To lure more tourists, the government announced Visit Nepal 2011 in January with the aim of attracting one million international visitors. The targeted number seems pretty ambitious because during a similar campaign in 1998, Nepal hosted only 464,000 tourists, earning US$ 24.8 million in revenue. Already squeezed by declining purchasing power due to global recession, potential tourists will either be postponing travel plans or looking for cheaper destinations around the globe. Any policy or promotional campaign should take stock of these changes occurring in the international tourism market. This means a change in regulatory structure and improvement in price competitiveness.
Does Nepal have the appropriate supporting regulatory structure, flexible policy framework and basic infrastructure that would increase price competitiveness without compromising on quality of service? According to the latest Travel & Tourism Competitiveness Report, published annually by the World Economic Forum, the answer to this question does not look that encouraging. Out of 133 countries, Nepal ranks 118 in travel and tourism competitiveness. It was ranked 116 in 2008’s report, which means competitiveness of this industry has actually declined. Perhaps, being modest about the real capacity and ability of this industry will help foster realistic dreams about the future of this sector.
Every time a new tourism campaign is launched, the primary focus is on increasing the number of tourists. It seems that the policymakers forget the primary purpose of this sector—to increase revenue and stimulate local economy. Just increasing the number of tourists does not fulfill this aim; what matters is per capita visitor spending in the economy. That being said, I do not mean to trivialize the importance of policies aimed at increasing the number of tourists coming to Nepal. Yes, this is important but in terms of revenue generation and stimulation of local economy, per capita visitor spending matters more. This means policymakers need to focus on luring high value tourists rather than budget visitors. It would be fantastic if we were able to get both, i.e. more tourists with more per capita spending.
Tourists are highly sensitive to price competitiveness and value added services provided by this industry. Generally, three factors – macroeconomic risks, regulatory structure, and tourism infrastructure – are essential to improve price competitiveness and to induce more per capita visitor spending in the Nepali tourism industry.
Tourists’ spending behavior is sensitive to exchange rate fluctuation. Appreciation of domestic currency against major international currencies increases the cost of visiting Nepal. This is what is happening right now as the domestic currency is consistently appreciating against the dollar and the euro. Continuation of this trend will not bode well for the tourism sector and the ambitious Visit Nepal 2011 campaign.
In addition, the existing regulatory structure is also unfavorable in terms of increasing price competitiveness. Nepal ranks 119 in the quality of regulatory framework in the T&T Competitiveness Report. Worse, it has one of the most cumbersome visa requirements (131 out of 133 countries) rules in the world. Easing of visa requirements for tourists from the industrialized and emerging nations, decreasing cost of application procedures and extending the number of days allowed to stay in Nepal will be helpful in increasing price competitiveness of the Nepali tourism sector.
Apart from macroeconomic and regulatory issues, the biggest constraint on growth and price competitiveness of this sector is bad infrastructure. The total roads network and roads density is horribly low when compared to countries with similar per capita income. In ground transport infrastructure, the ranking of Nepal’s road quality and transport network are 125 and 103 respectively. Frequent bottlenecks along the main highways, labor disputes, strikes, and a lack of supporting information and communication technology infrastructure have increased T&T costs, leading to unfavorable price competitiveness.
Furthermore, the air transport infrastructure – the most important mode of transportation for tourists – is also not conducive to smooth mobility of visitors. Out of 44 domestic airports, less than two-thirds are operational and the quality of the operating airports is frustratingly low (114 out of 133). For more than three decades, the country has been relying on a single international airport. The plans to build additional ones in tourist hotspots such as Lumbini and Pokhara are limited to discussion and planning phases. Add to this the effect of 16 hours (and counting) of load-shedding daily and the present day Nepali tourism industry looks like the most unattractive destination in its history.
That being said, the value addition contribution of the tourism sector to the GDP will continue to be higher than that of agricultural and industrial sectors. However, without a change in existing policies, regulatory structure, and improvement in infrastructure, it is unlikely that Nepal can attract a million visitors in 2011. Given the change in tourism landscape arising from global recession and resulting erosion of purchasing power of potential tourists, policymakers need to forge out a new approach that is systematic and is consistent with the realities of our economy.
(The writer is studying at Dickinson College, USA)
sapkotac@dickinson.edu
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