Liquor import ban leaves Nepal’s hospitality industry in a bad mood

The three-month ban on importing alcohol, which aims to save foreign currency, has left Nepal’s hospitality industry in a bad mood.

Tourism is one of the country’s biggest foreign currency earners, and hoteliers say without imported beverages, the MICE segment – which stands for meetings, incentives, conferences and exhibitions – will fall flat.

MICE is a big part of hotel business, even at the best of times, and it has become particularly important in the current situation where the tourism industry is trying to regain its footing after the Covid disaster, insiders say.

Alarmed by the rapid depletion of the country’s foreign exchange reserves due to surging imports, the government on April 26 banned the import of 10 types of goods it designated as luxury items.

Alcohols (excluding raw materials), cigarettes and tobacco products are among the 10 products under embargo. The ban, which was originally scheduled to last until July 16, has been extended until the end of August.

“This is a negative move, at least for the hospitality industry,” Shreejana Rana, chairperson of the Hotel Association of Nepal, told the Post.

“If we are open to the world, we have to respond to demand. We all know that tourists demand alcoholic beverages. They have their own choices. And if we can’t give them what they want, that will send a negative message.

According to her, the government should exempt hotels and restaurants by developing a certain mechanism.

“Otherwise, this decision could ruin the industry, she said.

According to hoteliers, alcohol sales account for 15% of upscale hotel revenue. Demand swells at weddings and large events, which have emerged as a lifeline for many hotels as tourist arrivals are still in the doldrums.

Varun Talwar, general manager of the five-star Hyatt Place Kathmandu, said the ban on importing international alcoholic products had made them more expensive.

“Due to the shortage of supply, prices will obviously increase. If this move is prolonged, it will have a significant impact on the hospitality industry in the near future,” he said.

In Nepal, a large number of Indian tourists, who currently account for 40% of total arrivals, consume international brands, according to hoteliers and tourism industry insiders.

The Alcohol Importers Association of Nepal said in a statement on Tuesday that hotels, restaurants and bars would lose significant revenue due to the alcohol import ban. He said the extension of the ban had raised questions about the sustainability of luxury properties.

Travel and tourism businesses, which accounted for around 8% of the country’s gross domestic product and provided more than 1.05 million jobs directly and indirectly in pre-Covid days, were the hardest hit after entering travel restrictions came into force at the end of March 2020 after the pandemic hit the country.

On September 23, 2021, Nepal dropped the seven-day quarantine requirement and resumed issuing visas on arrival to all vaccinated foreign travelers in a bid to revive its virus-ravaged tourism industry.

Travel restrictions and an economic downturn triggered by the Covid-19 pandemic have given Nepal’s luxury hotels a boost, decimating revenues and profits, and the stunned hospitality industry is still struggling to recover despite huge losses.

Nepal welcomed 1.19 million tourists in 2019.

In 2020, Nepal had just launched an ambitious Visit Nepal Year campaign to great fanfare, aiming to attract at least 2 million tourists, only to abandon the program after the incipient pandemic took on global proportions.

The disastrous year ended with 230,085 arrivals. After a difficult end to 2020, tourism in Nepal suffered further setbacks as countries tightened travel restrictions in response to new virus outbreaks.

The number of foreign visitors who entered the country last year stood at 150,962. Arrivals in 2021 were the lowest figure since 1977, when the country welcomed 129,329 tourists, a year after the number of tourists in Nepal reached six figures for the first time.

Tourist arrivals in the second quarter of 2022 continue to be disappointing. The outlook for the third quarter is not much better and unemployment remains a risk. Experts attributed the bad show to global inflation, which made travel packages more expensive than ever.

The Ministry of Tourism recently unveiled a plan to revive the struggling industry, but industry insiders say the plan does not outline how to boost tourist numbers.

According to the Liquor Importers Association, Nepal imports alcoholic beverages worth $12 million (1.5 billion rupees) per year, which accounts for about 0.1% of the total annual foreign exchange outflow.

The association says it is unfair to ban alcoholic beverages as it is also a source of foreign currency.

According to the association, the country spends $15 to import a liter of foreign alcoholic beverage, but hotels, restaurants and bars collect $120 for each liter sold. The country earns eight times more in foreign currency than it spends.

Counterfeit products are circulating rampantly in the market following the ban, and this could harm the industry as a whole, the association said.

Tek Bahadur Mahat, chief operating officer of Hotel Association Nepal, said that since the government has prioritized increasing the number of tourists, a major source of foreign exchange, it should not hold quality and standardization for granted.

“So far, the situation hasn’t gotten that bad, but if the restriction is prolonged, the industry could face greater consequences,” he said.

Prior to Covid, the hospitality industry was the main driver for the growth of the service sector in Nepal, especially with the unprecedented investments in hotels, restaurants and adventure leisure activities.

In just three years, from 2017 to 2019, the country has seen the addition of 25 four-star properties producing nearly 3,000 overnight stays. Since 2017, a host of 17 new luxury and luxury five-star resorts and hotels have been built.

Hoteliers say more luxury resorts are springing up, mostly operated by reputable global hotel chains, as investors are optimistic about the industry’s growth in the near future.

But investors bemoan the government’s short-sightedness as it has put in place policies that are counterproductive to the industry.

“In Nepal, most of the government agencies are enforcing strict rules instead of helping the industry with proper and attractive policies, which ultimately becomes counterproductive,” said Yogendra Sakya, a senior contractor in the construction industry. trip, to the Post in a recent interview.

Mahat said they informed the government of the possible consequences of the import ban.

“The government should address these issues before it is too late.

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