This "7MG001 – The Research Project International Business Management" assignment examines how the COVID-19 pandemic affected Nepal's tourism and hospitality sectors.
This chapter provides an overview of the impact of the COVID-19 pandemic on Nepal's tourism and hospitality industries, with a focus on financial losses, operational challenges, and changes in consumer behavior. It outlines the significance of tourism for Nepal’s economy and discusses how the pandemic led to economic downturns, with substantial declines in tourist arrivals and job losses. The chapter also introduces the research objectives, questions, and significance, aiming to explore strategies for recovery in Nepal’s tourism sector. For further insights into the research process and data collection, our Assignment Helper can guide you through the complexities of the study.
COVID-19 has brought uncertainty and affected almost all industries worldwide, severely affecting global tourism (Uğur and Akbıyık, 2020). Similar to another world giant, Aesop’s tourism often supplies a tenth. 4% of the world’s GNP and currently provides work to 10% of the world’s population. Similarly, Nepal has not been left out as the country receives huge economic losses because of restricted mobility and cancellation of flights in the initial 14.37% economic loss (World Bank, 2023). According to the latest statistics, annually in the year 2018, the Nepalese tourism industry earned NPR 240.7 billion, representing 7.9% of its GDP. Tourism has become one of the biggest and most significant sectors of the global economy by 2019 making up 8.9 trillion of the gross domestic products of the entire world and supplying a tenth of all the jobs on an international level (World Bank, 2023).
Especially in Nepal, 2019 figures show that tourism earned $ 651 million of foreign currency, 4% GDP of the country and providing work opportunities to 5% of the working population (Bhattarai and Karmacharya, 2022). However, with the advent of the COVID-19 pandemic that was declared on March 11, 2020, the tourism sector came under immense pressure. Globally the sector lost dramatically nearing $ 4.5 trillion destroyed in the year 2020, the current account balance would show 48. its share of the total world GDP declined by 1% while it also lost sixty-two million jobs (Bhattarai and Karmacharya, 2022). In Nepal, the economy shrunk at a rate of Percent change; exports decreased by 14.37%, while tourist arrivals dropped by 80% as compared to the previous year.
The COVID-19 pandemic has affected all the global economies to the highest level with the tourism industry bearing the brunt (Henseler, Maisonnave and Maskaeva, 2022). This sector, which is very crucial in many countries’ economies including the Nepalese economy, has been grappling with challenges such as restrictive travelling, cancellation of flights and a generally unfavourable environment (Henseler, Maisonnave and Maskaeva, 2022). Tourism and travel are not only means of generating income but it is instrumented for economic development, foreign exchange and job creation. Tourism has been a major source of income for making up global GDP in 2019 besides being a major source of employment (Song et al., 2021). Further, for the Nepalese economy, tourism has been one of the most important sources of revenue and foreign exchange amounting to several billion dollars, which in turn enhanced the opportunity of employment for thousands of people (Song et al., 2021). The immediate consequences were severe: imminent consequences that included high unemployment, decreased income and the future of thousands of people were at stake. It was further aggravated by a 2% drop in the number of tourists visiting the country in January 2020 than the corresponding period in January 2019, and this signalled the beginning of a free fall of both international and domestic tourism (UN Tourism, 2021). Further, around 10000 tourists including trekkers who visited Nepal before the lockdown were left stranded though the majority of them were evacuated later.
The effects of COVID-19 on the economy in Nepal have been very severe and it can be said that it has affected more than the earthquake of 2015. Over 5 million Nepalese are working overseas, which contributes about 23% of the country's GDP, adapting to the hit from the pandemic tougher financially (IMF, 2021). The Ministry of Foreign Employment has allowed over 4 million Nepalese migrant workers to work in 110 countries after granting them permits in 2009. In particular, it was noted that foreign remittances rose by 23% in the year following the 2015 earthquake, thus helping families affected by the crisis (IMF, 2021). However, the Covid-19 pandemic has occurred in the form of a much more serious economic shock and poses a threat to the Nepalese economy which is very much dependent on tourism and remittance income (Aigbedo, 2021). The effects of the pandemic also should stress the importance of developing plans how to develop a more diversified economy that is protected from such failures worldwide.
Aim
The aim of the research on COVID-19's effects on hotels and tourism at a Nepalese-listed business is to get a thorough understanding of the pandemic's diverse effects on the hospitality and tourist sectors.
Objectives of the research
The importance of this study is the ability of the study to offer valuable information on the impact of the COVID-19 pandemic on the Nepalese tourism and hospitality industry (KC, Dhungana and Dangi, 2021). Since these industries are crucial to the national economy, it is essential to identify the extent of financial, operational, and consumer behavioural issues that listed hotels and companies encounter in terms of recovery and resilience (KC, Dhungana and Dangi, 2021). Consequently, the findings of this research will provide useful data to policymakers, entrepreneurs, and other stakeholders who will be in a position to take relevant measures that will prevent such crises.
Further, the research’s literature review is intended to provide an idea of the efficiency of the government aid programs and obtain actual recommendations from the representatives of different industries to enhance future support mechanisms and strategies (Basnyat and Sharma, 2021). This will not only help Nepal’s tourism and hospitality industry to regain and be in a position to face such problems in future but also enable Nepal’s tourism and hospitality sector (Basnyat and Sharma, 2021). The outcomes of the present study shall be utilised to advance strategic management initiatives, optimise organisational performances, and strengthen the tourism industry in Nepal for its more sustainable growth by supporting the nation’s overall economic stability.
COVID has brought about a tidal wave of unprecedented nature to the world economy, particularly the tourism and hospitality industry (Gössling, Scott and Hall, 2020). As Nepal is highly dependent on tourism, the pandemic has resulted in severe problems such as heavy losses, shut and decreased demand from consumers (Gössling, Scott and Hall, 2020). Albeit, the sector plays a crucial role in the Nepalese economy, there is a dire absence of a study that measures enumeration and quantitative analysis on the most significant impacts of the pandemic on Nepal’s tourism and hospitality industries in terms of financial performance and consumer behaviour and government efficiency.
This research aims to fill this gap by studying the pandemic impact on the financial performance of Nepalese-listed hotels and companies empirically, discussing the business operation setbacks, and researching the shift in customers’ behaviour (Shapoval et al., 2021). Furthermore, the research will assess the functionality of all the government policies and support measures that were adopted to cushion the effect of the pandemic on the industry (Shapoval et al., 2021). Consequently, the study endeavours to offer potential implications and strategies for managing the perpetuating crisis within the tourism and hospitality industries for stakeholders to use in their functioning and preparing for future disruptions.
This chapter presents a critical review of the existing literature on the effects of COVID-19 on the global tourism and hospitality industries, with specific reference to Nepal. It examines the financial and operational impacts, shifts in consumer behavior, and government responses to mitigate the crisis. The review also highlights regional differences in the pandemic's effect on tourism, with insights into supply chain disruptions, workforce challenges, and the need for sustainable recovery strategies. This literature forms the foundation for the research, helping to address key questions in "7MG001 – The Research Project International Business Management.
The COVID-19 pandemic has adversely affected many industries although some are worse affected than others, to mention, for instance, the tourism and hospitality industries. This chapter encapsulates the state of knowledge of the literature review done to determine the impacts of the pandemic on the tourism and hospitality industries in Nepal. The review will look at the financial, operational and consumer behaviour risks that the industry has faced and the efficiency of government policies meant to deal with the risks.
The need for this literature review is to develop a background for the analysis of the level of affectation of the pandemic on Nepal's tourism and hospitality industries and also to understand the research questions that this study intends to answer. This chapter shall present trends that have been identified in previous studies giving a background to the subsequent analysis of the data collected for this research in response to the crisis, to identify its key themes. This review will also aim to review past coping mechanisms of similar crises in both, Nepalese and global contexts for idea generation for recovery and future resilience.
The publication of works begins with a discussion of the general overview of the industry in Nepal and then focuses on the effects of COVID-19. It will then move to the fields of crisis and opportunities that the crisis brought along them being the changes in consumer behaviour and the impact of the government policies on the industry’s reaction. Finally, the chapter establishes the research gaps that this study aims to address to create a contextual understanding of the research and situate it within the existing literature on crisis management in the tourism and hospitality industries.
The COVID-19 pandemic has caused incredible disruption in the tourism and hospitality markets, major world economies have always seen the tourism and hospitality sectors as quite resistant to even adverse economic changes and crises contained in specific regions (Al‐Mughairi, Bhaskar and Alazri, 2021). However, the size and nature of the lessons learnt due to the pandemic are unprecedented, therefore calling for a reinvention of the industry’s fundamental ways of functioning in the tourism and hospitality business.
Thus the tourism industry is well appreciated as one of the largest and if not the most significant industries on the global market. In line with Abbas et al., (2021), the industry contributes to about 10% of the country’s gross domestic product. account for 4% of the world’s gross domestic product and 10% of the world’s employment before covid-19 pandemic. Quarantine measures and social distancing in combination with the banning of international trips and staying at home restricted tourism activities to the lowest levels globally (WTTC, 2023). In 2020 it was about 5 trillion US dollars, and that is a 49 percent increase from 2019 to 2020. From 15% it has reduced its share to about 1% to be precise of the total global GDP (WTTC, 2023). This economic loss was incurred by all regions to a different extent depending on the region’s vulnerability level to the economic effects occasioned by the closure of regional tourist attractions due to the outbreak of the virus and the measures put in place to contain the spread of the virus.
Many places that were depending more on the source suffered the most, especially in the Caribbean, Southern Europe and Southeast Asia (Talapko et al., 2019). The dire consequences of the lost tourist traffic cut across various industries including tourism industries of the hotels, airlines, and tour operators as well as the other supporting sectors like the retail, food service sector and transportation industry (Talapko et al., 2019). The problem was further exacerbated by the sad reality that most of these areas are not driven by a diversified economy hence exposed to the raw impacts of the decline in tourist activities.
Apart from the economic consequences, the current pandemic has ushered in social and cultural changes in the tourism industry globally. In their work on the impact of the Covid-19 pandemic on the global tourism industry, Sufian and Hoque (2022) note that in Bangladesh’s Sylhet region, tourism is one of the major sources of income, meaning that the halt of tourism activities has affected social relations. This disruption is not only in the economic aspect as many tourism-dependent societies have suffered the loss of cultural interchange which is a positive aspect that comes with tourism (Sufian and Hoque, 2022). This has eliminated the feeling of global community which for centuries has been among the perks of global travel and tourism.
Some other ravaging impacts resulting from the cut on international travel include losses in cultural heritage (Cut Dewi et al., 2023). Since the heritage sites mainly depend on the revenues generated from the tourists visiting these sites, many of them have faced a lot of challenges (Cut Dewi et al., 2023). This has caused debate on the future of these sites as to whether they will be sustainable, especially in areas where the government is not fully supportive.
However, contrary to the negative impacts, the pandemic has balanced the environmental gains in the form of a decrease in carbon footprint and environmental harm (Cut Dewi et al., 2023). Due to the reduction of flights and overall travel all across the globe people have been relieved from the pressure of mass tourism for some time. As Abbas et al. (2021) observed, this has led to discussions within the industry about how sustainable tourism may be required in the future.
The notion of building back better has emerged, with the voices of industry representatives and policy-makers calling for an innovation of tourism that will be sustainable post-COVID-19 (Abbas et al., 2021). This consists of, decreasing the amount of carbon dioxide emissions when travelling, encouraging sustainable tourism and manner, and supporting the prosperity of tourism to benefit the local communities better. COVID-19 revealed shortcomings of the existing model of tourism development and opened up the possibility to consider its sustainable forms (Alexandrakis, Manasakis and Kampanis, 2019).
The effect of the COVID-19 pandemic on tourism has however not had an impact in equal measures across the world. The regions differ in the degree of their reliance on the tourism industry, the rate of virus spreading in the region, and the measures that have been taken by the government to mitigate the effects of the crisis (Alexandrakis, Manasakis and Kampanis, 2019). For example, Europe and North America recorded a sharp decline in international tourism; however domestic tourism helped cushion this blow because tourists were more inclined to nearby destinations. Conversely, areas including the Caribbean and Southeast Asia, that expected most of their income from international tourists saw almost all their tourism-related activities shut down.
Research including the one done by Sufian and Hoque (2022) and Abbas et al (2021) offers real information about these regional inequalities. In the Sylhet region, another area of Bangladesh the effects of this pandemic were worse because the region did not have a diversified economy and mostly depended on tourism. As the paper recognises, the commodity concentration poses a worrying trend as economies that slightly diversify themselves, are highly susceptible to shocks emanating from the global market.
The same applies to Southern Europe which is another region sensitive to tourism revenues and suffered immense economic losses (Abbas et al., 2021). Fragile economies such as the ones of Spain, Italy, and Greece suffered from significant losses in terms of revenues and employment in the context of the vulnerable tourism industry. The pandemic has clearly shown that these regions still need to diversify their economies to avoid the effects of future shocks.
The global tourism industry has also had to come up with and put into practice policies on how to mitigate and come out of the effects of the pandemic (Mekonnen, Bires and Berhanu, 2022). The authorities and other representatives of the industries have had to act fast due to the dynamic situation and introduce the necessary changes to help minimize the effects of the pandemic and promote the recovery process (Mekonnen, Bires and Berhanu, 2022). These have included offering bail-out packages to companies and, the creation of guidelines on health measures for the resumption of travel among others to regain consumer confidence and stimulus for domestic tourism.
Rasul et al (2021), as well as Kumar and Ekka (2023), have explained the efficiency of the mentioned crisis management approaches. It was identified that areas with high levels of government involvement and effective coordination for recovery measures were in a better position to cope with the loss due to the pandemic and start the process of regeneration (Rasul et al., 2021). For instance, Asian countries where the governments have put in place strict measures on health issues and additionally boosted the tourism segment significantly, are on the path of recovery faster in comparison to other regions (Kumar and Ekka, 2023).
The outbreak of the COVID-19 pandemic has taken a toll on Nepal’s economy, especially tourism and hospitality which are some of the area’s economic mainstays (ABDIN and KUMAR, 2020). Far-reaching consequences have been faced on the financial performance as evidenced by a low revenue base, poor profitability and solvency. This section however looks at the economic loss experienced in Nepal’s tourism and hospitality industries due to the pandemic based on different studies and reports revealing the extent of the recession in affected industries and the rest of the economy (ABDIN and KUMAR, 2020).
Pre-pandemic the tourism industry was a major earner of foreign exchange, a significant source of income and foreign exchange for the Nepals economy (Maiti, 2022). In the study done by Ulak (2020), he pointed out that the tourism sector in Nepal contributes approximately 7 per cent. In the fiscal year 2018, the tourism industry contributed 9 % of the country’s GDP whereas the tourism industry of Nepal earned NPR 240.7 billion in revenue (Dhungana, 2023). The COVID-19 outbreak, however, resulted in fewer tourists visiting the country, thus a low turnover in revenues. The COVID-19 controls that include the nationwide lockdowns, restricted movements and the cancellation of international flights negatively impacted the movement of tourists into the country which is the mainstay of the sector.
Shivakoti (2021) has pointed out that the result indicated that there has been a negative impact made by reduced tourism revenue since tourism goes hand in hand with other sectors like transport, restaurants, and shops. Customs and tourism businesses were among the hardest hit, as loss of revenue was not only suffered by players directly involved in the business of tourism but also those in the tourism value chain (Shivakoti, 2021). This loss was worsened by the fact that the sector is mostly constituted of SME businesses that have less ability to retain cash so would have been worst affected by the economic decline.
The pandemic cost Nepal's tourism and hospitality businesses in terms of jobs and income and many people lost their sources of employment. Panthhe and Kokate (2021) have brought out that the tourism sector in Nepal has failed to employ up to 5% of the total employees in its pre-COVID period. The lack of tourism activities dumped a huge number of people out of work specifically in the areas of hotels, travel agencies, and tour operators among others (Panthhe and Kokate, 2021). Quite several companies were either closed or made to work at below optimum capacity which resulted in loss of jobs and reduced wages for workers.
Losing employment affected society and the economy in general such as those people living in the rural areas where tourism is the main source of their income (Sun et al., 2022). At the same time, they led to high levels of unemployment and poor salaries especially as many people lost their sources of income in the tourism industry (Sun et al., 2022). These COVID-19 characteristics explained by Panthhe and Kokate (2021) show that vulnerable groups such as women and low-income earners were more affected due to their vulnerability in the tourism sector.
The pandemic also created clear threats to the profitability and solvency of the companies belonging to Nepal’s tourism and hospitality industries. According to Bastola (2020), fewer numbers of tourists from any given country hamper the chances of generating more revenue and this leads to great pressure in terms of financial deficit, especially for businesses that were already struggling with tight margins (Bastola, 2020). Costs incurred as a result of health and safety measures went higher thus reducing the profitability of implementing the measures as many businesses collapsed.
The main problem regarding solvency appeared as more and more enterprises experienced problems with their ability to pay for the cost of renting premises, employees’ wages, or the repayment of a loan. As evident from Shivakoti (2021) COVID led to a significant surge in nonperforming loans in the tourism sector because most of the businesses could not generate enough revenue to service their loans. This gave rise to the concern of the sound health of the banking sector and its vulnerability to calamities that could affect the tourism sector.
The problems felt on the financial fronts by the businesses in the tourism sector also had a domino effect in the economy (Radwan, 2024). The emerging high level of NPLs and the possibility of the ghosts’ business being closed also provoked a financial crisis if the situation continued long time (Radwan, 2024). This goes a long way to reinforce the need for subsidies and bailouts from the Ministry of Finance and the banking industry to forestall the total collapse of the sector.
In Nepal's economy, tourism is one of the most important foreign exchange earners major income is contributed from international tourists. As stated by Bhatta et al. (2022), the tourism sector of Nepal received f1350 million in foreign currency in 2019 out of which it has imported $660million, and the rest of it contributes to the balance of payments and also supports the foreign exchange reserves of Nepal (Bhatta, Gautam and Tanaka, 2022). Nonetheless, due to measures that were put in place to combat the spread of the Covid 19 virus, there was a dramatic drop in international tourist arrivals and consequent decrease in the amount of foreign exchange earned.
The tourism and hospitality industries levied a significant amount of pressure on the Nepalese economy due to the COVID-19 pandemic, hence the government introduced several relief measures (Joshi, 2021). As per the analysis provided by Allaberganov, Preko, and Mohammed in 2021, the government launched the state fiscal incentives containing financial stimuli like concessional, tax cuts, and subsidies to support businesses during the pandemic struggle. However, the success of these measures has remained ambiguous whereby many firms complained of the lacunas involved in applying for aid and adequacy of the aid extended to them. In this paper, Panthhe and Kokate (2021) also analysed the government’s reaction and concluded that the measures aimed at support were not enough to resolve the problem of the massive decrease in financial revenues in the sector. As a result, the authors of the study suggest the need for more effective and integrated support programs that will also provide the necessary safety nets for struggling businesses and employees in the sector (Chilembo, 2021). It is also important to highlight the necessity for the development of a long-term strategy to foster the recovery and resilience of the tourism sector, especially taking into consideration the uncertain conditions provoked by the pandemic.
COVID-19 has not only brought very sharp limitations to Nepali tourism and hospitality organisations financially; it has also provided them with numerous operational problems (Huynh et al., 2021). Companies in these industries have had to experience disruption in their operations throughout the organization and in areas such as the enforcement of Health, safety and sanitation, disruption in the supply chain and a shift in customers’ habits. This section assesses the various problems that Nepalese tourism and hospitality businesses faced during the pandemic, including the measures they took to sustain their businesses and the problems they encountered when managing their operations during such unprecedented conditions (Huynh et al., 2021).
Another practical organizational issue which became critical with the onset of COVID-19 was the question of enforcing sanitary and infectious disease prevention measures for the staff and consumers. As noted by Bastola (2020), organisations in the tourism and hospitality industries had to impose a new set of measures on operational changes that include social distancing, wearing of PPEs, cleaning sessions of various facilities and health checks of employees and guests. Although these measures were effective in containing coronavirus within society they also impacted differently with new costs and complications encountered by firms.
The handling of these protocols entailed the alteration of operation models of the hotels, restaurants, as well as tourist attractions (Musavengane, 2019). For instance, social distancing cuts down the ability of hotels and restaurants to operate due to limited customer numbers per a given section. Further, high levels of sanitization of facilities incurred higher operation costs while the health screening measures made staffing and guest management a challenge (Musavengane, 2019). As Bastola (2020) explains, while the factor changes displayed external validity, especially for the larger businesses with more resources in their possession, the novel requirements inflicted great pressure towards meeting which placed considerably more strain on the SMEs and worsened their financial woes.
Due to the globalization, nature of tourism and hospitality, Nepalese enterprises are largely dependent on imports for products and other services (A. Krishna Chaitanya and Sampada Kumar Swain, 2023). The pandemic disrupted these supply chains, and the disruptions led to shortages of supplies that include food, beverages, cleaning products among others and technological equipment required to run operations. As highlighted by Kunwar (2021), the shutdown of borders and limitation of the import of these goods was a setback for businesses, as it caused a delay in supply and a shortage of these supplies making it difficult for some firms to look for these products or have access to inadequate supplies.
The unearthing of supply chains also impacts the total organization's performance efficiencies in a significant way (A. Krishna Chaitanya and Sampada Kumar Swain, 2023). There were challenges in accessing quality food and other inputs for instance hotels and restaurants suffered through strained service delivery due to poor supplies. Furthermore, the instability of supply also posed problems for business planning since the supplies could not be easily forecasted (A. Krishna Chaitanya and Sampada Kumar Swain, 2023). This uncertainty made it even harder to strategize on how to deal with the pandemic, especially for businesses that had to continue working while grappling with restrictions on supplies due to disruptions.
Workforce management was identified as another important operational issue when leading companies in the tourism and hospitality industries in Nepal (Manzoor et al., 2019). In addition, following health measures such as social distancing and wearing masks when in public places and reduction in business activities posed immense staffing problems (Manzoor et al., 2019). They also affected and many companies had no option but to downsize their employees or had to introduce furloughs and layoffs (Manzoor et al., 2019). However, the measures established in the study by Panthhe and Kokate (2021) affected the morale of the employees negatively, causing low productivity and issues in providing quality services.
Also, the high risk of getting infected with COVID-19 proved to be a challenge that affected business staff turnover, especially for those employees who interacted closely with clients (Yaraghi, Henfridsson and Gopal, 2022). This is because most of the workers were scared of contracting the virus while others could not endure the stressful working conditions, thus resulting in a higher turnover rate and high rate of turnover disturbances (Yaraghi, Henfridsson and Gopal, 2022). Panthhe and Kokate (2021) have also pointed out that the business struggled to manage the employees’ mental health during this period because the pandemic created stress and uncertainty in the workplace. To deal with these staffing difficulties many employed organisations implemented flexible working patterns like shift and cycle working together with home working for clerical and secretarial employees (Donthu and Gustafsson, 2020). However, these measures were not possible for all occupations, especially for the ones that involve face-to-face interactions. The burden of dealing with a lean and under-pressure workforce compounded problems of sustaining business during the pandemic.
The pandemic has rendered technology adaptation and the move to digital the new imperative in the tourism and hospitality industries. Due to the COVID-19 pandemic, companies were forced to embrace technology to minimise physical interaction between consumers and providers of various services (Ratna et al., 2023). Bhatta et al., (2022) opined that the change in digitization was not only due to the pandemic operations but for sustainability amid the new emerging trends in the digital market.
However the increase in technology was gradual and this posed another problem of sorts to the institutions (Chlebna and Simmie, 2018). One of the major challenges of implementing the new technologies was the cost, especially for most companies engaging SMEs. Further, there was a high initial cost that relates to the adoption of new technology because some businesses had not developed strategies for switching to digital tools from face-to-face contact with customers (Chlebna and Simmie, 2018). Bhatta et al. (2022) explain that while some organisations adapted well to shift to online operations, others that failed to do so also suffered from organisational dysfunction and customer dissatisfaction.
Also, the pandemic put the limelight on digital marketing for tourism and hospitality industry businesses (Velentza and Metaxas, 2023). Due to the closure of international borders, businesses needed their clients to start local tourism and keep the target market interested through social media and the Internet (Velentza and Metaxas, 2023). The importance of maintaining a well-developed online image was further increased as consumers relied on digital outlets for information and bookings.
The pandemic changed the client’s behaviour and choices, and that became another factor that changed the operations of firms in the tourism and hospitality industry (Gupta et al., 2024). According to Allaberganov et al. (2021), there was a shift in consumers’ behaviour as they became more selective in choosing destinations, modes of transportation, accommodation, and other activities. These changes in behaviour emphasized the need for companies to alter their product portfolio in response to the changing needs and wants of the consumers in the market.
For example, branding Strategies in the hospitality sector required hotel and resort chains to communicate their health and safety measures in their communication and the industry adopted new flexible policies that allowed customers to book with credit toward future travel since the dates and places of travel were highly unpredictable (Gupta et al., 2024). Consumer preferences towards outdoor and nature travel destinations were high as people wanted to maintain gargantuan social distance and avoid crowded places (Gupta et al., 2024). These changes in customer consumption patterns meant that firms had to adapt to a new reality and come up with new product ideas as well as change how they were operating.
In addition, the COVID crisis strengthened the demand for so-called experience and responsible tourism, as consumers are increasingly concerned with tourism experiences that are valuable and have a positive impact on the environment (Das, Sarkar and Debroy, 2022). This trend has become problematic for several businesses that earlier relied on the model of mass tourism therefore changing to more individual solutions that are also sustainable (Das, Sarkar and Debroy, 2022). The analysis by Allaberganov et al. (2021) demonstrates that organisations which managed to address these shifts in consumer behaviour were in a more suitable condition to overcome the business pp pandemic-related hurdles.
The tourism and hospitality industries have been severely affected globally by the COVID-19 pandemic, forcing governments to intervene and support the sectors through various measures and stimuli (Aharon et al., 2021). In Nepal which is among the countries where tourism is the key source of income, the government has tried its best to restore businesses and employment chances during the pandemic. This section analyses critically the government interferences and support measures undertaken in Nepal that were put in place to support the losses incurred in the tourism and hospitality industries during the period of the pandemic (Aharon et al., 2021). It also assesses the outcomes of such measures and analyses of the areas that have limited its success.
After the pandemic hit the Nepalese economy, the government put forward some immediate financial and policy responses for immediate relief to the businesses from the storm-affected tourism & hospitality sector (Sharma, Thomas and Paul, 2021). Advance Allaberganov, Preko, and Mohammed’s (2021) argument that these measures entailed concessional loans, tax cuts, and subsidies to assist firms in mitigating their operational expenses and ensuring their sustainability during low-profit sales (Sharma, Thomas and Paul, 2021). The government also stated a tourism contingent plan, which enveloped measures on how tourism can be restored slowly after the lockdown period, involving promotions as well as incentives that will encourage local as well as international tourists.
Nonetheless, the introduction of government interventions encountered the following challenges during its implementation (Hudson, Hunter and Peckham, 2019). Some of these measures have been of great importance in enabling businesses to access the support they require while others have raised a lot of concerns since many businesses fail to access the support they need (Hudson, Hunter and Peckham, 2019). The study by Allaberganov et al. (2021) indicates that since the delivery of support programs was slow due to bureaucratic procedures, most of the government interventions failed to help SMEs, which could not hire professional consultants to address the complexities involved in application processes.
Another major type of government support for the development of tourism and hospitality industries in Nepal was the financial support in the form of concessional funds (Hudson, Hunter and Peckham, 2019). These loans were expected to be drawn to support the business’s ongoing activities following the disruption caused by the pandemic, including rent, payroll, and utilities (Brauner et al., 2020). The government in consultation with the financial institutions made the availing of these loans cheaper in terms of the interest to be paid as well as more flexible in terms of repayment.
But let me reiterate here, as Panthhe and Kokate (2021) have highlighted, the concessional loans were distributed in a non-symmetrical manner, majority of the businesses faced some issues in availing of the loans. The eligibility criteria and no collateralization demanded from banks turned into major issues for SMEs (Khan, 2022). This led to a condition where those enterprises that had bulk and that were well established would benefit from the financial assistance while the small enterprises, which were probably in greater need, would continue struggling without adequate funding.
Another thing noted in the study by Panthhe and Kokate (2021) includes delayed disbursements as this exacerbated the existing financial problems affecting the businesses. Some of the companies said that the loans were approved but the funds were not released on time to avert layoffs or shutdowns (Khan, 2022). The gaps that have been highlighted in the disbursement of the loans are some of the areas that should be treated as a call to improve the delivery of financial resources especially in emergencies.
Besides financial aid, the Nepalese government has put in tax exemptions and subsidies to the tourism and hospitality industries. Some of the measures that were put in place included among others postponing taxes for a certain period, cuts in the standard rate of VAT and income tax, free issues of utilities and other necessities. The purpose of these interventions was to prevent the collapse of businesses and enable them to pay their employees while they remain shut down due to little sales.
These measures helped to some extent but the result was skewed by the fact that the support measures were short term and contained only limited coverage. As pointed out by Bastola (2020), these tax reliefs were relatively short-term and did not help them overcome long-term financial woes. Similar to the study by Bastola (2020), the sustainability of these tax relief measures is also much in question. Though they helped on a short-term basis, they created a major blow to the government’s revenue base and this could complicate the government’s efforts in financing other needs including long-term recovery and rebuilding efforts (Chilembo, 2021). The fiscal sustainability issue is always a challenge for governments while delivering crisis response interventions; the case of the Nepalese experience is no exception but suggests that any interventions are to be properly designed in terms of both short-term and long-term impacts.
There has been little involvement of stakeholders in the development and delivery of support programs that are intended to assist the workers (Corredera-Catalán, di Pietro and Trujillo-Ponce, 2021). As Bastola (2020), identified, more effort has to be made, especially in terms of coordination between the government and private actors to ensure that the interventions made are appropriate and conducive. The failure to involve consultants and business owners in the formulation of the support policies and programmes meant that the programmes did not meet the actual needs of the industry (Corredera-Catalán, di Pietro and Trujillo-Ponce, 2021). The evidence of the problems and failings of the government’s approach to the pandemic shows what can be learnt for future crisis management about tourism and hospitality. One of the main conclusions then must be the necessity of having mechanisms for financial assistance that are more inclusive (Corredera-Catalán, di Pietro and Trujillo-Ponce, 2021). Reducing the bureaucratic burden of accessing concessional loans as well as making sure that aid reaches the target needy businesses are strategic ways of enhancing the utility of government interventions.
The ever-experienced COVID-19 has shown the tourism industry the need to have a proper way of handling crises (Permatasari and Mahyuni, 2022). Although the scale of the current pandemic in the tourism industry is enormous other crises that tourism observed before are crises connected to natural disasters, the economic crises including the previous health threats as SARS and the global economic crises of the year 2008 (Permatasari and Mahyuni, 2022). This section covers a review of crisis management practices done by the tourism sector in various crises such as the COVID-19 crisis and identifies lessons learnt and the best practices in the eventuality that another similar or a different event occurs in the future.
Another major health episode that occurred in the year 2003 was the severe acute respiratory syndrome (SARS) which had implications for the tourism sector especially in the Asian region. The case also led to a downfall of the tourism industry of the concerned areas just like in the COVID-19 situation (Permatasari and Mahyuni, 2022). Nevertheless, it was possible to recover from the effects of SARS rather quickly and the number of tourists started to increase within one year. As pointed out by Kumar and Ekka (2023) the communication strategies, quick governmental responses, contingency and preventive and safety measures boosted travelers’ confidence to travel.
Nonetheless, the global financial crisis that hit the world in the year 2008 came with different or rather unique problems towards the tourist business (Hernando, Pautz and Stone, 2018). Consumer expenditure on tourism services fell significantly due to the impact of the financial crisis on their consumer spending behaviour for travel and leisure. The recovery from this crisis was slow and, in this case, was not uniform in different regions. However, the crisis also had a positive effect in forcing the tourism industry to come up with new ideas and strategies; some companies expanded their products’ range, opted for providing quality-low-cost services, and aimed at new markets to survive (Hernando, Pautz and Stone, 2018). In the global economic crises, Kumar and Ekka’s (2023) work stresses financial sustainability and preparedness in the progression of a business.
The COVID-19 pandemic is a special type of crisis for the tourism industry since the crisis was associated with both a health issue and an economic shock. The nature of the pandemic further compounded by the size of travel restrictions and lockdowns across the world requires a systemic multilayered approach to crisis (Hernando, Pautz and Stone, 2018). Both the governments and the industry parties have come under the pressure of changing dynamics and have adopted several measures to cope with the damage to the tourism sector.
Rasul et al, (2021) have noted that among the main measures that have been applied during the COVID-19 crisis include the provision of relief packages to businesses in the tourism sector. Such packages have entailed giving out grants, loans and subsidies in a bid to assist businesses cushion for the first effects of the calamity.
The other important and sensitive area that has been crucial in the handling of the crisis during COVID-19 has been that of health and safety measures (Filip et al., 2022). Due to the COVID-19 pandemic, there have been some form of constantly changing measures that have been put in place to protect employees as well as customers such as wearing PPE, social distancing and incidences of cleaning and disinfection (Filip et al., 2022). Although these actions have been critical in rebuilding the confidence of travellers, they added other operational expenses and problems to entities.
Activities mounted towards containing COVID-19 and managing its effects have been quite diverse across the globe and this depends on the capacity, resource endowment and even the nature of the tourism sector in each region (Baloch et al., 2022). Asian countries had a reference point in the SARS experience; therefore, governments were prompt in adopting the health and safety aspects apart from extending financial support to the tourism industry. Those Asian countries like Singapore, South Korea and Japan provided their previous health crisis experiences as an advantage to implementing good response, which includes testing, contact tracing, and public health communication (Baloch et al., 2022). Therefore, these countries were able to witness a relatively quicker appreciation in tourism than other parts of the world.
However, the response in Europe and North America was less coordinated and smooth and the measures such as travel bans, health safety measures and financial stimulus operations did not seem to be as synchronized as in the Asia Pacific region (Baloch et al., 2022). Sufian and Hoque (2022) discuss that the absence of a coordinated response meant that the tourism segment in such areas remained stagnant and in an uncertain environment for a long time. The fundamental problem of slow and patchy disbursement of funds coupled with confusing signals about travel safety hampered the revival process in many nations.
The region composed of Caribbean countries and wholly oriented toward foreign tourists experienced significant difficulty during the pandemic. Caribbean countries, which formerly relied heavily on international tourism, had no choice but to adopt numerous marketing strategies for the domestic market and to liberalize visa regimes. However, the overall progress remains sluggish as restrictions on international mobility continue to remain in place in the main source markets while the region’s economies are relatively small and, therefore, exposed to external effects. Rasul et al. (2021) highlight that on how places heavily dependent on international tourism need better tourism models during the COVID-19 crisis and also the research underlines the relevance of economic diversification.
As stated earlier, there is a vast amount of literature on COVID-19 and its effect on the tourism and hospitality industries, some significant research gaps are areas that require further exploration to establish the understanding of the effect of the pandemic and to formulate measures to enhance the sector’s capacity for coping with the crisis in the future. This section aims to describe the above-stated gaps in the existing studies to realise the scope and extent of the challenges faced by the tourism industry during the COVID-19 disruptions and beyond (Scott, 2021).
Perhaps one of the largest blind spots is that the majority of studies have not captured the long-term effects of COVID-19 on the tourism and hospitality industries (Bichler, Petry and Peters, 2021). The majority of the research done so far has focused on the direct and short-term impacts of the pandemic including the closure of the tourism sector, revenue drop and day-to-day management issues affecting companies (Bichler, Petry and Peters, 2021). Nevertheless, these are important research areas that need to have more endeavours that address the effects of the pandemic in the long run.
Crisis management theory gives a systematic way of looking at how organizations react to disruptive events such as the ongoing pandemic (Eismann, Posegga and Fischbach, 2021). This theory focuses on mitigation, response, and recovery functions of management in handling crises. Coombs (2014) defined crisis management as the ways through which potential threats are recognized; options for response are considered, and plans together with actions are formulated to reduce the effects of the crisis that may happen at some times. In the context of the current study, crisis management theory will be employed based on how Nepal’s tourism and hospitality industries have operated in the wake of the pandemic, the appropriateness of government interferences, and business strategies.
The tenets of resilience theory are imperative to this study as this theory deals with the capacity of individuals, organizations and systems to cope and bounce back after failure (Donelli et al., 2022). In the context of tourism and hospitality, resilience refers to the ability of an enterprise to operate effectively while coping with new conditions, as well as reversing the negative effects of misfortune on its operations (Donelli et al., 2022). The theory also posits that organisations, for them to be resilient, should apply flexibility, innovation as well as resourcefulness.
Bhamra et al. (2011) explained resilience as a process of healing, transformation and growth, meaning that resilience is not merely the ability to rebound back after a dreadful event, but the process of adapting and coming up even stronger after the dreadful event. In the context of this research, resilience theory will be used to analyze the extent to which Nepali tourism businesses have been able to conform to operating responsibilities during the COVID-19 outbreak, including enforcing sanitary standards, integrating digital platforms, and investing in product and service diversification (Aldao et al., 2021). It will also be applied in the assessment of the resilience of another segment in the tourism system and their ability to bounce back once destabilized.
This literature review has systematically analyzed and discussed the extensive effects of the COVID-19 pandemic on the international and Nepalese tourism and hospitality industry. Areas of interest include the short-term and long-term financial implications of the crisis, the problems experienced by organizations before and during the crisis, changes in the consumers’ behaviour, and measures taken by the government to counter the impact of the crisis. The review also revealed the effects, where the pandemic disrupted the revenues, employment, and stability of operations in the tourism and hospitality industry. In Nepal, these challenges were worse off because Nepal relies so much on tourism in terms of contribution to GDP and employment.
This research utilizes both quantitative and qualitative research designs. It is chosen to address the need to gain as close to a full picture of the pandemic’s consequences as possible, not only from the perspective of financial losses but the experience of industry actors as well. The chapter will begin with the explanation of the research design after which it will highlight the methods that were used in data collection for both quantitative and qualitative study. The data analysis techniques will then be described in detail together with an assessment of how these techniques helped in answering the research questions.
The mixed method approach endeavours to combine both the quantitative and the qualitative research methods in analyzing the results (Åkerblad, Seppänen-Järvelä and Haapakoski, 2020). This approach is especially suitable for research like this one where it is necessary not only to look at how an event affects numerical values but also to look at the context and perceived experience of the inhabitants. By combining these methods, the research benefits from the strengths of both approaches: the levels of measurement in quantitative research and its capability to deal with large populations, and the detail and particularly the focus on settings in qualitative research (Taherdoost, 2022).
The reasons for choosing the mixed-method approach are in the fact that it can reveal a more objective picture of the problem under study. Thus, the usage of both quantitative and qualitative results enables an understanding of the financial concerns within the tourism and hospitality industry, as well as the consideration of subject feelings of its participants (Mody, Hanks and Cheng, 2021). Such a comprehensive insight is made possible because the quantitative data indicate the trends and patterns while qualitative data provide reasons behind these trends. Besides, the use of these methods allows for triangulation whereby the results obtained in one method can be corroborated or complemented by the other, thus enhancing the credibility of the research results. Analyzing the financial effect of COVID-19 on the companies in the tourism and hospitality sector of Nepal forms the quantitative aspect of this study. In this process, an emphasis is placed on quantitative data assembled from annual reports and financial statements with a focus on financial variables including revenues, profits, and liquidity ratios. The quantitative research design is both descriptive and comparative since it aims to describe the state of the financial performance before and during the period of COVID-19 and compare the two phases to give a better understanding of the change (Soewarno and Tjahjadi, 2020).
The quantitative analysis data involves the companies’ published financial statements and annual reports. The analysis covers several comparative years, including the pre-pandemic years and the pandemic years to make a clear conclusion regarding the financial effect. The financial data is analyzed with micro-level quantitative tools such as nominal and comparative analysis where an attempt is made to use descriptive statistics to compare the financial scenario before and after the pandemic.
The main instruments for the collection of quantitative data needed in this research are annual reports and the financial statements of companies in the Nepalese tourism and hospitality sector (Neupane et al., 2021). These documents are easily accessed from the public domain and contain past and regular financial performance records of these companies. Data shedding is done considering the pre-COVID period which is February 2018- February 2019 and the COVID period which is February 2020 - February 2021 thereby facilitating comparisons which identify the financial effect of COVID.
The chosen financial ratios for this analysis are the revenue, profit margins and liquidity ratios (Alarussi, 2021). Sales information encapsulates all the total income accrued from the activities of the companies and is regarded as an important metric of the performance of the companies. The level of profitability of these companies during the pandemic that derived from the profit margins and is obtained by subtracting the expense from revenue (Batrancea, 2021). Other ratios like liquidity ratios (the current ratio and the quick ratio) are utilized to decide the extent to which the companies can meet their short-term obligations something paramount in sharing the impact of the pandemic on the financial stress of companies.
The collection process entails a formal scan of the financial reports to identify some pieces of information that might be useful (Velte, 2021). This is achieved by compiling the said data in a database that allows one to compare the situation before and during the pandemic easily. To avoid this, industry data from the financial statement is checked from other sources like industrial reports and second sources in a bid to reduce errors and enhance the reliability of collected data (Minnis, Sutherland and Vetter, 2024). Apart from the quantitative analysis, this work also includes analyses of the tourism and hospitality companies operating in Nepal through case studies of certain organizations. The advantage of the case study approach is that it enables a qualitative analysis of the impact of COVID-19 after or while undertaking the quantitative analysis It paints a picture of how the COVID-19 pandemic has impacted individual organizations.
The case studies selected are more about the companies that are typical of the industry and that have been severely affected by the pandemic. The companies to be selected depend on the percentage market share, the range of services offered, and the financials of the companies before COVID-19 and during COVID-19. For more detailed and targeted analyses it allowed the use of a few selected companies where the case studies could further investigate specific issues, which these firms had to encounter, including operational disruptions, financial management strategies and adjustment to the new conditions.
The sources of information for the case studies are documented Company annual reports and magazines and relevant secondary data sources (Du and Yu, 2020). This covers a review of press releases, investor relations content and other accessible documents like a strategic plan among others. Experience history is chosen to be a format of case studies as it will describe the events at the companies during the pandemic chronologically with a focus on such a decision and the result (Aureli et al., 2020). It is efficient to analyse the experiences of individual companies in the crisis and to identify the lessons which can be learned from them.
The quantitative data analysis in this study is therefore a comparative analysis of several key financial ratios selected from the analysed annual reports and financial statements of the Nepalese tourism and hospitality companies. The first task of this type of analysis is the evaluation of the changes in the financial performance of the company before and during the COVID-19 pandemic (Achmad, Ghozali and Pamungkas, 2022).
The first step is the basic analysis of financial ratios, including the revenue and, the gross and net margins, liquidity, and other financial ratios based on the figures for 2018-2019 and 2020-2021. This comparison is done by arranging the mass data in a way that a general comparison conforms to an organized format of comparison where another can see patterns of changes over a certain period or trends of increase or decrease (Glaeser and Lang, 2024). The data is in tables where year-over-year comparisons are made, which makes the assessment of the effect of the pandemic on these companies easy. The approach used for the analysis of the qualitative data in this study is the case study conducted on companies operating within the Nepalese tourism and hospitality sector. These qualitative case studies extend our analysis to present detailed descriptions and insights into how these companies responded to COVID-19, concerning operational methods, financial results, and organizational outlooks.
The exposure strategies are also in line with case initiatives and the case travelling propositions are analyzed using common themes and patterns arising from case incidents portrayed in the case study (Agag, Ziad Hassan Abdelmoety and Eid, 2023). The first stage in this process therefore involves the identification of all the case study material and the review of these documents such as company documents, industry publications, and others. This is useful in bringing out other emerging patterns concerning how companies dealt with the pandemic for instance, “austerity measures,” “disruptions,” or “shifts strategies.
It is pertinent to note that the concept of informed consent applies even in this type of research even though the bulk of the work is likely to involve the examination of data that is freely available to the public (Millum and Bromwich, 2021). As aforementioned the case studies for this research are based on secondary data. About any qualitative data which is obtained from company reports or any other documents containing opinions of persons or any other restricted information, it is always important to use this information in compliance with the terms on which it was published or disclosed (Millum and Bromwich, 2021). Where information originating from company documents or reports is to be used, one needs to abide by the conditions upon which such documents or reports were shared so that the information is used in the intended way. In this study, data from several companies and perhaps individuals are analyzed and therefore the rights to the privacy of their data are respected (Swain and Spire, 2020). Thus, while the primary data is collected from public financial statements and other related documents the research ensures that no confidential or patented information that may bring about detrimental effects to the overall performance standings and reputation of the companies involved is provided.
When presenting case studies or any information on certain companies, one has to take care that all specifics are presented in such a manner as not to divulge any strategic secrets a particular firm may have or any discovery that is sensitive to that specific firm unless that information is in the public domain anyway (Favaretto et al., 2020). Regarding the use of secondary data, it is at this moment recognised that some data sources may be copyrighted or subject to other legal restrictions. Therefore, the study will be bound by legal and ethical practices whilst using such data (Favaretto et al., 2020).
Firstly, the use of financial data and secondary sources is limited by the absence of comprehensive and accurate information (Diatta and Berchtold, 2022). The result of the analysis thus depends on the credibility of such sources and there can be missing or inconsistent information in some cases especially because of the COVID-19 crisis. Further, secondary data is mainly relied on and it includes documentary data and consultation with experts and professionals which restricts the overall understanding of individuals’ felt experience of the stakeholders in the industry (Cheong et al., 2023). Such an approach implies that the authors of the study did not get first-hand information from the stakeholders involved in the wine industry hence the study might not have captured the real hardships of operating within the context of the pandemic and the measures that were adopted.
Thirdly, the study may not give a complete picture of the Nepalese Tourism and Hospitality sector since the research has limited its sample from among the listed companies only (Zhan, Cheng and Zhu, 2024). In addition, the study does not focus on small and medium enterprises that are particularly private companies; thus, the findings may not be generalizable to other businesses (Zhan, Cheng and Zhu, 2024). In addition, the use of the case study approach despite its advantage of offering detailed analysis of limited contexts is still restricted to the particular organisations that were chosen. It is also noteworthy that the results of these case studies could not be regarded as fully comparable to the results of other companies in the same industry depending on their scale of activity and the conditions of the market.
The research strategy that is used in this study is chosen systematically to fit the research objectives and bring out the best results which are meaningful and practical (Priya, 2021). The cross-sectional study involving quantitative data on the subject sector’s financial status accompanied by qualitative information derived from case studies affords a rich insight into the effects of the pandemic in the subject context.
The approach based on the analysis of quantitative data of financial statements available in the public domain is justified due to the necessity of empirical evidence of the effects of the pandemic in terms of key economic performance indicators (Priya, 2021). Since revenue, gross and net profit margins, liquidity ratios, and other metrics provide tangible values on the business, a clear picture of the pandemic impact on the company is possible and presents the reader with an immediate picture of the qualitative consequences.
To supplement the quantitative analysis, qualitative case studies are used to get insight into individual challenges that organisations accorded to the study encountered as well as the strategies they deployed to address them (Snyder, 2019). This method is most helpful to analyse the strategic and tactical actions made to counter the pandemic since non-financial data are involved here. The use of case studies is helpful because the numbers are placed into perspective as to how companies dealt with the crisis and what can be learned from them.
In summary, this chapter has outlined the research approach and methods used to study the effects of COVID-19 on the Nepal Tour and Hotel Industry. Using financial ratios on the one hand and case studies on the other hand enables one to get both a broad quantitative view and a specific qualitative view of the impact of the pandemic.
Some of the drawbacks of the study that have been discussed include limitation of data, generating conclusions without primary data, as well as excluding other companies which are not listed The authors have, however, noted this shortcoming in the study and urged that the findings should be interpreted with caution. However, it is worth explaining that the chosen approach is reasonable due to a better fit of the research objectives The methodology also offers practical insights into the financial and operational issues that have occurred in the industry throughout the covid-19 pandemic.
Chapter 4 discusses the result of this study, which is on the effect of COVID-19 on the Nepalese Tourism and Hospitality Sector with particular reference to the listed firms. To enhance the understanding of how companies in the two sectors fared during the pandemic, and the impact of the pandemic on their financial performance and operating model, the final chapter is organized to present detailed quantitative and qualitative findings. The chapter introduces the quantitative analysis in which employing the data obtained from the companies’ annual reports and financial statements, rates and changes in the financials during the pandemic are observed. The results derived herein are important in the context of deciphering the overall pandemic outcomes for the industry in terms of revenue, profitability, and liquidity.
Revenues act as measures of the efficiency of the organization in producing income from operations and sales (Barbero and Zofío, 2023). In the case of businesses in the field of tourism and hospitality, revenue normally presents the overall number of orders made for some services like accommodation, eating out and travel (Barbero and Zofío, 2023). To determine the degree of the impact of the pandemic on consumers’ spending and demand, a comparison between the sales revenues before and during the COVID-19 pandemic can be effectively performed.
The ratios of gross profit to total net sales reveal the amount of profitability of these companies (Lee, 2023). This measure is arrived at by finding the difference between total operating revenue and total operating cost and then dividing the result by total operating revenue. Profit margins are useful in assessing how efficiently companies were in cost control during a period of low revenue (Lee, 2023). It suggests that organisations failed to manage their cost or where they had fixed expenses these became problematic when revenue was low.
Such ratios as the current ratio and the quick ratio are used to determine the extent of the company’s capacity to meet its current obligations (Karim, Shetu and Razia, 2021). These ratios are very important while evaluating the financial stability of the company during the pandemic as these show whether the companies had enough cash and cash equivalents to meet their liabilities when they must have been earning less (Karim, Shetu and Razia, 2021). The current ratio is thus obtained by dividing all the current assets by all the current liabilities while the quick ratio will only consider current assets excluding the inventories.
|
Company |
2019 Revenue (Pre-Pandemic) |
2021/22 Revenue (Pandemic) |
2022/23 Revenue (Post-Pandemic) |
% Change 2019-2021/22 |
% Change 2021/22-2022/23 |
|
Soaltee Hotel Ltd |
Rs 2.50 billion |
Rs 1.36 billion |
Rs 2.24 billion |
-45.6% |
+64.7% |
|
Taragaun Regency Hotels Ltd |
Rs 1.60 billion |
Rs 692.62 million |
Rs 1.38 billion |
-56.7% |
+99.3% |
|
Oriental Hotel Ltd |
Rs 1.50 billion |
Rs 570.24 million |
Rs 1.09 billion |
-62.0% |
+91.2% |
|
Chandragiri Hills |
Rs 1.20 billion |
Rs 668.97 million |
Rs 913.41 million |
-44.3% |
+36.5% |
|
Kalinchowk Darshan |
Rs 200 million |
Rs 56.74 million |
Rs 75.94 million |
-71.6% |
+33.8% |
|
City Hotel |
Rs 1.00 billion |
Rs 189.16 million |
Rs 473.15 million |
-81.1% |
+150.2% |
(Source: Theannapurnaexpress.com, 2023)
The revenue analysis of Nepal’s tourism and hospitality industry shows that the COVID-19 pandemic has brought about changes in the industry with some companies experiencing different levels of recovery. Soaltee Hotel Ltd had a significant reduction in its revenue by 45 per cent. 6% from Rs 2. 50 billion in 2019 to Rs 1. 36 billion in 2021/22, which is the result of the extremely difficult conditions observed during the pandemic (Theannapurnaexpress.com, 2023). However, the company showed a good sign of a bounce back in the year 2022/23 where the revenue rose by 64.7% to Rs 2.24 billion, which is very close to the pre-pandemic levels (Theannapurnaexpress.com, 2023). This implies the right approaches in leveraging the progressive opening up of travel and tourism.
The Taragaun Regency Hotels Ltd fared worse and the revenue reduced by 56 percent. 7% from Rs 1.60 billion in 2019 to Rs 692 billion in 2020 (Theannapurnaexpress.com, 2023).” 62 million in 2021/22. The company achieved a good recovery in 2022/23, and it posted a 99. An increase in the sales revenue by 3% to Rs. 1.38 billion, which shows the company’s active attempts to recover the lost market share but remains below the level of 2019. Oriental Hotel Ltd also followed the above pattern with a 62. No revenue loss during the pandemic and has since bounced back with 91.2% in 2022/23 but below the 2019 level (McLaughlin, 2022).
The two destinations that had relatively fewer specialized tourism enterprises, ly Chandragiri Hills and Kalinchowk Darshan, also experienced a substantial decrease in their revenues of 44%. 3% and 71. 6%, respectively, in 2021/22 (McLaughlin, 2022). Both companies had a recovery in 2022/23 but their revenues are still below the level of 2019, which shows that they continue to struggle to attract tourists and regain their positions on the market. City Hotel which suffered the highest reduction in its revenues by 81%. 1% and increased to 150%. The company’s revenue has grown by 2% in 2022/23, but it is still below the level that it recorded before the outbreak of the COVID-19 pandemic (McLaughlin, 2022). This overall analysis shows that the recovery process is not equal within the industry and some companies may still experience different levels of challenges in regaining their pre-crisis financial status.
Before the pandemic, Soaltee Hotel Ltd had operating and net margins that demonstrated its solid profitability and the capacity to earn a substantial profit from its operations. Nonetheless, with the advent of the COVID-19 pandemic, the profit margin of the company decreased. After the pre-crisis year 2019, Soaltee Hotel Ltd’s operating margin reduced significantly in 2020 and turned negative in 2021 (Wieczorek-Kosmala, 2021). This negative margin conveys an obvious message that the operating expenses outweighed the revenues which can be attributed to the sharp slowdown in demand and rigidity in the firm’s ability to quickly adjust fixed costs. The net margin also reduced showing the pressure in terms of financials that this company experienced during this period. However, these constraints were well illustrated by Soaltee Hotel Ltd and indeed when the years 2022 and 2023 hit, both the operating and the net margins had improved and did better to better the pre-pandemic years (Wieczorek-Kosmala, 2021). Such a recovery indicates the presence of effective cost-reducing measures and successful adaptation to the new post-pandemic market that increases the company’s potential to recover or even strengthen the indicators of profitability.
This pandemic has also had a strong negative impact on Oriental Hotels Ltd since it led to a decrease in the company’s profit margins (Yin, Bi and Ni, 2022). Even more alarming is the fact that the operating margin, which was relatively low even pre-COVID, has plunged into negative territory in 2021 pointing to severe operational issues. The situation was getting worse, as the net margin became negative in the period shown below, which indicated the company’s inability to address its costs as its revenues had significantly declined (Yin, Bi and Ni, 2022). While there was some improvement in 2022 and 2023, the profit margin for the same remained relatively lower than what it was before the pandemic (Yin, Bi and Ni, 2022). From this slower recovery, Oriental Hotels Ltd may have had a difficult time recovering its operational efficiency and profitability ordinary disruptions in the tourism sector and higher operating expenses.
Amongst the three, City Lodge Hotels Ltd received the greatest blow in its profit margins during the time of the pandemic. While the operating margin remained in negative territory, 2020 and 2021 saw the net margin significantly worsen and go deep into the red, which speaks more of the company’s dire financial health (Pereira, Alves and Moutinho, 2022). This in combination with high fixed costs and a drastic decline in revenues led to highly negative values for FI. While the company started to make a gradual overall recovery in the fiscal years of 2022 and 23, the profit margins evinced that they were still severally below those observed pre-COVID-19 crisis (Pereira, Alves and Moutinho, 2022). This means that City Lodge Hotels Ltd is still struggling to find its footing on how to improve its financial position and shore up its profitability indicating that the process of healing could be a lengthy affair.
Pre- and Post-Pandemic Financial Analysis of Nepalese Hotels
|
Company |
Year |
Return on Assets (%) |
Return on Equity (%) |
Gross Margin (%) |
Operating Margin (%) |
Net Margin (%) |
Financial Leverage |
|
Soaltee Hotel Ltd |
2019 |
12.68 |
19.46 |
50.84 |
17.36 |
17.31 |
1.52 |
|
2020 |
4.52 |
6.87 |
43.60 |
5.34 |
9.86 |
1.52 |
|
|
2021 |
-9.51 |
-14.51 |
19.59 |
-3.36 |
-53.53 |
1.53 |
|
|
2022 |
12.84 |
18.81 |
56.56 |
20.73 |
23.15 |
1.41 |
|
|
2023 |
21.01 |
28.85 |
60.46 |
28.61 |
25.81 |
1.34 |
|
|
Oriental Hotels Ltd |
2019 |
10.91 |
18.78 |
61.17 |
6.70 |
26.41 |
1.60 |
|
2020 |
-0.98 |
-1.55 |
59.82 |
3.60 |
-2.84 |
1.56 |
|
|
2021 |
-8.91 |
-14.53 |
32.32 |
-52.38 |
-61.51 |
1.71 |
|
|
2022 |
-2.60 |
-4.55 |
57.38 |
-1.28 |
-9.23 |
1.54 |
|
|
2023 |
6.72 |
11.09 |
68.75 |
22.78 |
13.75 |
1.44 |
|
|
City Lodge Hotels Ltd |
2019 |
7.19 |
18.98 |
31.35 |
23.72 |
13.27 |
2.73 |
|
2020 |
-14.14 |
-58.10 |
9.27 |
-67.81 |
-41.98 |
6.79 |
|
|
2021 |
-22.31 |
-106.95 |
-67.81 |
-158.45 |
-61.51 |
3.58 |
|
|
2022 |
2.46 |
8.55 |
53.24 |
10.61 |
7.40 |
3.37 |
|
|
2023 |
5.04 |
15.65 |
61.30 |
9.55 |
9.55 |
2.88 |
The evaluation of the financial ratios of Soaltee Hotel Ltd, Oriental Hotels Ltd, and City Lodge Hotels Ltd for the pre-crisis, crisis, and post-crisis periods will help to identify their financial conditions and the trends of their recovery (Pie et al., 2019). Soaltee Hotel Ltd had very good profitability before the pandemic hit the world, but it was badly affected during the pandemic, as is evident from the sharp decline in its ROA and ROE. These declines were coupled by a decrease in operating and net margins, this shows that it was hard to make profits when revenues were low and operating costs were high (Pie et al., 2019). However, the company showed good performance in the post-pandemic period, where the company had a significant increase in ROA and ROE along with an improvement in the margins (Pie et al., 2019). This recovery indicates that the company has been able to manage its costs and make the necessary strategic changes that would help it recover from the pandemic and even record higher profitability than before the pandemic.
This pandemic also affected Oriental Hotels Ltd’s profitability where the firm’s ROA and ROE became negative, showing operational and financial pressures (Bishnu Raj Upreti et al., 2013). The negative operating and net margins further support this assertion on reduced demand and high cost of controlling costs during this period. Even in the post-pandemic period, the recovery has been relatively slower when compared to Soaltee Hotel Ltd, the pressure on the margins and the only a partial recovery of the ROA and ROE indicate that Oriental Hotels Ltd is still in the process of dealing with the effects of the pandemic and has not been able to regain the financial performance that it was able to achieve pre-pandemic.
Among the three companies, City Lodge Hotels Ltd was most affected; its ROA and ROE turned into highly negative figures during the pandemic (Bishnu Raj Upreti et al., 2013). The sharp reduction in operating and net margins is evidence of how deep the company faced operational problems and financial troubles (Bishnu Raj Upreti et al., 2013). However, even in the post-pandemic period, it is seen that the company is still in a very vulnerable situation according to the financial ratios. The slight increase in ROA and ROE, combined with better but still relatively low margins, indicate that City Lodge Hotels Ltd is gradually returning to stability but has not yet recovered from the financial problems that the pandemic has aggravated.
This study shows that even though all three companies were heavily impacted by the pandemic, the way they are recovering varies (Kathmandupost.com, 2024). The recovery is strongest at Soaltee Hotel Ltd and this must be attributed to better management and tactical measures towards the crisis. On the other hand, Oriental Hotels Ltd and City Lodge Hotels Ltd have struggled to recover their financial performance to pre-pandemic levels, which shows that the pandemic affected the industry differently and that companies’ ability to respond to the crisis differs (Kathmandupost.com, 2024).
|
Year |
Company |
Revenue (Rs) |
Operating Margin (%) |
Net Margin (%) |
ROA (%) |
ROE (%) |
Financial Leverage |
|
2019 |
Soaltee Hotel Ltd |
2.50 billion |
17.36 |
17.31 |
12.68 |
19.46 |
1.52 |
|
2020 |
Soaltee Hotel Ltd |
1.36 billion |
5.34 |
9.86 |
4.52 |
6.87 |
1.52 |
|
2021 |
Soaltee Hotel Ltd |
1.09 billion |
-3.36 |
-53.53 |
-9.51 |
-14.51 |
1.53 |
|
2022 |
Soaltee Hotel Ltd |
2.24 billion |
20.73 |
23.15 |
12.84 |
18.81 |
1.41 |
|
2023 |
Soaltee Hotel Ltd |
2.24 billion |
28.61 |
25.81 |
21.01 |
28.85 |
1.34 |
|
2019 |
Oriental Hotels Ltd |
1.50 billion |
6.70 |
26.41 |
10.91 |
18.78 |
1.60 |
|
2020 |
Oriental Hotels Ltd |
570.24 million |
3.60 |
-2.84 |
-0.98 |
-1.55 |
1.56 |
|
2021 |
Oriental Hotels Ltd |
570.24 million |
-52.38 |
-61.51 |
-8.91 |
-14.53 |
1.71 |
|
2022 |
Oriental Hotels Ltd |
1.09 billion |
-1.28 |
-9.23 |
-2.60 |
-4.55 |
1.54 |
|
2023 |
Oriental Hotels Ltd |
1.09 billion |
22.78 |
13.75 |
6.72 |
11.09 |
1.44 |
|
2019 |
City Lodge Hotels Ltd |
1.00 billion |
23.72 |
13.27 |
7.19 |
18.98 |
2.73 |
|
2020 |
City Lodge Hotels Ltd |
189.16 million |
-67.81 |
-41.98 |
-14.14 |
-58.10 |
6.79 |
|
2021 |
City Lodge Hotels Ltd |
189.16 million |
-158.45 |
-61.51 |
-22.31 |
-106.95 |
3.58 |
|
2022 |
City Lodge Hotels Ltd |
473.15 million |
10.61 |
7.40 |
2.46 |
8.55 |
3.37 |
|
2023 |
City Lodge Hotels Ltd |
473.15 million |
9.55 |
9.55 |
5.04 |
15.65 |
2.88 |
The firm that operated before the pandemic displayed an impressive operating and net margin together with an outstanding return on assets and equity. But the event of COVID-19 in the year 2020 impacted a lot towards the revenue which reduced from Rs. 2.50 billion in 2019 to Rs 1 trillion in 2021 (Junuguru and Singh, 2023). This decline in revenue significantly affected the operating margin which fell to 5.34% and increased net margin finally to 9%. 86%. The situation declined even further in 2021 when the operating margin became negative (-3.53% according to the figures, hence painting a picture of a company that has operating expenses which were above its income levels when the COVID-19 pandemic was at its worst (Junuguru and Singh, 2023). However, Soaltee Hotel Ltd indicated fairly good future recovery in 2022 and 203 as depicted in the figures above. By the end of 2023, the company not only got back to its revenues of Rs 2.24 billion but also got a better operating and net profit than it was before the pandemic with the operating margin of 28.61% and 25.81%, respectively (Junuguru and Singh, 2023).
7 Years | MBA
Oriental Hotels Ltd suffered a very bad effect from the pandemic as its revenue significantly declined from Rs 1.100 billion in the year 2019, down to Rs 570.24 million in 2020 (PTI, 2023). The operating margin applicable to the company, albeit low even before the occurrence of the disease (6. 70% in the year 2019) further dropped to 3.60 per cent in 2020 and recorded negative growth of (-52. 38) per cent in 2021 (PTI, 2023). This dramatic decrease could be attributed to the difficulties the company experienced in its operations, mainly standard capacities, which would probably concern occupancy rates, where high fixed costs could not be covered by drastically lowered revenues. The net margin in this regard also exhibited the same trend as the gross margin with negative values in both 2020 and 2021 indicating general financial pressure (PTI, 2023). However, Oriental Hotels Ltd started to bounce back in FY2022 & FY2023 with betterment in both operating as well as net margins, nonetheless, the values are still below the pre-COVID showing that its position is still emerging.
Of all the companies experiencing a decline in their revenues, the pandemic affected City Lodge Hotels Ltd badly as its revenues went down from Rs 1. 86 billion in 2019. 189. 16 million in 2020 (BizCommunity, 2024). Msaka opined that operating and net margins substantially declined in 2020 and 2021 with the operating margin reaching a low of -158%. 45% in 2021 (BizCommunity, 2024). Such an extreme negative margin indicates a scenario where operational losses were significant, probably because organizations seldom generated any revenue during the year, and proved unable to cut costs in proportion with the catastrophe in sales. The negative ROA and ROE during these years constitute to enhance the fact that the company was financially devastated. Although there was some improvement in the financial year 2022 and 2023, the revenues were estimated to be Rs 473 (BizCommunity, 2024). Further, this financial position does not automatically mean that City Lodge Hotels Ltd does not face challenges; the company needs to work hard to achieve 15 million in sales while seeing its margins get better.
The qualitative data suggests one of the main outcomes is the tremendous challenge companies have experienced in rearranging their day-to-day operations due to the pandemic (Stadheim et al., 2022). Soaltee Hotel Ltd, Oriental Hotels Ltd and City Lodge Hotels Ltd have pointed out drastic changes in their operational activities. These were things such as laying off workers due to lower sales, business closures for some time and some compliance with health rules put in place by different governments (Stadheim et al., 2022).
This resulted in unprecedented problems in sustaining occupancy levels and controlling service quality due to the collapse of global and domestic tourism (Stadheim et al., 2022). Due to the pandemic, many companies had to adapt and continue their operations by offering their spaces for business with long-term stays and quarantine services, which offered few revenues during the worst times.
The qualitative data also shows how these companies have shifted their business models due to the COVID-19 outbreak (Sohl, McCann and Vroom, 2022). For example, Soaltee Hotel Ltd made strategic efforts to achieve greater online visibility accompanied by intensified advertising plans targeting the domestic market because international tourists would likely take a longer time to come again (Sohl, McCann and Vroom, 2022). This included giving localized offers as well as promoting discounts to the regional customers which partly helped to compensate for the reduction in this segment.
Like other companies, Oriental Hotels Ltd and City Lodge Hotels Ltd also adopted various strategies including cutting down on operating hours, and negotiating new deals with suppliers to maintain cash availability (Reinhardt, 2022). Some businesses also used the locked-down period to improve their properties to estimate that there would be revival and the subsequent influx of clients who would be willing to pay for better sanitation services, clean billowing air and comfortable facilities.
The pandemic also posed significant challenges and flexed the leadership and management muscles of these companies (Hutchinson et al., 2021). The analysis of the qualitative data refers to the fact that it was challenging to make decisions, and leaders were forced to make decisions frequently with inadequate data (Hutchinson et al., 2021). The requirement for efficient crisis management was identified as necessary and some companies which possessed good leadership and good communication plans were more successful in dealing with the dynamics (Błaszczyk et al., 2023).
For instance, in Soaltee Hotel Ltd, the management ensured that employees and other relevant stakeholders were informed and updated on incidences that had affected the company and measures that were being put in place to correct the situation. This approach proved useful in managing the morale and the trust of the staff during a shift that was characterized by quite a lot of unpredictability (Błaszczyk et al., 2023). Conversely, firms that experienced issues regarding communication or slow decision-making were the exact ones that experienced difficulty with the continuation of business operations and employees’ motivation.
Qualitative data also provides a better understanding of altering customer behaviour and expectations due to the COVID-19 pandemic (Stanca, Dabija and Câmpian, 2023). The risk of getting infected together with closed borders impacted consumers’ preferences; safety and cleanliness became essential needs. Clients started shifting towards properties that can ensure streamlined health measures and be flexible in the reservation (Stanca, Dabija and Câmpian, 2023). This change made companies adapt their services and firms started to integrate contactless services, improve hygiene measures, and liberalize terms of cancellation. For instance, Soaltee Hotel Ltd embraced new sanitation technologies and altered its customers’ cycle from touchpoints to only necessary points and customers were assured of safety.
Many of the key players are now aware that the industry requires more durability to meet future shocks for whatever cause (Komonen and Seisto, 2022). Obtaining new sources of revenue, technology development and enhanced relations with domestic visitors.
The crisis has also shown the need for sustainable action where some firms are considering how to have sustainable solutions as they seek to recover from the impact of the crisis (Komonen and Seisto, 2022). For example, there has been a shift towards local purchasing, waste minimisation and energy conservation; which are considered cost-effective solutions and consumer-driven changes.
This chapter investigated the effects of COVID-19 on Nepalese tourism and hospitality industries particularly Soaltee Hotel Ltd, Oriental Hotels Ltd, and City Lodge Hotels Ltd. Using quantitative analysis, the research observed a sharp decrease in revenue and profit margin up to COVID-19. However, the increase in Soaltee Hotel Ltd shows that the company would likely bounce back by 2023. On the other hand, Oriental Hotels Ltd; and City Lodge Hotels Ltd continue to be in a struggle to attain their pre-pandemic profitable figures. The pandemic gave the push for change and adaptability in business with benefits both for customers who are now more conscious about safety and flexible working. In summary, the chapter highlights the fact that contrary to previous beliefs, companies in the industry are in the process of recovering and that resilience and strategic flexibility is central to managerial decision-making in the current circumstances; this is evidenced by the diverse recovery profiles that exist and that can be generally considered as an indication of varying levels of success in the attempt to adapt to the new environment.
The qualitative and quantitative analysis and discussion of the data collected from the Nepalese tourism and hospitality industry are presented in this chapter towards a synoptic understanding of how the COVID-19 pandemic has affected the industry. The paper will focus on the mistakes and impacts that the pandemic had on operational and financial performance, measures taken and implemented, and the implication of all these in the future of the industry. The first section of the chapter focuses on the qualitative data and discusses the type of experience, the strategies adopted, and the leadership of the major firms in the sector. It then goes deeper into the figures that show the financial position that the pandemic had exposed and the efforts of the companies towards their recovery. The chapter concludes by giving a synthesis of the points progressed in the discussion above to give the reader a comprehensive outlook of the industry at the current and in future.
The outbreak of COVID-19 led to the disruption some of which were very dire consequences in the tourism and hospitality industry (Liu et al., 2023). In the industry analysed, occupancy levels significantly fell as restrictions in both international and domestic travel were put in place. For instance, the information from the Nepal Tourism Board showed that the number of tourists in the year 2020 was 80% less than the year 2019 which badly affected hotel occupancy (Liu et al., 2023).
Soaltee Hotel Ltd which normally operates with an occupancy rate of 75-80% in peak seasons faced this figure to be below 20% in the middle of the pandemic in 2020 (PTI, 2020). These changes led to a significant decline in occupancy level and this compelled the hotel to close several of its amenities partially and function at an extremely reduced level. The same can be said about Oriental Hotels Ltd, for which the occupancy rates were at an average of 70% in 2019 and dropped to less than 15% in 2020 (PTI, 2020). Such operational disruptions were further exacerbated by the latter of government guidelines that greatly affected and altered the service delivery practices to accommodate health-related guidelines (Ntounis et al., 2021).
Restaurants and hotels, for instance, had to ensure high levels of hygiene, cut down on the number of persons allowed in a restaurant at a given time and come up with ways to address physical touches via contactless strategies and technologies (Ntounis et al., 2021). These changes not only added additional costs that needed to be covered but also created the need for faster updates on business processes – another burden to firms many of which have seen their revenues decline.
Due to the difficulties that arose during the pandemic, the firm needs to find and use different solutions which can help it to function (Jafari, Özduran and Saydam, 2021). Among the diversification strategies, the most notable was a movement toward the domestic market. Due to the inability of international tourism virtually stagnate, hotel companies such as Soaltee Hotel Ltd and Oriental Hotels Ltd sought to target domestic travellers (Jafari, Özduran and Saydam, 2021). Soaltee Hotel Ltd came out with a series of staycation packages and promotional offers which targeted domestic clients to an extent (Chang and Wu, 2021). The hotel noted that domestic guests contributed to more than 60% of hotel occupancy in 2021 as compared to 2019 where only 20% achieved the same.
A similar challenge came to City Lodge Hotels Ltd through implementing long-term stay packages at an affordable price targeting domestic travellers on extended stays (Mody, Suess and Lehto, 2017). These packages offered flexible check–out time, different rates for extended stays and improved in-room dining services. While this transition was necessary it also drew attention to the fact that local customers had different needs and beneficiary characteristics than international market segments (Mody, Suess and Lehto, 2017).
The other activity that formed part of the strategic response was the management of costs. Due to a dramatic decrease in their revenues, organizations were forced to adopt strategies that helped them conserve cash and remain sustainable (Oklevik et al., 2021). Some of the measures implemented by Orient Hotel Ltd for instance include operating at a limited number of hours; certain unprofitable operations were closed; and suppliers were approached to reduce their prices (Oklevik et al., 2021). Another measure was the reduction of the staff; this is one of the most challenging things that may ever happen in an organisation, but in the given case, it became necessary to adjust operational expenses for the decreased income. The Nepalese Hotel Association said that around 50 per cent of the staff across the sector’s organization were either let go or put on unpaid leave during the pandemic, which indicates that cost-cutting measures affected the hospitality industry massively (Alrawabdeh, 2021).
Digital transformation was another clear key strategic approach that was employed by these companies (Kraus et al., 2022). During the increase in the number of remote interactions and contactless services, firms advanced their usage of digital technologies to interact with customers and optimize work processes (Kraus et al., 2022). For example, Soaltee Hotel Ltd modernised online ordering and payments and also updated their way of promoting the services. These measures not only kept the company’s customers engaged during the pandemic but also put in a strategic readiness to capture the market share once the pandemic period is over (Kraus et al., 2022). The WTTC report also reveals that digital involvement in the hospitality sector rose by 40% during the pandemic which explains why technology is vital in managing the situation (WTTC, 2021).
The leadership and management issues arose due to the pandemic impacted the oriented organisations and the tourism and hospitality sector was not an exception to this ordeal (Talwar et al., 2022). Leadership was also important in managing the risks that came with the pandemic especially in the aspect of decision making and especially when making fast decisions and making communications with the employees and stakeholders.
Some of the companies that put these aspects into practice include Soaltee Hotel Ltd’s management where they enhanced open communication and involved the employees in managing the crisis (Talwar et al., 2022). Management used virtual town hall meetings to communicate with the staff regarding the changes taking place in the market, the company’s financial position, and the measures being undertaken to overcome this adversity (Talwar et al., 2022). This approach was useful in ensuring that the morale of the employees was retained and also the sense of unity was retained despite the many complications. This was also stressed by the Nepalese Hotel Association pointing out that organizations with appreciable and engaging leadership did relatively better in terms of operational resilience and staff retention.
On the other hand, companies which had issues in decision-making and communication activity had more severe problems (Verhoef et al., 2021). For instance, Oriental Hotels Ltd failed to carry out cost reduction strategies as early as possible because they expected a better improvement in the number of tourist arrivals. That caused a greater financial burden, which later needed even more extreme measures, including deeper personnel reduction and service downsizing (Verhoef et al., 2021). The failure to adhere to effective and efficient two-way communication during this period also contributed to confusion among the workforce hence compounding the operations burden. The practices and consequences of these companies prove the importance of leadership during a crisis and their ability to take decisive actions and to make sure all the stakeholders are informed about the actions of the company (Verhoef et al., 2021).
The pandemic also brought changes in the behaviour and expectations of customers in the tourism and hospitality sector (Brunetti et al., 2020). Consumers’ behaviour changed greatly, and the safety and hygiene of customers were a major priority in personal travel planning and in choosing a place to stay. According to an online questionnaire by the Nepal Tourism Board in 2021, 70 per cent of the clients visiting various hotels and restaurants selected health and safety measures as a top priority that had greatly improved from pre-COVID-19 days (Silwal, Gonzales Garcia and Silwal, 2022).
Due to such shifting expectations, the providers were forced to evolve their service potentials rather faster (Silwal, Gonzales Garcia and Silwal, 2022). Thus, Soaltee Hotel Ltd to established strict measures of sanitation such as ultraviolet room and area sterilization & contactless doors and payment procedures through mobile applications. The hotel also changed the food and beverage delivery model to increase the deliveries to guest rooms and decrease seating capacity in restaurants (Silwal, Gonzales Garcia and Silwal, 2022). These steps also served as effective strategies towards continuing to have confidence in the product while other objectives were key to differentiating the company in the market especially when people were becoming more conscious about what they consumed.
Fluctuations in demand and further demand for flexibility were the other changes in customer expectations (Aryal et al., 2024). Due to the unclear measures in place regarding travel limitations, customers started to insist on the customization of the contracts, in particular, more openness to cancelling procedures. This compelled Oriental Hotels Ltd to offer customers more flexibility in terms of bookings by offering a policy that gave clients a leeway to change or cancel their booking with very many restrictions (Aryal et al., 2024). This was particularly useful when there was a lot of uncertainty and it was instrumental in maintaining the faith of the customers and ensuring continued booking (Aryal et al., 2024). It is believed that the flexibility of the customer services will remain high even after the COVID-19 situation as clients have more options regarding their travelling plans.
Another one refers to the long-term changes in the area of business model and increased versatility of the business (Bidmon and Knab, 2018). It is not a secret that organizations have shifted focus to diversify revenues and seek new sources of income not tied to global tourism, especially after the events like COVID-19 pandemic (Bidmon and Knab, 2018). The new vital direction that appeared as a result of the pandemic and the necessity of domestic tourism is more likely to persist in future as the companies strive to establish a more stable fragmented client base.
Sustainability is also another area that has been adopted in the industry’s recovery process as another concept. 2020 helped in realizing that green approaches are not only necessary due to saving on costs but also due to increasing consumers’ demand for such companies (Bidmon and Knab, 2018). For instance, Soaltee Hotel Ltd predicts that they will decompose their carbon dioxide emissions through the use of energy-efficient devices and through sourcing their products within the local markets (Leipziger, Kanbach and Kraus, 2024). The current business environment has led to the adoption of sustainability to not only meet customers’ demands but also to alleviate the impacts of operational risks towards future sustainability.
Another long-term effect, which the pandemic left on society is digitalization. The adaptation of technological solutions in the course of the crisis has become the new normal in terms of relations with clients and business management (Leipziger, Kanbach and Kraus, 2024). That’s why online booking, contactless services, and digital marketing are part of the business’s model now, and any business that will keep on searching for new solutions in these fields will be likely to become more competitive after the pandemic. From the WTTC, more digitalization is anticipated to happen in the tourism and hospitality sector with a focus on increasing the value proposition for the customers and optimizing the business processes (WTTC, 2021).
First and foremost, the buyers’ liquidity in the tourism and hospitality industry took a severe hit with the onset of the COVID-19 pandemic. This is reflected in the revenues from Soaltee Hotel Ltd which recorded a healthy revenue of Rs 2. From Rs. 50 billion in 2019, it nose-dived to Rs 1 (Nepalindata.com, 2019). The total global healthcare expenditure was estimated to be $ 36 billion in 2020 indicating a growth of 45%. 6% decrease. This has been mainly caused by a sharp decline in international tourist arrivals and increased strict measures including a complete lockdown of the economy. It was even worse in 2021 when additional revenues were reduced but the firm seemed to revive in 2022 and especially 2023 (Nepalindata.com, 2019). Within the year 2023, Soaltee Hotel Ltd.’s revenue has recuperated up to Rs 23.9 billion, only one per cent less than the number recorded before the coronavirus pandemic began, which shows a rather rapid rebound fueled by an aggressive redistribution toward the domestic market and a gradual easing of restrictions on foreign travelling (Nepalindata.com, 2019).
The revenue of Oriental Hotels Ltd declined even further with it showing Rs 1. 51 billion in 2019 to Rupees: 570 billion. It reduced from 24 million in 2018 to 9 million in 2020 which is a decline of 62% (BS Web Team, 2023). The recovery of the companies’ revenues has been less positive with 2022 and 2023 reflecting a slight increase compared to the pandemic year but below the numbers recorded before the pandemic. This slow recovery may be a result of several factors such as slow adjustment to change by each business and continued overdependence on international tourists, which have not been many.
The above figure depicted that tourism in the post-pandemic world declined in April 2020 (IMF, 2021). Furthermore, the tourism rise seen in September 2020 is being peak and growth of the tourism sectors has been recorded. It was reported that City Lodge Hotels Ltd had taken the worst hit where the company’s revenue declined from Rs 1.00 Crore in 2019 to Rs 189. In the year 2020, the number of international migrants reached 16 million, which comprises a physical blow in the face of the global population with an eighty-one per cent increase. 1% decline (BS Web Team, 2023). The recovery in the upcoming years has been slow and the actual revenue of the company in 2023 will be Rs 473 crore only. 15 million, which is less than half of what it was in 2019 (BS Web Team, 2023). This points to the fact that has been facing a herculean task in its attempts to re-open its operations because of the crisis, which might have hit this company especially hard due to its model of operations that probably heavily relied on the flows of international tourists or the business travels.
The current ratio which is a covering ratio and quick ratio helps the analyst in understanding the relative strength of the firm and its capacity to withstand the financial pressures during the periods of financial stringency (Borio, Furfine and Lowe, 2023). One of the major challenges that emerged during the pandemic was how to ensure that companies in the tourism and hospitality sector had good liquidity.
Soaltee Hotel Ltd has kept the current ratio somewhat healthy even during the pandemic period and it has remained above 1.4 out of the 2019 to 2023 program as proposed will be achieved during the period (Borio, Furfine and Lowe, 2023). This shows that the company had adequate current assets to meet the current liabilities hence demonstrating proper management of operating cash flows. The alterations in the above specified current ratios reflect that Soaltee Hotel Ltd had been able to handle its working capital or manage the general liquidity position of the business quite efficiently despite the downturn in its revenues (Borio, Furfine and Lowe, 2023).
Oriental Hotels Ltd however suffered a decline in the liquidity ratios in the period of the pandemic with the current ratio dropping to 1.50 in 2019 to nearly 1.44 in 2023 (Borio, Furfine and Lowe, 2023). The decline shows that there is some measure of liquidity constraint and the reason might be that there are not enough cash receipts and adequate funds to meet current obligations (Ongoro, 2018). While the company has not fallen into a liquidity crisis the ratios have drastically reduced meaning that the firm has become stricter in its financial status and may not have been able to dispense cash towards recovery projects or any other unplanned financial situation that was likely to arise (Ongoro, 2018).
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Liquidity was the biggest problem faced by the City Lodge Hotels Ltd Company. This turned out to be at a current ratio of 2. seventy-three in 2019, plunged to 1 in 2020. Seventy-eight in 2020 and it is reduced even further to 1. 48 in the year 2021, which shows that financial pressure has risen for people in the manufacturing sector (IMF, 2022). This shows that the pandemic led to higher use of debt financing among the company hence its higher debt-to-equity ratio. Possibly, the troubles to ensure enough working capital intensified the operational issues and hampered the company’s speedy restoration, as reflected by the sustained negative margins and relatively slower increase in revenues.
The comparisons of the financial numbers of these three companies indicate that there are significant distinctions between them in the organisation’s performance during the pandemic and post-pandemic responses (Qadri et al., 2023). Of the three companies, Soaltee Hotel Ltd has emerged as the most robust and perhaps has relatively better revenge in revenue, operating profit margin and asset and equity returns (Qadri et al., 2023). Some of the aspects that empowered the company to bounce back to profitability quicker included shifting to domestic tourism, efficient management of costs and its solid liquidity base.
However, it took Oriental Hotels Ltd and City Lodge Hotels Ltd a slightly longer period in their recovery processes (Dwivedi, 2022). The slower increase in revenue, the further decline in profit margins, and a worse recovery of ROA and ROE indicate that these companies faced more difficulties and challenges due to the pandemic and failed to quickly respond and diversify to the adverse conditions (Dwivedi, 2022). Among the three firms, City Lodge Hotels Ltd has faced a more challenging recovery process, which is illustrated by negative profit margins, reduced liquidity ratios and poor earnings on assets and equities.
From the financial analysis of Soaltee Hotel Ltd, Oriental Hotels Ltd and City Lodge Hotels Ltd it was seen that COVID-19 affected the Nepalese tourism and hospitality industry in many ways. The analysis shows that all three companies faced significant negative changes in their revenues, gross and net profit margins and returns on assets and equity during the pandemic and especially in 2020 and 2021. Thus, the Soaltee Hotel Ltd revealed the highest level of recovery, especially in revenue and profitability by the year 2023, which described the strategic imperativeness, especially the domestic market and cost management approach. This coupled with the fact that the company has been in a position to maintain its liquidity ratios while at the same time enhancing the other ratios available, depicts the strength of the firm.
The empirical analysis of COVID-19 on Soaltee Hotel Ltd, Oriental Hotel Ltd and City Lodge Hotel Ltd in Nepal provides an analytical perspective on how deeply the companies were hit and how they managed to recover from the pandemic. The COVID pandemic affected the world economy in a very bad way, and the industry that suffered the most from its effects is the tourism and hospitality industry. Due to inactivities in international travel and other stiff restrictions such as lockdowns and social distancing, the companies recorded sharp dips in sales revenues, permanent razor-thin margins and poor financial performances.
The 65% of the firm showed that all three firms had a poor year financially in 2020 and 2021 during the pandemic. Soaltee Hotel Ltd had ensured strong financial stability till the onset of the pandemic; during the pandemic, the company’s revenues and profitability were lower and both operating and net margins became a negative value at the worst of the pandemic period. Nonetheless, it rebounded by 2023, thanks to the following factors; Market focus: The company shifted focus to the local market to reduce Competition Cost control: The company has been able to control its costs of operation through the introduction of efficient measures relative to its sales Liquidity: The company has been able to ensure it maintains good liquidity. This recovery is a clear indication that businesses especially manufacturing firms need to embrace strategic flexibility during crises.
City Lodge Hotels Ltd and Oriental Hotels Ltd on the other hand had some serious and longer tests. This resulted in severe declines in the revenues of both companies as well as their inefficiency in restoring the profit margins and the key financial ratios. The slow recovery of these companies can be attributed to several factors such as slow change in response to the dynamic market environment, continued dependence on the international tourism market and problems in controlling operating expenses among others. The longer duration of either negative or below-average profit indicates that these organisations were somehow less prepared to deal with the disruption of operations and the financial pressures caused by the pandemic.
In addition to the statistical findings, the qualitative analysis enhanced the knowledge about these challenges by identifying the operational, strategic, and leadership choices during the pandemic. The dramatic change in customer behaviour due to the COVID-19 outbreak requires a stronger focus on health and safety actions caused the shift of companies’ strategies by introducing new measures such as sanitation standards and contactless services. The following are Soaltee Hotel Ltd's findings: Soaltee Hotel Ltd has implemented its digital transformation strategy on time and ensured that good communication networks were maintained with both the employees and the stakeholders which enabled the Soaltee Hotel Ltd management to prepare well and return strongly after the pandemic. However, the long time taken to communicate their new strategies, and strict response to the affected hotels slowed down the recovery of Oriental Hotels Ltd; and City Lodge Hotels Ltd.
The study also brings to light the issue of leadership and management, especially during periods of crisis in the tourism and hospitality sector. The implication was that, organizations that responded to the crisis appropriately, that is sustained decisive actions, and clarity of communication to employees and stakeholders stand a better clip. Leadership played a crucial role in keeping the organisations’ spirits high, supporting focus on operations/ activities to be executed and its ability to sustain loss played a significant role in influencing the degree of recovery in these organisations.
Regarding the future, some of the long-term impacts of the pandemic on the tourism and hospitality industry of Nepal are identified. The crisis has exposed business operations to extreme vulnerability and thus there is a need for increased flexibility. This leaves firms in a precarious position where they have to look for other sources of revenues and gradually move away from the reliance on international tourists and continue investing in digital transitions. Moreover, the focus on sustainability and proper behaviour of companies is only going to continue as people and companies realize the necessity of diminishing harm done to the environment and strengthening their positions.
Soaltee Hotel Ltd, Oriental Hotels Ltd, and City Lodge Hotels Ltd are some of the best examples of worst experiences, especially during the pandemic period, which can be learned by the overall industry. Although the pandemic has brought unprecedented challenges, it stimulated the companies to restore ineffective strategies of their activities and look for new effective solutions. Even though the level of recovery of these companies may vary at certain periods of time, overall experience shows that companies in this sector can regain their strength and expand their businesses after going through tough challenges, and the experience may serve as a guide for other players to tread the path as they prepare for future shocks.
6.2 Recommendations
6.2.1: Diversification of sources of income
Another one of the major weaknesses which the pandemic revealed is that Nepalese hotels are highly dependent on international tourists (Waller and Abbasian, 2022). To manage this risk, organizations must seek other sources of income to reduce over-dependence on a particular product. This can be done by increasing food and beverage options for the domestic market, opening up other niche tourism segments such as eco-tourism, wellness tourism and cultural tourism and tapping other markets like the regional source markets from the neighbouring countries (Waller and Abbasian, 2022). Companies should also develop new forms of entertainment like virtual, or they should coordinate their business with other online-based companies to provide other travel-related products that may be of interest to the guests.
6 2.2 Strengthening Digital Transformation
It has been noted that due to the pandemic, digital transformation initiatives in tourism and hospitality have been forced to step up (Gutierrez, Ferreira and Paula Odete Fernandes, 2023). Thus, organizations need to keep on focusing and allocating resources to digital enablers that help create value by improving client interactions, business processes, and services (Kaushal and Srivastava, 2020). This includes enhancing services, adding cashless and contactless strategies, and leveraging data analytics to understand the client’s desires and consequently provide them with solutions as per their needs (Kaushal and Srivastava, 2020). In addition, the increase of development in digital marketing activities can help companies extend the range of new customers and improve online identities for businesses that are critical in today’s digital economy.
6.2.3 Stephancing Health and Safety Standards
Today’s customers are sophisticated and they have turned their focus towards health and safety issues and this trend will not change (Nilsen et al., 2020). Hygiene and safety should be ensured by the companies to the guests to create confidence among the guests. This includes sustained spending on sanitation technologies, refresher training of the staff on health and safety protocols, and sharing with the guests about measures being put in place (Nilsen et al., 2020). Lastly, a company should look into achieving accreditation with known health and safety associations to add more credibility to it.
6 2.4 Fostering Sustainable Practices
The aspect of sustainability is gaining popularity among consumers as well as among enterprises. Businesses should seek to adopt sustainable strategies in their operations to implement sustainable practices that will help them to appeal the emerging environmentally conscious tourists (Quach et al., 2022). This may include cutting down on the usage of energy and resources, disposal of waste and use of locally manufactured products, and encouraging ecologically friendly tourism (Quach et al., 2022). When companies ensure that they are sustainable they play their part in conserving the environment but this helps them stand out in the market.
The research utilised secondary data from the selected firms; a fact that might lead to bias since other details of the entire industry were not captured. Exhaustive quantitative analysis is not possible owing to the unavailability of internally organised data, especially about unlisted firms. However, this study focuses on three companies only, although the sector comprises many SMEs most of which the impact of the pandemic may have been slightly different.
The study regards mainly the direct and short-sighted effects of the pandemic, based on the data up to 2023. On this account, it can be slightly inadequate in explaining the impacts in the long run especially as the industry unfolds in the future years (Knott et al., 2022). The focus was also laid on the financial and operating performance indicators, which might lead to missing out on other important factors, like the effectiveness of the staff, customers’ satisfaction, or socio-economic effects.
The analysis of the qualitative part of the data collection was in the form of interviews and reports which were secondary (Knott et al., 2022). Although information from these sources proved rather useful, they may not give a comprehensive view of the experiences of all stakeholders in the industry. This again is a limitation emanating from the fact that the study only relies on secondary sources of data, and the conclusions derived are a reflection of the efficiency of sources (Knott et al., 2022). The discoveries and suggestions made cannot be assumed as a proposition to companies not formalized within the studied firms of tourism and hospitality business in Nepal.
Among the most significant future implications, the following can be mentioned: strategic agility. Covid-19 has made it very crucial for businesses to be in a position to transition very fast whenever the market is changing. Firms that seek to offer a diverse mix of products and services, target new consumer groups, and adapt quickly to change will be prepared for future success. The element of flexibility to adapt to changing circumstances such as moving from international tourism to domestic tourism or from traditional business models towards the Sharing Economy business models will probably continue to define success in the sector. Such a situation calls for a corporate culture that embraces innovation besides being adaptable to respond to emerging issues.
Sustainability has also turned out to be one of the most important issues, tangible not only in regard to environmental issues but also in connection with business continuity. The COVID-19 pandemic has exposed the weaknesses of applying conventional and frequently destructive tourism approaches. For the rest of this century, sustainable practices will become more popular not only with the consumer demand for environmentally friendly products and services but also with the increasing risk from environmental and economic volatility. There is evidence suggesting that sustainability-minded businesses will gain competitive advantages in size, customer retention and cost. This change will not be limited to mere cosmetic alterations; it implies a complete ’paradigm shift’ with regard to resource utilisation and service provision and business relations with local populations and other dynamics.
In my opinion, it has been insightful to go through the process of implementing this study as it has shed light on the many issues and challenges that plague the tourism and hospitality industry most especially during unprecedented instances such as the current COVID-19 outbreak. The analysis of the effects of the pandemic on organizations such as Soaltee Hotel Ltd, Oriental Hotels Ltd, and City Lodge Hotels Ltd has been both enlightening and rather been a humbling experience to learn how the organization needs to be strong, strategic, and have strong leadership in turbulent times.
I would like to highlight that one of the biggest points, which I understood, is the essence of the ability to withstand the crisis, or, in other words, the power of the ‘spirit of roastiball’. How Soaltee Hotel Ltd responded to the crisis by building new strategies, effectively communicating with stakeholders and investing in areas such as digitalization and healthcare reassured the theory that resilience is not only about surviving the crisis but about transforming and even thriving after it. This has made me aware and thankful to those who work hard during crisis and most importantly the importance of being proactive rather than reactive.
Another key area that has come out clearly in this research study about the leadership. How leaders managed risks and made decisions most of the time was quite insightful by having to make decisions while being open and also encouraging their teams which was an indication of how much leadership matters in moments of crisis. This aspect of the study has enriched me with how leaders do not only lead by example in the day-to-day running of an organization but also how they guide an organization through uncharted waters. It has also highlighted the issues and concerns that encourage ongoing leadership development and also made it clear that leadership learners must be equipped on how to cope with the existing crises.
Other changes in the dynamics of the tourism and hospitality industry could be observed throughout the pandemic as well. This was not only about revenue or profit losses, or business continuity issues, but about changes in customer demand, labour force and business processes. This has enabled me to widen my perception of how factors in this industry are closely related, be it with the customers, employees and how all these aspects should be taken care of for the industry to run in the long run.
During my work, I came across some key limitations, these include limitations in access to data and limitations in the scope of the study. These limitations made me more sensitive to issues of quality data gathering and especially the availability of data in research. Hurdles that I encountered when trying to gather detailed and exhaustive information exposed the latter’s lack of sharing in the industry and that real-time information is extremely beneficial for the rapid developmental scenarios. This exercise has also supported the notion of being more attentive or cautious about the type of information found in research, especially secondary data.
Reference
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