Inflation makes Kathmandu an expensive dining destinationCost of dining in restaurants and hotels rose 15 percent year-on-year in the first quarter, a central bank report says.
Eating out in Kathmandu has become an expensive affair. Restaurant prices in the valley and other major urban centres have jumped by more than 15 percent in just the past two months.
Restaurants owners say prices could rise further as inflation shows no signs of abating.
According to a central bank report, the cost of dining in restaurants and hotels showed a 15.19 percent year-on-year increase in the first quarter of the current fiscal year ended mid-October.
ND’s Café used to sell a plate of chicken momo for Rs240 two months ago, now it's Rs290.
“It is obvious that with the sharp rise in food prices, menu prices have also increased,” said Araniko Rajbhandari, president of Restaurant and Bar Association Nepal. “Prices of edible oil and sugar have jumped sharply in recent times.”
Rajbhandari, who is also the owner of ND’s Café, said high taxes directly affect menu prices. “ND’s Café has increased menu prices by 12-15 percent depending on the dish.”
Hotels and restaurants have been adding a mandatory service charge to food and beverage bills since the regulation came into force on January 1, 2007, besides value added tax (VAT) and service tax.
As a result, diners pay 24.3 percent more than the price stated on the menu—10 percent compulsory service charge, 13 percent VAT and 1.3 percent service tax. The government gets its cut in the form of VAT and service tax.
"Inflation has discouraged people from eating out, and customer flow is down in restaurants. Even with the FIFA World Cup in full swing, restaurants are almost empty," Rajbhandari said.
“We had installed a huge TV screen and decked out the restaurant in World Cup-themed decorations, expecting football fans would come to watch the matches and eat their favourite dishes. But it was a let-down,” Rajbhandari said. “It seemed like everybody was being stingy.”
Steep hikes in the interest rate and the liquidity crisis have hurt restaurants just as other businesses, restaurant owners say.
The government recently eased restrictions on business hours, and allowed restaurants to stay open till midnight in a bid to stimulate the tourism economy. The move has cheered restaurateurs who expect a rise in sales.
"But if inflation keeps rising, keeping restaurants open till midnight will not result in increased business," Rajbhandari said.
The government's decision to permit longer opening hours will increase customer flow in restaurant hubs like Jhamsikhel, Thamel, Lazimpat and Durbarmarg, but it will not have much effect in other places, insiders said.
According to restaurant owners, the number of diners has swelled because of higher tourist arrivals to the country, but it is not sufficient.
“It has been three months since we jacked up our menu prices by up to 15 percent; but because of runaway inflation, it is still difficult to break even,” said Pramod Jaiswal, owner of Mela Restaurant and Bar at Lazimpat.
"There is tough competition in the market due to which restaurants try hard to keep their prices down. But the prices are already high because of all the government taxes," he said.
"Canned food, which we used to buy at Rs70 one and a half years ago, now costs Rs170. Besides food, other items that are needed to run a restaurant have also become more expensive."
But Jaiswal says higher prices have not kept diners away from restaurants, and the government decision to allow eateries to stay open till midnight is expected to increase the number of customers.
The owner of Bricks Café concurs. “Till now, inflation has not impacted customer flow,” said Mohit Acharya, owner of Bricks Café, Kupondol.
Inflation has put restaurant owners in a difficult situation as decreasing the portion may prevent diners from coming back, and increasing the price may drive them to other places.
According to Restaurant and Bar Association Nepal, there are 2,022 restaurants nationwide.
Restaurant owners say that if inflation continues to mount, menu prices will go up as they have no other option.
“We reviewed our menu prices around six months ago; and since then, the rates have more than doubled,” said Acharya.
“We have not been able to change the menu prices as there is tough competition in the market; but we are planning to review them soon as it is becoming more difficult to manage the expenses in the current economic situation,” he said.
Acharya says tourist flow has been good in the past three months.