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Tourism

     

  • Sector Overview

  • Opportunities

  • Laws and Regulations

  • Investment Incentives

  • Tourism Sector Profile PDF

Sector Overview

Nepal is unique on a number of levels, perhaps the most important being its sheer natural beauty. Home of the world’s highest mountain range and containing eight of the world’s ten tallest mountains, Nepal is a magnet for the world’s most avid mountaineers, rock climbers, trekkers, and adventure seekers. Owing to the immense vertical drop from its northern mountains to its southern plains, it is a hotspot for climatic and biological diversity. Naturally, its cultural array mirrors its geological and climatic varieties. Chitwan National Park, a World Heritage Site, whose elevation lies between 100 and 800 meters above sea level, lays claim to more than 500 species of birds, 50 mammals and 55 amphibians and reptiles. Sagarmatha National Park, whose lowest point is approximately 2,800 meters, is home to over 100 species of birds and provides universal scenic views of flora and fauna. Nepal’s biodiversity is not limited to land creatures. It is estimated that the country also has over 250 species of fishes in its vast river systems.

Nepal, situated the crossroads of the great Indian and Tibetan civilizations, is also home to a number of unique cultures. The architecture and ancient history of Nepal’s cities, including its capital, Kathmandu, Jankapur, Bhaktapur, Patan, Palpa, Ilam, also reflect the country’s amalgamation of diverse cultures, which is reflected in the cuisine, festivals, art and architecture. World famous cultural heritage sites including Pashupatinath (the holy Hindu temple), Janakpur (birthplace of Goddess Sita), and Lumbini (birthplace of Gautam Buddha) draw hundreds of thousands of tourists each year. Nepal’s travel and tourism sector offers virtually unlimited investment opportunities. These are enhanced by the existing pool of skilled labour in the areas of hotel management, food and beverage service, and adventure tourism. The sector has grown rapidly in recent years. Between 2012 and 2014 when it accounted for 4.3% of the nation’s GDP, gross revenues from the tourism sector increased at an annual rate of 69%.4 Today, Nepal’s tourism sector accounts for 3.5% of the nation’s total workforce. In 2014 it directly provided 487,000 jobs. The government of Nepal (GON), recognizing prior successes as well as the sector’s unmet potential supports private sector participation in the sector, which comes from a number of foreign countries.

Essential tourism infrastructure, including hotels and resorts, is an obvious target for new investments. Business opportunities also exist to consolidate existing travel and tourism services which are badly fragmented. In recent years, as a result of increasing levels of disposable income, improved air connections, and a rising interest in adventure travel, the number of Asian travellers to Nepal has exploded. It is expected that these markets will continue to grow in the coming years and remain Nepal’s largest travel and tourism market. India and China will remain high on the list of visitors, both in terms of raw numbers and percentage of growth.

These customer bases can be increased by identifying and by refining services to cater to their specific preferences. Nepal’s own expanding middle class will also drive the delivery of quality, affordable services. It is well recognized that domestic tourists have above average spending patterns during their short trips and if service providers can successfully identify and meet their touristic needs, that market should also continue to experience rapid growth.

There has been a steady increase in the number of tourist visitors to Nepal in recent years. Since 2010 tourist numbers have increased at an annual growth rate of 7%. The average length of stay has held steady at approximately 12.5 days per visitor. Although most tourists enter Nepal by air, a sizeable minority also come by land. The two major entry points are Kodari, bordering China, and Bhairawaha on India’s border. Almost half of Nepal’s tourist traffic originates in India, China, Sri Lanka, USA and the UK. In 2014 India and China together accounted for one-third of the total number of tourists to Nepal. On average, India contributes about one-fifth of the country’s total tourist traffic. Since 2010, the number of Chinese tourists coming into Nepal has increased significantly. China’s outbound tourism is expected to be double by 2020 and to reach 200 million by 2020. In 2013 Chinese tourists reached approximately 113000 which was an increase of 250% over 2009.

By 2020, Chinese tourists are expected to reach 1 million, The average expenditure per Chinese visitor has increased from US $ 50 in 2011 to $ 100 in 2015. Similarly, visitors from India are expected to reach 50 million by 2020 and their expenditures are expected to be in the range of US $ 40 billion. Most visitors come to Nepal for recreation and adventure. In 2014 the major reasons for visiting Nepal were recorded as being holiday, trekking and mountaineering, followed by business, official, and pilgrimage. There has been an appreciable increase in the number of visitors for business conventions and conferences. This segment has increased by 40% from 2010 to 2014.

Institutional Arrangement
Policy Level

  • Ministry of Culture, Tourism and Civil Aviation

Regulatory and Implementing Level

  • Nepal Tourism Board
  • Department of Tourism

Most incoming visitors into Nepal are between 16 and 45 years of age. Almost one-fourth are between 16 and 30 years of age. This demographic is followed by the age group between 46 and 60.

Opportunities

Tourism and its associated services comprise a significant portion of Nepal’s GDP. Tourist expenditures are comprised largely of outlays for hotels, travel agencies, tour operators, trekking and rafting agencies, and miscellaneous other services. Tourist sourced revenues have increased sharply from US$ 359 million in 2012 to US$ 516 million in 2014. The fact that the tourism market has increased in the face of recent downturns and the depreciation of the Nepalese currency (NPR) demonstrates that the market is deep and resilient. It also points to another welcome trend: local tourists are assuming a larger share of the market.

Emerging Trends
There are new and as yet unexplored opportunities that make tourism well-suited for new investments. Early entrants into these new market niches will likely establish a long-term competitive position.

  • Two new international airports in Pokhara and Lumbini are expected to open for business soon, and this will significantly increase inbound flight capacity
  • There has been an appreciable increase in MICE tourism in recent years
  • Tourism packages can be customized for and mass-marketed to increasingly affluent Indian and Chinese travelers
  • The market for local tourism has been growing at a rapid rate in recent years

Hotels
According to Hotel Association of Nepal (HAN), there are 10 five star, 2 four star, 27 three star, 48 two star, 31 one star, and 625 tourist standard hotels in the country. A disproportionate share of these facilities are located in Kathmandu. Today there are 324 hotels and resorts registered in the Kathmandu valley, comprising 18,203 rooms and 22,000 beds. Outside of the Kathmandu valley, the total capacity is 4,458 rooms and 12,598 beds. As such, lucrative opportunities await investors in underserved and undeveloped areas. The tourist traffic in Nepal’s parks and wildlife reserves has increased threefold from 145 thousand in 2010 to 426 thousand in 2014. National parks in Shivapuri, Chitwan, Bardiya and Langtang have seen a significant increase in tourist traffic. New resorts and ancillary services can tap the revenue potential of new visitors to these locations. Significant opportunities also lie in the consolidation of various services in the hospitality sector.

Today, the sector is heavily fragmented; most hotels are stand-alone assets. Experienced operators therefore have an opportunity to introduce consistency, reliability, and economies of scale into the sector. Nepal’s hotel occupancy pattern closely tracks tourist arrival patterns. Occupancy rates rise sharply in the spring (March-April) and autumn (September-November) and fall during the monsoon months. Opportunities exist to customize services that will encourage local tourism during these slow months. Experienced hospitality entrepreneurs with sound management will be well placed to capitalize on these trends.

Nepali people are known for their warm hospitality and dedicated service. Often, visitors are welcomed with gratitude and treated like family. With numerous educational institutions providing training and turning out quality oriented graduates, the sector is increasingly prepared for both green field and brown field investments.

Adventure Tourism
Nepal is a thrill seekers paradise. It offers travelers a myriad of activities including mountaineering, white water rafting, trekking, paragliding, jungle safaris, and bungee jumping. The best season for mountaineering is the autumn, (from October to December). A total of 414 peaks have been opened for mountaineering, of which 188 remain unclimbed. Trekking in Nepal is the best way to experience in-depth exploration of the unique hospitality of Nepalese people, the diversity of their cultures, the eye-catching views of mountains and jungles, the superb landscape, the beautiful rivers and waterfalls, and the unspoiled local villages. Many rivers flow through the Himalayas featuring different grades of difficulty and rapids. The Trishuli, Seti, Bhotekoshi, Kali Gandaki, Karnali, Sun Koshi, Arun and Tamor rivers offer a wide range of rafting and kayaking activities. The market potential of these services can be increased by offering customized services according to the preferences and skills of tourists. Nepal also offers a number of options for adventure activities including bungee jumping, paragliding, rock climbing, mountain cycling and zip-lining. These activities are also growing in popularity in the local market and have great potential if properly developed and marketed. This new and growing market also presents an opportunity for consolidation.

Nepal also offers opportunities for more leisurely pursuits. The tropical forests in the plains region of Nepal offer some of the best wildlife habitats on the subcontinent. A jungle safari can be a great opportunity to experience the wealth of Nepal’s biodiversity. For newer market entrants, the far west region of Nepal offer some of the most attractive flatlands, forests, and national parks which are largely underdeveloped. The region is blessed with picturesque highlands, rare wildlife, and splendid rivers. Although Nepal, a country known primarily for its mountains, could be ideal for winter sports, this is, as yet an untapped market. The high valleys and slopes of Nepal are superb for skiing and heli-skiing. Places such as upper Lantang or parts of Khumbu are less steep and are situated at altitudes of 5,300 to 3,300 meters above sea level. They have great potential to be developed as destinations for winter sports during late winter and early spring. Mountain flights offer the most luxurious experience of viewing of the majestic Himalayas. Investors seeking to expand into high value services such as ski resorts and mountain flight services can build a sustained competitive advantage due to high entry barriers.

Cultural/Religious Tourism
Nepal has a wealth of spectacular destinations for both the cultural connoisseur and the spiritual traveler. Nepali culture is a harmonious blend of two of the world’s major religions. The tenets and traditions of Hinduism and Buddhism have co-mingled and evolved alongside one another over millennia to create a way of life that is unique to the people of Nepal. This tradition is reflected in the local cuisine, folklore, the arts, and architecture. As a result, religious sites often have cultural significance and enjoy widespread popularity. Around 56% of inbound tourists visit religious and cultural sites during their visit to Nepal.7 This represents an opportunity for tourism entrepreneurs to invest in associated infrastructures, including restaurants and gift shops. Nepal also has many holy sites for devout Hindus and Buddhists. Pashupatinath, Lumbini, Janakpur, Jaleshwor Mahadev, Dolakha Bhimsen, Swargadwari, Swayambhunath, Bouddhanath, Manakamana, Baraha Kshetra, Pathivara, and Gosai Kunda are among the hundreds of sites that Hindu and Buddhist devotees hope to visit. Pahupatinath and Lumbini each attract more than 150,000 visitors annually. While there is heavy pilgrim traffic to religious sites, the entrepreneurial opportunities related to this traffic have not been formally monetized. Nepal is also famous for natural treatments including Ayuvedic care and Naturopathy. For its part, Naturopathy includes exercise, yoga, reiki, meditation, physiotherapy, and various other methods for curing physical and mental illnesses. Its popularity has been increasing rapidly in recent years. However, there are a lack of facilities and trained practitioners to leverage this growth. This lack of infrastructure and human resources represents a real business opportunity for tourism entrepreneurs. The popularity as well as market of Ayurvedic medicines and care has been increasing day by day. The ancient knowledge of Ayurveda has starting benefitting from modern research and has resulted in advance and quality products and techniques in the market. Ayurvedic system of healing is based on a holistic, natural and inherent healing system which has gain popularity in recent times. The market opportunity for religious tourism is vast. There are 1.5 billion Hindus and Buddhists in the world, and most of them live in the Indian subcontinent, China and South East Asia. Even if Nepal were able to attract only one-tenth of the total population of these regions over a 10-year period, this would increase Nepal’s total tourist traffic by 150,000 tourists annually. Infrastructure is needed to make this a reality. Tourism entrepreneurs interested in investing in Nepal will be instrumental in developing this infrastructure and will be well placed to reap the benefits over the long-term.

MICE
Nepal, with its pleasant climate and warm hospitality is ideally suited for meetings, conferences, and retreats. Nepal has a temperate climate throughout the year and as such, makes an ideal location for retreats and conferences. Average temperatures in Kathmandu and Pokhara range between 200C-300C throughout the year. This makes both indoor and outdoor activities viable year-round. Nepal already has the requisite infrastructure for meetings, conferences and exhibitions. There are already a number of international luxury hotel chains including Radisson, Crowne Plaza, and Hyatt Regency in Kathmandu. Marriott and Sheraton will join the market shortly. There are also luxury resorts in the immediate vicinity of Kathmandu which are readily accessible from the capital. Similarly, the famous tourist destination Pokhara, which boasts of several luxury resorts is only a short flight away from Kathmandu. Kathmandu is well connected to major Asian destinations including Delhi, Bangkok, and Kuala Lumpur. Most Asian cities are less than a 6-hour flight away from Kathmandu. Indians do not require a visa to enter into Nepal. Virtually all others can obtain a visa on arrival. There are opportunities for experienced entrepreneurs to leverage Nepal’s unique features and existing infrastructure to promote Nepal as a regional MICE center. It has an inherent cost advantage over its regional competitors due to lower cost labor and overheads.

Laws and Regulations

Nepal’s tourism sector is growing rapidly and has tremendous potential, owing to its natural beauty and cultural heritage. In this context, the GON has indicated its intent to increase national productivity and income, create employment opportunities, improve regional imbalances, and more robustly to project Nepal’s image in the international arena. Most of these goals can only be realized by developing and diversifying the nation’s travel and tourism industries.

Tourism Act 1978
This act comprises rules related to registration, license, renewal, operation, suspension of licenses, and cancellation of tourism enterprise registrations. Main features include:

  • Details on the license that is required to provide travel and trekking services
  • Provisions relating to standards for hotels, lodges, restaurants, resorts and bars
  • Provisions on restrictions, permissions and royalties to be paid for mountaineering
  • Provisions relating to tour guides

Tourism Vision 2020
The GON’s Tourism Vision 2020 (the Vision) identifies tourism as the nation’s best hope for and principal contributor to a sustainable Nepal economy. The Vision seeks to achieve 2 million tourist visitors a year and, by adding one million jobs to the sector, making the tourism industry the nation’s number one employment generator by 2020. It will do so by developing Nepal as a safe, unique, exciting and environmentally sustainable tourist destination.
The major goals of Tourism Vision 2020 include:

  • Destination promotion and other marketing efforts
  • Efforts aimed at increasing international connectivity by entering into air service agreements with other countries and supporting NAC’s fleet expansion program
  • Incentives to private sector entrepreneurs to expand tourism services
  • Developing land transport links with China, India and Bangladesh
  • Promoting the development of new tourist destinations

National Tourism Strategy and Action Plan 2015-2024
The GON’s Tourism Vision 2020 which intends to achieve an inflow of 2 million visitors per year and to establish tourism as the number one employment generating sector of the economy by setting a target of 1 million. Plan 2015-2024 provides much needed direction and guidance for the implementation of the proposed strategy will be implemented in two stages; Phase 1 (2015-19): The main emphasis during this stage of development is on diversifying and improving services. In this phase range of products will be diversified by expanding new areas and locations which is expected in relieving the congestion in tourism zones, also will develop new and improved products and services that are currently emerging. Phase 2 (2020-25): This phase will emphasize sector consolidation and expansion, strengthening the products and achievements of Phase 1, expanding the product range, and targeting new high-yield markets. The focus of the strategy will be on quality control and maintain the quality improvement.

Investment Incentives

Visa

  • Indian nationals do not need a visa to enter Nepal.
  • No tourist visa fee applicable to Chinese nationals.
  • No visa fee applicable to the passport holder of member states of the South Asian Association for Regional Cooperation (SAARC) for 30 days.

Income Tax

  • 10% tax rebate to Tourism companies listed with Security Exchange Board
  • In case of special industry, industry based in agriculture and tourism sector that provides direct employment to at least 100 Nepalese national during a whole year, the effective tax rate shall be 70% of applicable tax rate.
  • Mandatory provision has been made for the employees of profitable public corporations and those employees working in ‘A’ and ‘B’ class bank and financial institution to be sponsored for internal tourism trips in Nepal by their respective employers. This may serve to drive up number of domestic tourism in Nepal.

Custom duty

  • 1% custom duty shall be applicable for import of promotional materials printed outside Nepal for promotion of tourism business.
  • Rebate of 50 % custom duty on the import of luxury coach, micro-bus and mini-bus is allowed for travel agents, trekking agencies, rafting agencies, hotels and resorts on the recommendation of MoCTCA.

Tourism Sector Profile PDF