Third-quarter financial reports of luxury hotels show record catastrophe lossesThe first wave was a catastrophe for tourism, the second wave may sound the death knell for several hotels, insiders say.
Two of Nepal’s luxury hotels have posted their third-quarter reports showing the highest-ever catastrophe losses, a legacy of the Covid-19 lockdown as tourism disappeared into thin air.
Insiders say the first wave of the pandemic in 2020 was a catastrophe for tourism which brought the hospitality industry to near collapse.
The second wave, which started in Nepal in mid-April 2021 with the daily infection rate shooting up to almost 10,000 daily from 300 within a month, could well sound the death knell for several hotels teetering on the brink.
Among the three hotels listed on the Nepal Stock Exchange, two have published their financial reports for the third quarter of 2020-21 ended March 31; and one has come out with the second quarter report which has painted a gloomy picture.
The Soaltee Crowne Plaza, which was recently rebranded as The Soaltee Kathmandu, said in its unaudited third-quarter report that it suffered a net loss of Rs136.63 million, compared to a net profit of Rs140.45 million in the same period in the last fiscal year 2019-20.
The hotel said its revenues plunged by 73.54 percent. Its third-quarter earning in 2020-21 amounted to Rs308.74 million, a steep drop from Rs1.16 billion in the same period of the last fiscal year.
After the government imposed a two-week-long second lockdown on April 29 to prevent the spread of the virus, and extended it by another two weeks till May 27, the hotel said it expected further debacles ahead.
Oriental Hotel Limited, which operates the five-star Radisson Hotel in Kathmandu, was the top loser as the property was closed for almost a whole year.
The hotel reported a net loss of Rs221.14 million in the third quarter of this fiscal year, a 284 percent plunge from the profit earned in the same period in the last fiscal year. The hotel’s third quarter revenue dropped 90.70 percent.
The hotel's third-quarter revenue stood at a meagre Rs55.9 million in the review period as compared to Rs690 million in the same period in the last fiscal year.
The government allowed hotels to reopen in July last year, but they remained closed because there were no visitors, and the result was zero income. They have pinned their hopes on the vaccination drive in Nepal that it will bring back tourists and help the tourism industry to rebound.
“The industry was brought to its knees last year, but we had seen a glimmer of hope this year due to an increase in bookings for spring trekking and expeditions,” said Pawan Rajbhandari, director of sales and marketing at the Radisson Hotel Kathmandu. “But the second wave started and everything is uncertain.”
According to the Department of Immigration, Nepal welcomed 8,874 foreign tourists in January. The number grew slightly to 9,146 and 14,977 in February and March respectively. In April, the expedition season, particularly Mt Everest, drew 22,450 tourists showing a sign of a tourism rebound. But the second wave which started in mid-April 2021 reversed the few gains that the tourism industry had made.
“We were one of the first industries impacted by the virus… and it’s becoming clearer and clearer that we are going to be the last industry to recover. Obviously, we are in the red zone. And it will be a challenging year ahead. We don’t know how long,” said Rajbhandari.
Taragaon Regency Hotels Limited, which operates the Hyatt Regency Hotel, has not unveiled its third-quarter financial report. Its report for the second quarter ended December 31, 2020 shows a net loss of Rs87.58 million against a net profit of Rs177.64 million in the same period in the last fiscal year.
The hotel said its total income dropped from Rs665.84 million in the second quarter of the last fiscal year to Rs55.79 million in the review period.
According to Binayak Shah, senior vice-president of Hotel Association Nepal, the hotel industry has reported the highest-ever level of third quarter losses. “They are ‘catastrophe losses’ that no hotelier has faced or even imagined,” he said.
“We lost everything last year and, again, the industry is expected to remain empty in 2021,” he said.
“The hoteliers had turned from survival mode to redemption mode as bookings for the spring tourism season were looking good. But the second wave has dashed all hopes,” he said. “Recovery will come, but when and in what shape, is wholly uncertain.”
In January, Hotel Association Nepal, which counts around 3,000 establishments among its membership, retained the uniform payout structure, fearing that hotels would not be able to pay their employees as it did not see a 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 are given Rs5,000 per month. Earlier, it was Rs9,000 per month. Employees of four-star hotels and resorts are given Rs4,000 monthly. Earlier, it was Rs8,000 monthly.