Five-star hotels report plunging profits in fourth quarter because of lockdownThe tourism industry bore the brunt of the lockdown that lasted from March to July, insiders say.
Nepal's five-star hotels saw their profits plunge in the fourth quarter as the virus lockdown wiped out arrivals.
Starting in March, the government ordered everyone indoors, closed the borders and suspended flights for four months as the Covid-19 pandemic took hold. The result was disaster for the tourism industry which ground to a halt as there were no travellers.
A majority of the luxury properties in the Kathmandu Valley reported zero occupancy and revenue during the March-May period, which is Nepal’s peak tourist season.
Among the three hotels listed on the Nepal Stock Exchange which have published their financial reports for the fourth quarter ending mid-July, Oriental Hotel Limited, which operates the five-star Radisson Hotel in Kathmandu, topped the list of loss makers, followed by Soaltee Hotel and Taragaon Regency Hotels.
Oriental Hotel reported a fall in its net profit by 79.8 percent in the fiscal year 2019-20 as against profits booked in the fiscal year 2018-19. The hotel said its profit after tax fell to Rs62.2 million in the review period compared to a net profit of Rs308.5 million in the corresponding period in the previous fiscal year.
Oriental collected revenues of Rs690.4 million in the last fiscal year, down from Rs1.23 billion in the previous fiscal year. “The decrease in net profit is primarily due to the impact of Covid-19 and lockdown imposed by the government,” it said in its unaudited financial report.
The hotel and tourism industry bore the brunt of the lockdown that lasted from March 24 to July 21, insiders said. Even after the stay-home order was lifted, luxury hotels saw no improvement in their situation as tourist arrivals were restricted.
Soaltee Hotel Limited said in its fourth-quarter report that its net profit plunged 64.64 percent to Rs105.7 million in the last fiscal year.
The company’s revenue from the operation dropped to Rs1.23 billion in the last fiscal year as compared to Rs1.83 billion in the previous fiscal year 2018-19, Soaltee said in its unaudited report.
Taragaon Regency Hotel Limited, which operates the Hyatt Regency Kathmandu, published its fourth-quarter report this week projecting a drop of net profit by 53 percent in the last fiscal year.
The hotel had earned a net profit of Rs353.22 million in the previous fiscal year 2018-19, which dropped to Rs165.61 million in the last fiscal year 2019-20. Its revenue dropped by 39.28 percent to Rs852.6 million in the last fiscal year.
All hotels may report a net loss in the first and second quarters of the current fiscal year due to high operating costs amid zero revenue, industry insiders said. But there is hope that Nepal’s hospitality market will rebound to some extent in the third quarter as most source markets have started vaccinating their citizens.
“People will travel once they are vaccinated. But there will be fierce competition among all countries, even the developed nations, to attract tourists to boost their ailing service sector,” said Binayak Shah, senior vice-president of Hotel Association Nepal.
“But we don’t see Nepal preparing to compete to bring travellers, and that’s a big worry for the entire hospitality industry.” He said that lack of promotion means it will take two years for the industry to recover completely.
As travel restrictions and lockdown measures spread across the globe, all hotels including those in Nepal were forced to shutter temporarily, furlough employees and cut salaries and other costs.
In a bid to provide some respite to hotels and restaurants struggling to stay afloat after revenues evaporated, Hotel Association Nepal and the restaurants agreed on a uniform payout structure under which all staff, from front office workers to general managers, received the same pay. The arrangement would apply from April 13 to December 31.
The lockdown spelt devastation for the service sector which employs tens of thousands of people. According to the Department of Immigration, tourist arrivals to Nepal fell sharply by 78 percent to 218,170 individuals in the first 10 months of 2020.
On March 12, the government decided to stop issuing on-arrival tourist visas to nationals of all countries besides cancelling spring mountaineering expeditions including Everest missions. The decision came a day after the World Health Organisation declared the Covid-19 outbreak a pandemic, and urged countries to take precautionary measures.
From October 17, Nepal opened the door a crack for trekkers and mountaineers. According to the department, arrivals for October totalled 1,874 compared to 134,096 in the same month in 2019. Between April and October, 3,059 tourists visited Nepal.
The country received 1.2 million tourists last year, and had planned on boosting the figure to 2 million by holding the Visit Nepal 2020 campaign.
Since the end of July, tourism entrepreneurs began wooing domestic visitors to make up for the loss of foreign visitors by reopening mountains and trekking trails, jungle safari and various landmarks to local travellers.
“Domestic tourism movement never happens in Kathmandu. People may travel to Pokhara, Chitwan and other places, but there is no record of Nepalis staying and dining in Kathmandu’s five star hotels,” said a hotelier, who did not wish to be named. “A few marriage functions kept some luxury hotels busy, but the situation is worse than expected.”
He said that big properties in Kathmandu were surviving on a hope that tourists will return. “But things are still uncertain for the luxury hotels.”