Nepal’s Fourth-largest Industry by Employment, is Trying to Come Back from the Brink

With the government resuming on-arrival visas and abolishing the seven-day quarantine requirement to all vaccinated foreign travelers, the Nepali tourism sector is now all set to welcome visitors in the new tourist season

the HRM

When the Covid-19 pandemic hit Nepal in early 2020, the country had already started celebrating Visit Nepal (VN) 2020. The government and private sector were doing massive promotional campaigns to make VN 2020 a global hype with the target of bringing 2 million tourists. Hotel entrepreneurs had invested billions of rupees in renovating their existing hotels and opening new hotel properties across the country.

The 2020 was supposed to be the year which would give much needed impetus to Nepal’s hospitality industry. However, the outbreak of the Covid-19 from Wuhan city of China made 2020 the worst year in the history of Nepali hospitality industry.

Travel and tourism businesses, which accounted for around 8 percent of the country’s gross domestic product and provided employment to more than 1.05 million jobs directly and indirectly prior to the pandemic, were affected the most after travel restrictions came into force in late March 2020 globally.

Multiple shocks
With the combination of shocks – suspended international flights and arrival of foreigners and restriction in mobility of the domestic visitors, the pandemic spelled a catastrophic impact on hotel, restaurant, travel, and trekking during and after the lockdown.

According to a report by National Labour Academy, loss of jobs and employment in the tourism and hospitality sector both for wage employed, self-employed, and formal and informal segments are incomparable. “As the year 2020 was declared as Nepal visit Year, the investment and employment had gone up high at the end of 2019, and must have provided jobs to more than 800,000,” states the report.

In 2020, Nepal hosted 230,085 foreigners, a drop of more than 80 percent compared to 2019. As of August, this year, total international arrivals to Nepal have been just 66,966.

As the Covid-19 pandemic disrupted international traveling, Nepal’s foreign exchange earnings from tourism declined massively. Nepal’s foreign exchange earnings from tourism in 2020 were down by a whopping 70 percent as the hospitality industry struggled to survive. The Nepal Tourism Statistics 2020 released by the Ministry of Tourism and Civil Aviation shows tourism revenue shrank to $217 million in 2020 from $724.33 million in 2019.

Pushed to the brink by the pandemic, hoteliers decided to minimize their losses by shutting down their properties. In the first week of May 2020, an emergency meeting of the Hotel Association of Nepal decided to close the star hotels in Kathmandu till September 2020.

The iconic Annapurna Hotel on Durbar Marg closed its operation for an indefinite period due to a severe loss of revenue. Another casualty of Covid-19 was the Tiger Palace Resort in Bhairahawa which on March 23, 2020, announced a temporary closure of its two properties—Tiger Place Resort and The Millionaires’ Club & Casino in Kathmandu. Six months later, the Tiger Palace Casino Resort in Bhairahawa laid off all its 393 Nepali employees. With the Bhairahawa-based businessman Balkrishna Bhushal now acquiring the resort, Tiger Palace got a new lease of life and started operating from the last week of September.

Salary Cut & VRS
With employees’ remuneration being the highest expenses in the hotel sector, they also decided to pay only 12.5 percent of the basic salaries to the employees while asking the government to pay the workers through the social security fund. According to hoteliers, 40 percent of the hotel sector’s income is spent on staff management.

The salaries were further reduced in January 2021 when Hotel Association Nepal, which has 300 hotels, resorts and guesthouses as its members, retained the uniform payout structure, fearing that hotels would not be able to pay their employees as there was no prospect of tourism recovery this year either. Under the uniform payout deal made with trade unions, all staff, from front door workers to general managers, would remain on salary without working but they would all get the same pay. As per the renewed agreement, all employees working in five-star hotels or resorts were given Rs 5,000 per month from earlier Rs 9,000 per month. Employees of four-star hotels and resorts were given Rs 4,000 monthly from earlier Rs 8,000.

Along with the pay cuts, thousands of employees in the hospitality sector were laid off, many of them participated in the Voluntary Retirement Scheme (VRS) to permanently move away from the sector.

Trade union leaders associated with the hotel industry say 20 percent of the staff of major hotels (4-star and 5-star) participated in the voluntary retirement scheme (VRS). In hotels like Soaltee, Yak & Yeti, Annapurna and Hyatt, staff who’ve completed 25 years of service opted for VRS, said Surya Kunwar, President of Nepal Independent Hotel Casino and Restaurant Workers’ Union. According to Kunwar, who works at The Soaltee Kathmandu said around 200 staff have chosen VRS in the last one and a half years. The number of staff opting for VRS in Hotel Annapurna was 60.

Bijay Pyakurel, Head- Human Resource and Administration at Hotel Yak & Yeti remembers the period as the difficult phase for the entire hotel business. “As the business almost collapsed, we had no other option than to take the painful decision of axing the jobs,” said Pyakurel. The Yak and Yeti also introduced VRS to address the challenge of overstaffing. As many as 100 employees benefited from the VRS scheme, said Pyakurel.

According to the Central Bureau of Statistics (CBS), the business of the accommodation and food sector shrank by 25.7 percent over the year in FY 2020/2021 due to the Covid-19 pandemic.

A March 2021 survey from the Ministry of Agriculture and Livestock Development (MoALD) shows that of those who reported income reductions, the tourism sector was the most severely affected, with more than 79 percent of workers reporting severe income reductions due to the pandemic.

Looking for Revival
After a disastrous 18 months, the tourism sector has put its bets on the ongoing vaccination drive and the easing of travel restrictions to see brighter days. With more than 80 percent of tourism workers vaccinated, travel trade entrepreneurs say they are safe enough to welcome international visitors.

Tourism entrepreneurs have welcomed the government decision – resuming on-arrival visas and – getting rid of the seven-day quarantine requirement to all vaccinated foreign travelers, saying that it would provide a huge boost to the country’s tourism industry.

“Had the government acted earlier, we could have brought sizeable visitors for the autumn season, especially for mountaineering,” said Binayak Shah, First Vice President of Hotel Association, Nepal.

Hoteliers say if the government moves assertively, Nepal can attract Chinese visitors again. The government needs to work proactively to send a message across the world that Nepal is open and safe enough to welcome international visitors.

Travel trade entrepreneurs say that inquiries from prospective visitors to Nepal have surged lately, and they were eagerly waiting for Nepal’s decision to ease quarantine requirements and visa issuance.

The HR heads of star hotels said while the recovery from the pandemic will take time, they are slowly starting the staff recruitment process.

What HR Chiefs of Star Hotels have to Say

Chudamani Parajuli
HR Head, The Soaltee Kathmandu
The pandemic has been an immense shock for the overall tourism and hospitality sector. It is still a very difficult time for five-star hotels as the business is solely dependent on the arrival of foreign guests. Unlike small hotels, we cater to high-end tourists. So the situation is still challenging for five-star hotels.

As the business went down following the pandemic, we introduced an ‘Employee Exit Plan’ quite similar to the Voluntary Retirement Scheme. More than 200 staff benefitted from the scheme. Under the scheme, we provided additional benefits to our staffers.

Prior to the pandemic, we had 550 staff. Now the number has reduced to 250. We only had permanent staff except a few on contract basis. We have only renewed the contract of necessary staff.

Bijay Pyakurel
Head- Human Resource, Administration and Security, Hotel Yak and Yeti
It was a difficult phase for the entire hotel business in the first wave of the Covid-19 pandemic. As the business almost collapsed, we had no other option than to take the painful decision of lay the staff from their jobs. Yak and Yeti also introduced Voluntary Retirement Scheme (VRS) as we were also facing the challenge of overstaffing. As many as 100 employees benefited from the VRS scheme.

Likewise, we were also compelled to cut off contract-based employees. The management made the decision as business was down, and there were no signs of recovery.

Prior to the pandemic, Yak and Yeti had 200 permanent and 150 contract staff. Now the number of permanent staff has dropped to 100, and contract staff to 80. As the tourism sector is slowly reviving from the shock of the pandemic, we have already started the recruitment process.

Pramod Thakur
Human Resources Manager, Hyatt Place
We did not have to resort to lay off any staff as we were preparing to open the hotel. The number of staff in the hotel was small, so we did not face any difficulties. But the tourism sector, especially the hotel business, suffered the most.
In the first wave, a large number of those employed in the hotel sector lost their jobs. As Nepalis working in the hotel sector in the Middle East lost their jobs, we are finding skilled manpower easily. We are planning to operate full-fledged from November, and it has not been difficult for the hotel to find mid-level workers.

Lomash Karki
Human Resources Director, Vivanta Kathmandu
It was a difficult time for the hospitality industry. The hotels had to lay off workers as well deduct salaries. The number of workers at Vivanta Kathmandu is currently reduced to 92. Those who lost their jobs at Vivanta Kathmandu were paid an extra month’s salary. Likewise, salaries of those retained by the hotel were also deducted after the Covid-19 pandemic. In the initial phase, staffers received 60 percent of their salaries. Then the salary was increased to 75 percent and 80 percent. Currently, staffers’ salary is adjusted at 90 percent.

Chadani Khadka
Asst. Manager HR, Ramada Encore by Wyndham Kathmandu
When the pandemic struck, we had not started the operation of the Ramada Hotel. We only had 30 staff when the first wave of the pandemic hit the nation. Currently, we have 40 staff. As we are going full-fledged in a few months, we now have to start the recruitment process. But, it has been difficult to find skilled manpower. We recently called for applications for certain positions, but only a few people have applied for the posts.

Malika Rana Basnet
Research and Development Manager, Hotel Annapurna
It was a time when the operating cost was way higher as business hit the lowest. We introduced the voluntary retirement scheme. As many as 60 staffers opted to retire through the scheme. Still, staffers have the option to retire through the scheme.
In the first wave, we had to lay off almost everyone working on a contract basis. Only a select number of staffers were retained as we only wanted to survive.

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