The Nepal earthquake and subsequent aftershocks of spring/ summer 2015 caused immediate disruption to the tourism industry. Consequently, the number of foreign visitors entering the country by air and road has fallen dramatically. In order to assess the impact of this market shock upon the various actors in the tourism value chain, 342 enterprises in the Kathmandu Valley and Pokhara were surveyed between July – August, including hotels, tour operators, travel agencies, trekking agencies, restaurants and curio shops.

Surprisingly, the respondents expressed a degree of cautious optimism about the recovery and resilience to the market shock. The majority of respondents identified the need for international marketing and promotion as the most critical tool for revival and recovery. Whilst a national campaign to build confidence in Nepal as a destination is being led by Nepal Tourism Board (NTB), it is also clear that businesses can do a lot by themselves. The impact upon enterprises has not been uniform and some businesses/ sectors have been hit harder than others. In general, more innovative businesses, with a strong brand, strong marketing presence (including in social media), a quality product and service, and links to international intermediaries are more likely to be resilient. The diagram below illustrates how relationships between primary entities in the tourism sector have been affected after the earthquake and what interventions are needed to improve relationships.

Infographic: Kiran Maharjan

Enterprises remain cautiously optimistic

Bikram Rai

98% of respondents confirmed that their business was growing, either rapidly or steadily, before the earthquake. Average growth in turnover from 2013 to 2014 was more than 20%. After the earthquake, average cancellation of bookings for the period August – December 2015 was 77%. However, many businesses benefit from walk in customers. 60% of respondents said that the impact of the earthquake upon their business would be less than one year, whilst 91% said that the impact would be less than two years.

China and European visitors dominate source markets

As expected, China and Europe were identified as the major source markets. Anecdotal evidence suggests that a greater than expected flow of free independent travellers (FIT) has supported the industry post-earthquake. FITs have helped to support smaller companies who are more vulnerable at this point in time. FITs, along with aid-workers, have also helped some in the hotel industry.

Employees remain employed but vulnerable

92% of enterprises said that they haven’t fired anyone. Furthermore, almost 62% anticipate that they won’t need to make salary cuts in the next six months. Where contracts are in place which limit the ability of managers to release staff, there is a real concern that workers may be forced to take unpaid leave.

Government support and assistance is required

Bikram Rai

88% of all respondents said that tourism enterprises should receive government support in the form of marketing support (54%) and financial support (25%). Interviewees said that international marketing (81%), reconstruction of natural heritage sites and better management of them (55%), infrastructure development (especially development of international and domestic airports) (32%), and improving market conditions (33%) should be the primary areas of focus for a quick revival of the tourism sector. These areas of focus also coincide with the three things that Nepal Tourism Board (NTB) is planning to focus on in the coming months: marketing and promotion, reconstruction of heritages, and development of human resources.

Managing cash-flow and unhealthy competition will be major challenges

Gopen Rai

Attracting customers and managing cash flow were identified as the most important and immediate operational challenges. Unhealthy competition is also a major concern over the next 6 months.When asked about their concerns for a quick revival of the tourism sector, interviewees identified market concerns, negative messaging in international media and politics. Surprisingly, most interviewees were not concerned about the sector’s vulnerability to natural disasters even though the major reason for booking cancellations after the earthquake was the risk of natural disasters and disaster preparedness.

Revenues are projected to fall on average by 30% from the previous year

Businesses performance has slumped after the earthquake at a similar rate across size of business and sector. On average, enterprises had earned 35% of their total 2014 turnover in the first seven months of 2015. The respondents projected they would generate approximately 70% of 2014 earnings on average in 2015, suggesting a 30% fall in revenue. Recent operational challenges may have dampened those projections.

Few entrepreneurs see the earthquake as a chance to improve products and services

Only 28% said the earthquake is an opportunity to improve products and only 25% said they would use this time to invest in their employees to improve service delivery. This is worrying given the need for the sector to remain competitive and continue to innovate.

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#MyGHT, Ayesha Shakya