Hotel profits plunge as quake hits occupancyThe Soaltee and Oriental hotels posted a slowed revenue growth in the last fiscal year, largely due to the April 25 earthquake that severely affected business.
The Soaltee and Oriental hotels posted a slowed revenue growth in the last fiscal year, largely due to the April 25 earthquake that severely affected business. The
downturn is expected to continue in this fiscal year as demand from business and leisure travellers has plunged since the disaster. The last
fiscal year came to an end on July 16.
Hoteliers are keeping their fingers crossed that the industry will see a revival in arrivals during the September-November peak tourist season. According to the fourth quarter report of these two five-star hotels listed on the Nepal Stock Exchange (Nepse), the Soaltee recorded a net profit of Rs207.42 million in the last fiscal year, down 6.49 percent compared to the same period last year. According to the report, the hotel has provisioned Rs67.08 million for government tax.
The report showed that the Oriental or Radisson hotel recorded a net profit of Rs198.54 million, down 5.51 percent.
According to the Soaltee, negative travel advisories issued by a number of source markets, including the fastest growing Chinese market, immediately after the earthquake significantly affected tourist arrivals in the fourth quarter.
Due to the dreadful event that prompted a mass departure of tourists, the hotel said that its revenues dropped 16 percent during the April-June period year on year.
However, the Soaltee’s earnings in operation rose 3 percent to Rs1.39 billion despite the earthquake. The hotel said that the government and concerned stakeholders in the hospitality industry had been devising various strategies to revive the industry in the aftermath of the earthquake which is expected to lead to a rebound to some extent.
“The hotel will continue its marketing and promotional strategy in various source markets, and would be diversifying and focusing on the meetings, incentives, conferences and exhibitions (MICE) segment to attract visitors,” said the hotel in a statement.
Meanwhile, the Radisson said its earnings in operation dropped 2.57 percent to Rs1.05 billion. The hotel has provisioned Rs54.76 million for government taxes. Radisson said that it took some time to get back to full operations after the earthquake as it conducted repair work that affected earnings.
The Radisson said that tourist arrivals to Nepal dropped to near zero for a brief period, which resulted in its missing its occupancy targets. “Besides, the closure of the casino has also negatively affected the hotel’s earning and business,” the hotel said.
Strikes and bandas, load-shedding and infrastructure bottlenecks are the emerging challenges for the industry, the five-star properties said. The country’s political situation still remains as a challenge for the hotel sector.
Five-star hotels recorded an average occupancy of 61 percent last year, up from 58.85 percent in the previous year. An occupancy rate of above 40 percent is considered as “survival” level, and a rate higher than 50 percent is termed “fair”. A rate of above 60 percent is “good” and 70 percent and higher is “excellent”.
According to the Tourism Ministry, 319,284 room nights out of the 523,453 room nights produced by the luxury hotels were sold. There are 10 five-star properties in Nepal, eight in Kathmandu and two in Pokhara. The hotels recorded the highest occupancy rates of 86.33 percent and 73.02 percent in November and October respectively last year.
Following the October-November season, hotels were busiest during March and April, recording an average occupancy of 72.77 percent and 70.62 percent, respectively. The lowest occupancy was recorded in January (49.78 percent), June (49.21 percent) and July (49.74 percent).
Despite the growth in room occupancy last year, Nepal’s hotels are likely to see a sharp fall in occupancy this year due to the earthquake.