Last week, for a half-day workshop on venture capital, a colleague tried to book a hall at one of the five-star hotels in Kathmandu. To get the best rates, he made a few calls, only to discover that all the five hotels quoted the exact same price. Surprised, he probed further and found out hotels were following a directive, recently issued by their trade group-the Hotel Association of Nepal (HAN). The HAN, mind you, looks after the interests of the local Nepali owners and partners as opposed to those of the professional managers of Kathmandu's top-tier hotels. And thanks to the political and the financial clout it carries, the HAN has historically enjoyed the kind of price-fixing prerogatives that OPEC members might envy.
Still, HAN's one-price-fits-all directive struck me odd for two reasons. On one hand, thanks in part to the January ceasefire agreement between the government and the Maoists rebels, Kathmandu's newspapers now report that room bookings, even at five-star hotels, are up. On the other hand, just as more tourists are reportedly coming in, Nepali consumers, who brought the hotels good business in the lean years, are being slapped with astronomical fixed prices for halls and banquets. Has the HAN already forgotten how the slump years really played out?
Flashback: Kathmandu's hotel professionals look back and agree that 1997 was the last banner year in their industry. Bookings were up. Preparations were underway for the then Visit Nepal Year 1998. Hotels sprang up. Multilingual seasoned tourist guides could command up to Rs 50,000 a month. The sky was the limit till things started sliding after an Indian Airlines flight was hijacked from Kathmandu in late1999.
As global media played up news about the violence in the hilly hinterland, international guests decided to vacation elsewhere, while the infamous "Ritik Roshan Kanda-2000"-which allowed attacks against dark-skinned Nepalis on the streets-threw cold water on Indian visitors' desire to come to Nepal. The year 2001 was the annus horribilis what with the royal massacre, the imposition of the state of emergency and the war in the hills, while 2002 wound down as the bloodiest year in Nepal's history. Given all this, it is a wonder that our five-star hotels have not gone out of business altogether.
Nepali customers: Professional managers, sans HAN guidance, found a new set of customers right under their noses but had been ignored. These local customers paid in rupees and they paid well, hiring posh rooms and halls for banquets, parties and Friday evening dances. Once the managers realised that these hitherto under-served customers could, to a large extent, compensate for the slump in the tourist market, they became bold and creative on their own, and went on to woo and pamper. As a result, they brought in entertainers as diverse as French Can Can dancers and lissome satellite-TV VJs to Kathmandu, and sold profitable dinners to thousands of Nepalis at obscenely high prices. During the same period, new restaurants that were not members of any restrictive trade-association did roaring business too. Thamel's Himalayan Java, for instance, is always crowded with Nepali customers who appear willing to shell out Rs 100 for a cup of coffee.
Bad decision: Now with its directive, the HAN clings to narrow-minded views even though the profiles of its paying customers have changed. And so, instead of trusting the judgement of its professional managers, it has forced a monolithic stance that negates the diverse offerings that Kathmandu's five-star hotels offer. Moreover, it has robbed the Nepali customers their right to choose among hotels based on various factors, price not least among the considerations.
The sooner the HAN takes its hand out of the business of fixing prices for its members, thereby controlling even the portion of the pie per member, the sooner it can learn to adapt to the market's invisible hand to increase the size of the total pie for all its members.