Annapurna Hotel to close its doors indefinitelyThe hotel's closure highlights the deep trouble in the tourism industry, insiders say. The hospitality industry has been among the hardest hit by the pandemic.
The iconic Annapurna Hotel on Durbar Marg is closing its doors for an indefinite period due to a severe loss of revenue as the coronavirus snuffed out the tourism industry.
Established in 1965, the Annapurna is one of Nepal’s oldest five-star properties. Its closure highlights the deep trouble in the tourism industry, insiders said.
A formal announcement of the closure has not been made, but Executive Director Sreejana Rana said the process to shut down the hotel had started. More than 60 of the staff have already resigned. “We have asked the employees to take voluntary retirement,” Rana told the Post.
The Annapurna's closure means its 360 employees will lose their jobs. But industry insiders said that the hotel planned to give voluntarily retirement to old employees as they had become a big liability to the company.
With new global chains and modern innovations making inroads into Nepal's tourism, the venerable Annapurna is being weighed down by its old employees, most of whom are more than 50 years of old.
“The problem is not only of the Annapurna, hotels like the Soaltee and the Radisson, among others, are facing similar problems,” said an Annapurna employee who has spent more than three decades at the hotel. Among the 10 five-star hotels in the Kathmandu Valley, the Annapurna and the Malla are currently shuttered.
Rana admits that if they have to compete in the market, they would need to completely revamp their property and the productivity of the workers. “We are not closing permanently. As we don’t see the tourism market recovering by 2021, we cannot afford to become bankrupt by then,” said Rana. “We have plans to come back, but we are not sure when.”
Started as the Hotel de l’ Annapurna in 1965, the 149-room hotel occupies 44 ropanis of land (22,385 square metres) in the heart of Kathmandu. According to Rana, her family including her husband Kapil SJB Rana own more than 85 percent of the shares of the hotel. The Nepal Trust owns 5 percent and the Khetan Group holds less than 2 percent of the shares.
In 2011, the hotel had planned to redevelop and re-brand the property and add 100 rooms. It had hired a German consultant to prepare the master plan. The hotel initiated a plan to invest Rs5 billion for the makeover. The four-year project was slated to begin in 2012, but it fell through due to internal issues, said an employee.
Surya Bahadur Kunwar, president of the Nepal Independent Hotel, Casino and Restaurant Workers’ Union (Central Committee), said they don’t have any problem if the hotel management launches a voluntarily retirement scheme and gets rid of old employees.
“We have not received any official notice from the Hotel Annapurna about its closure,” he said, adding that to close the hotel, it has to first declare bankruptcy.
Many hotels have launched a voluntarily retirement scheme, and that’s a good way to give a grateful exit to the workers, Kunwar said.
“The Soaltee Hotel has sent off 150 workers under the voluntarily retirement scheme following a mutual understanding with the trade union,” said Kunwar, who is also an employee of the Soaltee Hotel. It still has more than 350 employees.
Rana said that she plans to give every benefit as per the law to the workers leaving voluntarily.
But a tussle between the trade union and hotels is likely to begin.
In May, two months after the lockdown was imposed, hotels teetering on the edge amid the coronavirus closure decided to cut their losses by remaining shuttered for six months, as they didn't expect tourists to visit Nepal for at least another year.
Officials had said more than 3,000 hotels would send their staff home because they can't keep paying their salaries with no revenue coming in due to the lockdown.
Following pressure, Hotel Association Nepal decided to keep the hotels open by making a significant cut in worker salaries. In July, nearly four months after the lockdown began, it unveiled a uniform payout structure: All staff, from front office workers to general managers, would remain on salary, but they would get the same pay. The move was intended to avoid mass layoffs.
The association, trade unions and hotel workers agreed on the uniform payout structure and signed a deal. The new pay structure was implemented from April 13 to December 31.
“We have started holding discussions on what measures should be taken after December 31,” said Madhav Pandey, president of the All Nepal Hotel Casino and Restaurant Workers’ Union. “We have requested the hotels to open fully and pay workers their full salaries from January, but they are reluctant as the Covid-19 situation is still uncertain.”
“We can’t do anything if the hoteliers say they are not in a position to open fully because we have to save the employer first to save the employees,” he said, adding that the unions were making efforts for the best deal for both employers and employees.
Rana, who is also the president of Hotel Association Nepal, said the situation was unprecedented, and due to the continued uncertain impact of Covid-19, they have to close down temporarily.
“We cannot run a hotel with 5 percent occupancy. The poor occupancy will continue through 2021. And we are increasingly feeling pressure from new players in the hospitality industry.”
The first casualty of Covid-19 was the Tiger Palace Resort in Bhairahawa. On March 23, the Silver Heritage Group, the Australian-listed gaming investor which operates two casinos in Nepal, had announced a temporary closure of its two properties—Tiger Place Resort and The Millionaires’ Club & Casino in Kathmandu.
Tiger Palace Casino Resort in Bhairahawa laid off all its 393 Nepali employees, effective from September 9, due to financial distress as the virus lockdown brought tourism to a halt.
The hospitality industry has been among the hardest hit by the pandemic. Nepal's five-star hotels saw their profits plunge in the fourth quarter as the virus lockdown wiped out arrivals. 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.
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. Taragaon Regency Hotel Limited, which operates the Hyatt Regency Kathmandu, published its fourth-quarter report last week projecting a 53 percent drop in its net profit in the last fiscal year.
The 1970s and early 1980s were a prosperous period for tourism. It was during this period that many categories of luxury hotels were established and many foreign brands entered the country.
Nepal’s hospitality industry was battered by an armed insurgency from 1996-2006.
Although tourists were not harmed by the insurgents, arrivals declined sharply. Even five-star hotel rooms were available for less than $50 per night during that time.
The post-conflict scenario was more painful for entrepreneurs. The advent of militant labour forced a number of star hotels to shut down.
Established hotels like the Woodland, Yellow Pagoda, Narayani, Blue Star, Sherpa and Durbar shut their doors. There was no major investment in hotels until People's Movement II in 2006.
Boom times returned to the Nepali hospitality sector recalling the heady days of the 1970s and 1980s with leading global hotel brands coming to the country or poised to make their debut.
"In Kathmandu, hotels had reached a saturation point; and at the same time, Covid-19 brought cracks in the economy, including the tourism industry," hotelier Yogendra Sakya said.
In 2017, Hotel Association Nepal had issued a ‘white paper’ urging the government to rein in the overheated hotel sector. The apex body of the country’s hotel industry had asked the government to assess the demand and supply of hotel rooms, and raise the criteria for hotel expansion.
“We should be careful as these new hotels could create additional rooms rather than competing over prices and replacing good old hotels,” the white paper stated. “If these hotels go out of business, banks which have invested heavily in the sector will have problems, and it will eventually hurt the economy.”