Desh Bandhu Basnet

Chairperson

Tourism & Air Transport Committee – FNCCI

Tourism is often cited as a crucial pillar of Nepal's economy. How do you view its significance?

Tourism is undoubtedly one of the most important pillars of Nepal's economy, as it is sustainable and uniquely viable. While other sectors like industries, hydropower, agriculture, IT, and remittance contribute significantly, each has its limitations in the context of Nepal.

For example, in industries, it's hard to compete with economic giants like China and India, who dominate global manufacturing. Hydropower, though promising, faces the risk of technological shifts in the future. Agriculture is constrained by our geography, limited technological advancement, and a lack of human resources. Remittance, while a lifeline for many families, is not a reliable long-term strategy, as it relies on sending our workforce abroad, which weakens our domestic potential. IT is growing, but as the world rapidly advances, we struggle to keep pace.

Tourism, on the other hand, offers Nepal an unparalleled advantage. We have unique and irreplaceable assets like the birthplace of Buddha, Mount Everest, Pashupatinath, rich cultural heritage, and stunning natural beauty. These attractions make us a global destination, and unlike consumable resources, they remain intact with proper preservation. By focusing on promoting and developing tourism, we can strengthen this pillar and sustain our nation's economy for generations.

 What is impacting Nepal's ability to compete with neighboring countries, and what changes are needed to move forward?

Nepal is naturally gifted for tourism. We have the perfect blend of culture, heritage, nature, and hospitality it feels as if we were made for this industry. From our appearance and way of life to our traditions and how we share our culture, everything aligns perfectly for tourism. It's as if God created this beautiful country and told us to showcase it to the world.

However, every country's development needs a strong foundation, and that comes from its rule book the laws and policies that guide progress. In Nepal, the Tourism Law of 2035 still governs our industry. Think of it like trying to compete in a race with a car built in 2035 against one built in 2024 it’s just not feasible. This outdated framework makes it hard for us to compete with our neighbors.

Bhutan has gone far ahead with its well-regulated and exclusive tourism model. Tibet has achieved remarkable growth, and even Bihar, despite its limitations, is advancing steadily. Meanwhile, Nepal, with unmatched assets like Mount Everest, the birthplace of Buddha, wildlife, whitewater rafting, and the majestic Himalayas, is falling behind.

To regain our competitive edge, we must modernize our tourism laws and policies. This includes addressing infrastructure gaps, simplifying processes, and creating strategies to sustainably harness our resources. We need to assess where we are lacking and act quickly to secure our place as a global tourism leader.

What changes are necessary to streamline governance and make Nepal more competitive as a tourist destination?

Tourism in Nepal faces significant challenges due to the involvement of five different ministries Tourism, Industry, Economy, Law, and Home Affairs. Each has its own rules, requirements, and regulations that affect the sector, making it difficult to operate efficiently. Without a unified task force dedicated to tourism, progress remains fragmented, and we struggle to move forward cohesively.

The first step is updating our policies and regulations to reflect the current realities and make Nepal competitive in today's global tourism market. For example, our tax structure is a major hurdle. Tourists are already deterred by high airfares to and from Kathmandu, and additional costs like a 13% VAT on airfares and a 2% luxury tax introduced last year make Nepal an even more expensive destination. These taxes, along with a complicated tax system, push potential tourists toward more affordable alternatives.

To address these issues, we need a streamlined governance model a single, specialized task force or body that can cut through red tape and focus solely on advancing tourism. We also need to reassess our tax policies to ensure we remain competitive without overburdening the industry. If we reduce costs and simplify processes, Nepal can capitalize on its unique attractions and draw more visitors, strengthening its position as a global tourism hub.

What role should the government play in supporting these private investments, and what challenges currently hinder collaboration?

The private sector has been a driving force in Nepal's tourism industry, investing heavily and creating opportunities that benefit the entire nation. For example, near about 100 Billion Rupees have been invested in branded hotels, which have generated substantial employment and attracted a global audience to Nepal. These hotels not only promote Nepal as a beautiful destination but also contribute directly to the government's revenue through luxury taxes and VAT.

Despite these efforts, the government’s support remains minimal. Instead of fostering collaboration, the government often adds to the burden by imposing high taxes and regulations that stifle growth. This approach discourages further investment and undermines the very sector that has worked tirelessly to build Nepal's tourism reputation.

What we need is a partnership where the government works hand-in-hand with private investors. The government should focus on creating enabling policies, improving infrastructure, and reducing unnecessary financial burdens. Recognizing and supporting the private sector's contributions is essential. If the government actively supports these efforts instead of just squeezing investors, Nepal's tourism industry will thrive, benefitting everyone from entrepreneurs to citizens.

Do you believe branded hotels are beneficial for Nepal's tourism industry?

Absolutely, branded hotels are vital for Nepal's tourism industry. They serve as the face of tourism, showcasing the country to the world with their global reputation and standards. Nepal’s hospitality sector has seen a significant evolution in international chain hotels, from pioneering establishments to modern global brands. The journey began with Hotel Royal in 1955, established by Boris Lissanevitch, marking Nepal’s entry into modern hospitality. The first international chain, Hotel Annapurna (formerly Royal Hotel), operated by ITC in 1965, set the benchmark for luxury accommodations. Soaltee Hotel further elevated Nepal’s standing by partnering with Oberoi Hotels in 1969, followed by management shifts to Holiday Inns and IHG’s Crowne Plaza until 2011.

The modern era saw renewed growth with Kathmandu Marriott’s debut in 2019, followed by the entry of global brands like Hyatt Palace, Aloft, Ramada Encore and Fairfield by Marriott. Recently, niche luxury offerings like Shinta Mani Mustang – A Bensley Collection, have emerged, reflecting a diversified market catering to both luxury and adventure tourism. The pipeline is robust, with Accor’s Mercure Hotel, Ramada by Wyndham, IHG, and other renowned brands poised to expand Nepal’s international hospitality landscape. When Marriott opened in Nepal, it set a benchmark, and now we have more than a dozen international hotel brands here. These brands come with extensive customer bases and global networks, significantly amplifying Nepal’s visibility and promotional reach. 

However, Nepal presents challenges for such investments. For instance, the government has capped brand royalty at just 5%. While this may seem like a protective measure, it’s counterproductive. Nepal is not a large market, and our policies are not particularly favorable. If brands find neither sufficient profitability nor a supportive environment, why would they choose to operate here? Operating a global hotel chain in Nepal under such constraints is extremely challenging. 

To unlock our full potential, we must create an attractive investment climate for more branded hotels, including renowned names like, JW Marriot, Raffles, Four Seasons and Wyndham Grand etc. These high-end brands can elevate Nepal’s profile as a destination for luxury tourism, drawing affluent travelers who bring greater economic benefits. The government needs to reassess its policies, remove unnecessary barriers, and actively encourage global chains to invest in Nepal. By doing so, we can enhance the tourism sector and strengthen our economy.

we must create an attractive investment climate for more branded hotels, including renowned names like, JW Marriot, Raffles, Four Seasons and Wyndham Grand etc. These high-end brands can elevate Nepal's profile as a destination for luxury tourism, drawing affluent travelers who bring greater economic benefits. The government needs to reassess its policies, remove unnecessary barriers, and actively encourage global chains to invest in Nepal.