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Just as Nepal was recovering from a decade long political uncertainty, the country was hit by an earthquake of magnitude 7.9Mw in April 2015, with aftershocks being felt even in May. In the short term, various tourism segments will be negatively impacted by this; however it is expected that Nepal’s inbound arrivals will bounce back by the end of 2016.

Tourism a key contributor to the Nepalese economy

The Nepalese economy witnessed its strongest real GDP growth of 5.5% in 2014 due to a rebound in agriculture and increased domestic demand. Tourism is an important industry for Nepal’s economy and is also one of the key sources of foreign exchange and revenue. According to the World Travel and Tourism Council (WTTC), the total direct contribution of travel and tourism to Nepal’s GDP was NPR75.6 billion, contributing 4.2% of the whole economy GDP in 2014.

Nepal – GDP Growth and Tourism Overview, 2009-2014

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Source: Euromonitor International Economy, Finance & Trade Data & ‘Travel & Tourism Economic Impact 2014 Nepal’ report by the World Travel and Tourism Council (WTTC)

Tourism also directly supported close to 500,000 jobs in 2014, contributing 3.5% of total employment in the country.  Tourism in Nepal supports jobs including employment by hotels, travel agents, airlines and other passenger transportation services. Also the activities of the restaurant and leisure industries are directly supported by tourists. Thus a negative impact on tourism would have a widespread impact on the country’s economy.

Pilgrimage tourism set to be negatively impacted

As per Ministry of Culture, Tourism and Civil Aviation of Nepal tourists visiting Nepal for holiday/pleasure, trekking and mountaineering and pilgrimage made up close to 80% of all tourists arriving in Nepal in 2014.

Nepal, known for its rich Hindu and Buddhist pilgrimage centres, attracts thousands of tourists from India, Bangladesh and China every year and pilgrimage tourists constituted close to 13% of all tourist arrivals in the country in 2014. The earthquake had a devastating impact on the country’s pilgrimage centres.  The number of World Heritage Sites in the districts of Kathmandu, Bhaktapur and Lalitpur were damaged to an extent that they cannot be restored to their original states. Also, the numerous other pilgrimage centres that were damaged by the earthquake from Kathmandu Durbar Square to Manakamana Temple need immediate attention and repairs for tourism to resume. Pilgrimage tourism would need time to recover and can resume only when repairs and restorations are completed.

Inbound Arrivals by Purpose of Visit, Nepal 2014

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Source: Euromonitor International from Ministry of Culture, Tourism and Civil Aviation, Government of Nepal

Of the 75 districts in Nepal, only 11 were impacted by the earthquake and only 3 out of 35 trekking areas were affected. The majority of hotels and resorts remained unaffected by the earthquake and are ready to take in tourists. Thus holiday/pleasure and trekking and mountaineering are expected to recover faster than travel for pilgrimage.

Domestic tourism to be impacted the most

Domestic tourism has been increasing steadily over the past four years as the growing economy has enabled a new generation to explore their country. Domestic trips have registered consistent growth of close to 12% over the past five years while inbound international arrivals growth registered significantly slower growth in 2013 and 2014.

Domestic Trips vs Inbound Arrivals, Nepal

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Source: Euromonitor International from Travel Research

Trekking and adventure sports are popular among young Nepalese in particular, indicative of the travel across the country as locals take part in a number of events and activities that were previously targeted at foreign travellers. The earthquake is expected to have a major impact on domestic tourism as the local population has been severely affected and needs time to recover.

How soon can Nepal recover?

The process of rebuilding Nepal’s infrastructure is challenging as the terrain is tough and the process requires both time and funds. Yet, apart from the damage to basic infrastructure such as roads and power, popular adventure destinations and hotels have remained relatively undamaged. The rate of recovery of tourism now depends upon the speed with which the government is able to restore basic infrastructure and connectivity.

Best case scenario

For the best case scenario, Euromonitor International estimates that tourists visiting Nepal for holiday/pleasure, that make up 50% of all tourists, will start visiting the country by the end of July. Most hotels and resorts remained unaffected by the earthquake and hence tourist arrivals are expected to pick up.  August may see pilgrims from India and China start visiting as the government of Nepal is planning to carry out large scale media campaigns in India and China. Tourist circuits which have suffered minimally are expected to start operating by September and trekking is expected to resume in the unaffected areas. World Expeditions, a well-known travel agency that specialises in trekking, travel and active adventure holidays has announced that it will resume trekking events in Nepal from September 2015. By the end of the year, tourist arrivals are expected to reach close to 70% of arrival figures witnessed in 2014.

Nepal: Monthly Arrivals in 2015 – Best and Worst Case Scenarios

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Source: Euromonitor International Estimates

Note: Data for 2015 are Euromonitor estimates

Worst case scenario

For the worst case scenario, Euromonitor International estimates that tourist arrivals would need more time to pick up. In the near short term, safety concerns may prompt international tourists to visit other popular destinations such as Sri Lanka, Maldives, New Zealand or other South East Asian countries. Pilgrims visiting the country may not be back soon and could delay their trip to ensure roads and connectivity is back to normal. Tourists visiting the country for trekking and mountaineering may stay hesitant to visit the country for safety concerns. In the worst case scenario, by the end of the year tourist arrivals are expected to reach close to 50% of arrival figures witnessed in 2014.

In essence, 2015 will be a year of recovery with the overall recovery of tourism in Nepal expected to require a year’s time. By end of 2016, tourism in Nepal is expected to reach to normal levels.

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