Nepal, a country with breathtaking landscapes, relies heavily on tourism to support its economy. However, the COVID-19 pandemic brought the thriving tourist industry to a standstill, leaving stakeholders at a critical juncture. Their decisions will determine the sector's long-term survival. Before the pandemic, tourism contributed 7.9% to GDP and supported over one million jobs. Now, as international tourism shows signs of improvement, hospitality experts doubt the hotel industry's resilience against future crises.
Economic pillar under pressure
According to the World Travel & Tourism Council, tourism contributed 8% to Nepal's GDP before the pandemic, generating Rs. 240.7 billion in revenue and supporting more than one million jobs. In early 2020, international arrivals dropped by 73.25%, forcing many new tourism businesses to close or scale back operations drastically. When the prohibition on tourist arrivals was lifted in February 2022, recovery signals emerged. However, industry analysts warn that this progress is threatened by rising inflation, political tensions, and growing climate risks.
Pandemic's lasting impact
The pandemic exposed fundamental weaknesses in Nepal's hospitality sector. Establishments dependent on foreign visitors faced extreme financial difficulties, leading to major operational problems that affected an estimated 10,000 tourism businesses. The trekking industry suffered severe consequences, with many small hotels and lodges in popular regions shutting down permanently. Job insecurity reached critical levels, and psychological distress intensified among employees, including those in Kathmandu's five-star hotels.
Global context and comparative recovery
While countries with similar economic structures designed efficient recovery plans, Nepal's tourism rebound has been notably slow. The Maldives, for instance, successfully attracted high-quality visitors by implementing strict health safety measures during the global travel downturn.
Nepali policymakers announced stimulus packages, but these were hampered by bureaucratic delays and insufficient funding. An assessment by the Hotel Association Nepal found that 72% of hoteliers identified government inefficiency as the main obstacle to growth. Unlike other nations that covered up to 50% of operational costs, Nepal's tourism businesses received minimal support, leading to a slower recovery.
Emerging threats to stability
Just as the hotel industry began recovering from the pandemic, new obstacles emerged. A potential global recession, rising inflation, and higher interest rates suppress international travel demand. Vital tourist markets like China and India have reduced spending due to economic pressures at home.
Furthermore, Nepal's tourism infrastructure faces enduring dangers from natural hazards, including earthquakes, landslides, and floods. In 2023, flash floods destroyed trekking routes, disrupting tourism and damaging local economies. According to the United Nations Development Programme, Nepal ranks twentieth among countries facing the highest climate disaster risks. Unpredictable market conditions, driven by inconsistent political direction and frequent changes in government leadership, also hinder growth. Industry representatives point to a lack of long-term tourism strategies and inconsistent taxation policies as significant impediments.
Workforce and market challenges
Current labor surveys reveal persistent workforce challenges. A substantial portion of hotel employees who left their jobs during the crisis have not returned. Soaring fuel costs and inflation have significantly increased operational expenses, putting more strain on an unstable sector. These challenges are compounded by a significant reduction in arrivals from key markets like China, while non-Asian international visitors remain a small fraction of the total.
Survival strategies and path forward
Local experts suggest that survival and success depend on comprehensive strategic shifts. The hotel industry requires proactive crisis management systems, market expansion to non-traditional sources, digital modernization, recovery funding, and sustainable business practices. Hotels that have adopted digital strategies, such as contactless operations, AI-driven customer insights, and intelligent pricing models, are recovering faster. These technological implementations were key to the success of international hotels during the pandemic.
Sustainability has evolved from a luxury to a necessity. Statistical evidence indicates that a significant majority of travelers prefer eco-friendly hotels. To meet international standards and appeal to this market, hotels in Nepal must invest in renewable energy, waste management, and water conservation systems.
Hope or uncertainty? The road ahead
The path forward remains uncertain. Industry leaders believe recovery is possible through strategic planning and targeted investments but warn that failing to learn from the recent crisis could cause permanent harm. There is no time to delay. To regain strength, hoteliers, policymakers, and stakeholders must unite to create a sustainable strategic plan. This collaboration is essential to ensure Nepal's tourism sector can endure future global unpredictability and emerge stronger.
Dr. Silwal has completed his doctorate from Westcliff University, California
