Expectations in hospitality industry «

Expectations in hospitality industry

Hospitality industry is service oriented industry that comprises businesses such as hotels, restaurants, travel and airlines. The term ‘Hospitality’ refers to an act of welcoming and receiving guests whether that be through warm greetings, providing delicious meal, accommodation, services of transportation or entertainment.

The main objective of hospitality industry is to ensure thattourists and travelers feel comfortable and have access to convenient amenities while they are away from home. Hospitality industry has evolved into a major sector that not only generates foreign exchange and creates employment opportunities but also plays a crucial role in preserving and promoting culture and cuisine, increasing export revenue and diversifying a country’s economic portfolio.

Researches have shown that majority of developed economies consider tourism a fundamental industry for their economic growth because it depends on other productive sectors. Althoughthe hospitality industry has potential to become a significant contributor to national economy, it is also highly volatile industry that requires massive investments. The industry is directly influenced by environment, politics, rules and regulations, infrastructure as well as culture and practices of a place or country.

Nepal has experienced handful of events such as political instability, the global economic meltdown of 2008, earthquake, economic blockade and the recent lockdown due to COVID-19 pandemic which have all significantly impacted the flow of tourists, thus affecting the hospitality industry.Therefore, keeping in mind, the industry’s nature as well as its potential, it is essential for the government to protect hospitality entrepreneurs by addressing their issues and creating a safe environment for investment.

One of the issues that the hotel entrepreneurs have long been advocating for is receiving concessions in energy management, similar to those given to other manufacturing industries. While Industrial Enterprises Act, 2076 in its Schedule-6 identifies tourist housing, motel, hotel, resort, bar and restaurant as ‘industries’ under tourism industry, Electricity Collection Regulation, 2078 in rule 3 have listed hotels, restaurants, travels and other services in relation to tourism as‘business’.

This discrepancy in laws haveresulted to a huge disadvantage to hospitality industry because concessions on electricity bills are only given to those sectors identified as ‘industries’ under Electricity Collection Regulation. Another expectation kept by hotel entrepreneurs is for the government to exempt hotels with property tax. Property tax levied by the local government has resulted in increased expenses for hotels. Hotel industries are hardly given any tax exemptions or incentives and it is believed that it must be taxed more because it is paid by foreigner. While the operation cost of hotels is already high, the liabilities towards government creates more obstacles for hotel entrepreneurs.

The government should consider local tax exemptions for properties, especially for the hotel industry and establish reasonable business taxes Hospitalityentrepreneursare alsofacing problems due to outdated laws. For instance, the provisions made by Foreign Exchange Act, 2019 regarding foreign exchange for tourists do not seem relevant in the current digital era. The requirement for foreign currency permission to conduct tourism business is not practical anymore because guests typically pay through credit cards and debit cards. Even Tourism Act which mandates that foreign guests pay in foreign currency does not align with the current practices of the hotel industry. Hoteliers believe that the service fees charged by banks for credit and debit card payments have also affected the hotel industry.

It is necessary for the government identify thechanging industry dynamics and propose solutions to simplify these issues. Another prevalent trend in hospitality industry is online booking with various online companies selling services, including hotel rooms, at discounted prices. However, this practice has impacted hotel industry as hotels are required to pay commissions to these online companies. The proliferation of online booking companies has resulted in increased competition and price pressure on hotels.

Many of these online companies offer discounted rates, which often require hotels to pay commissions based on the booking value. This has caused concerns among hotel owners and operators as these commissions can significantly impact their profit margins. Moreover, these online companies may not always comply with Nepal’s tax regulations, which can further exacerbate the issue. In light of this, it is imperative to regulate these online booking companies in accordance with Nepal’s tax laws, including VAT and income tax.

To address this challenge, it is essential to subject online booking companies to the same tax regulations as other businesses in Nepal. This includes imposing VAT and income tax on the services provided by these companies. As per the laws of Nepal, these companies should be liable to pay taxes on the commissions earned from hotel bookings. This would ensure that these online companies contribute to the country’s tax revenue and operate on a level playing field with other businesses in the tourism industry.

The government must work closely with relevant stakeholders and online booking companies to develop policies that are practical and feasible and should also carefully monitor the enforcement of tax regulations. This could involve setting clear guidelines on tax compliance, establishing a system for monitoring and reporting, and providing support and resources for online companies to comply with tax regulations. The government should also note that hospitality industry is one of the most favored industry by foreign investors.

Various international hotel chains have entered the Nepalese market and more are expected to follow suit in the coming years. The real challenge for the government is to create a favorable environment to retain FDI. The changing regulations of FDI, lengthy process in getting visas for investors and their family members, unnecessary compliances for repatriation of income, lack of adequate infrastructure and the prolonged political uncertainty are some of the reasons that the foreign investors are reluctant to invest in Nepal. It is the duty of the government to address these issues and provide support to lure foreign investments.

In conclusion, the hospitality industry has seen increased investment and growth however, it still remains a highly unpredictable business. That is why, the hospitality entrepreneurs have expectations from the government and relevant authorities to take measures to actively solve the underlying issues which they have been advocating for a long time. Only the support from the government can secure the hospitality entrepreneurs and foreign investors who invest significant amounts in establishment and operation of these businesses. This would encourage more investors to venture into the hotel sector, leading to increased employment opportunities, economic growth, and revenue generation for the country.