tourism operations in protected areas remains a challenge. NTB is working closely with the Ministry of Forests and Environment in this regard.
Additionally, NTB maintains close coordination with the Ministry of Foreign Affairs to effectively promote tourism as part of economic diplomacy through our diplomatic missions abroad. We collaborate with all stakeholders and agencies to maximise the benefits from the tourism sector.
