Shaligram Apartment-Hotel
Hotel on heritage
To say that the insurgency years were very bad for tourism in Nepal would be to restate an outmoded cliché. However, even during these chaotic years, the story of Shaligram Apartment-Hotel in Jawalakhel was different. While many other apartment hotels which opened after Shaligram started its operations have closed down, Shaligram is still going strong.
The hotel started operations in 1999 when an apartment hotel was a new concept even internationally. Till then the long-stay visitors in Kathmandu could choose only from pensions and guest houses where the rates were cheap but lacking in premium facilities.
To start this fresh project, Sarit Rana, who heads the hotel as the managing director, took a loan of Rs. 20 million from the Himalayan Bank to turn his family property into an apartment hotel and amazingly, he has already managed to pay back all his monetary obligations. "We registered the hotel in 1997 with four apartments and started business in 1999. As we all know, the country's situation deteriorated rapidly after that time," says Rana. "The main reasons for our success during the turbulent years were our location and the fact that we went in with a long term view."
After Shaligram, numerous apartment hotels cropped up in the Jawalakhel area as well as at various other locations. Meanwhile, Shaligram expanded to 10 apartments with an area sprawling across 12 ropanis of land offering amenities like a swimming pool and floodlit tennis court.
One reason for the success may be that it is a property with a historical legacy. First, the property was part of the palace of Rana Prime Minister Juddha Shumshere . Second, as Sarit Rana recalls, "When Tibetans first entered Kathmandu , most locals viewed them suspiciously but my grandfather, Maheshwor Shumsher Rana, gave a part of the Jawalakhel land to the Red Cross so that the refugees could be settled. So these premises were the first carpet factories of the Tibetans in Nepal ." When the space was later turned into an apartment hotel, it was ensured that the Tibetan essence was preserved as much as possible during the reconstruction, he says.
That legacy might definitely have attracted the long-stay consultants from western countries and many similar guests in Shaligram who have a special attraction to things that are Tibetan. But that is not all that explains Shaligram's success.
Equally (or even more) important is the fact that the UN headquarters and many other foreign missions and aid agency offices are located near Shaligram. "Therefore, such guests can avoid trouble even during the days of general strikes and traffic jams. Moreover, tourist attractions like the Patan Durbar Square and many prime restaurants are also close by. 
But Rana attributes success more to the long-term vision of the management though the location and historical legacy might have helped in this. "Unlike other apartment hotels, Shaligram did not slash prices just to fill rooms. We stuck to our mission of providing service at par with global standards with the Nepali ambience striving to meet the needs and expectations of guests to their fullest satisfaction," he says.
Also, the reconstruction of the building preserving the Tibetan heritage was an expensive exercise. But the downturn in the economy during this period came as a blessing in disguise. "That downturn forced the banks to reduce the interest rate to 8 per cent from 15 per cent and this did help the hotel in a big way," says Rana.
Apartment-Hotel Defined
An Apartment hotel is a serviced apartment complex that uses a hotel style booking system and flexible accommodation. It is similar to renting an apartment, but with no fixed contracts and occupants can 'check-out' whenever they wish. Instead of the rigid format of a hotel room, an apartment hotel complex usually offers a complete fully fitted apartment. The length of stay in these apartment hotels is very varied with stays ranging from a few days to months to even years. Prices tend to be cheaper than hotels. Apartment hotels are used as a home away from home therefore they are usually fitted with everything an average home requires. |
Also, business really picked up when more facilities were added in the complex after a year and a half of operations. "We added a swimming pool, tennis court, and sauna and that is when more guests started arriving," informs Rana. According to him, many other apartment hotels failed because they were just apartments and not anything more. Apart from renting the apartments, Shaligram also started a club - the "Bamboo Grove". This helped to bring in additional revenue. Out of the 200 members of the club at present, 140 are Nepalis. "People have told me that the club's facilities are at par with those of five star hotels," says Rana and informs of a plan to add spas for both ladies and men, a jacuzzi and a conference room too. Another plan on the cards is to add a fusion restaurant and then also to get star-rating for the hotel. "For this, we are seeking help from the Nepal Tourism Board," he says.
If tourism takes off, some of the rooms in Shaligram may be converted into regular hotel rooms, he says but adds that most of it will remain an apartment hotel. "We will be losing business if we don't convert into a regular hotel when the number of arrivals go up significantly. But such numbers will not be there overnight," he says.
One interesting point about the hotel's management is that it has a trade union affiliated to the Maoists, but they have not created any problems for the management, claims Rana. "This is because all our staff get the best facilities that they can expect to find in the market," he claims.
Prudential Insurance
ENORMOUS PROGRESS
Prudential Insurance has seen enormous progress and improvement in its operations in the last couple of years. It has reported underwriting profit in almost all classes of insurance in its portfolio in the fiscal year that ended on mid-July 2006, while only fire insurance was above the water last year. So compared to huge underwriting losses last year, the company has earned Rs. 5.356 million as underwriting profit in the fiscal year 2005-06. The result was that the company increased its net profit to Rs. 8.58 million in 2005-06 from Rs. 3.57 million in the previous year.
Raghu Pant ACII, Chartered Insurer, who took over as CEO and Company Secretary of Prudential Insurance Company about a year and a half back, is proud that his ambitious target of collecting Rs. 100 million as premium was almost fulfilled in 2005-06. The premium collection figure for the current fiscal year is also showing a robust 18 percent growth in the first quarter compared to the same period last year. Though this is less when compared to the 26 percent growth in premium collection in the twelve months of 2005-06, it is not bad as the growth in the remaining period is going to be higher as in the last year, he says confidently.
According to Pant, while the company has always believed in sound underwriting practice, net results are better due to improved returns on the company's reinsurance arrangements. This is because of better deals both in terms of higher reinsurance commissions (in its proportional treaty) and lower reinsurance premium (in non-proportional treaty). Pant's experience in reinsurance while working with state-owned Rastriya Beema Sansthan helped in this.
The success to meet 88 percent of the target in premium collection (Rs. 88.6 million out of the targeted Rs. 100 million) is remarkable as it was achieved despite various challenges facing the country and the insurance market of Nepal . The marine portfolio has become the biggest portfolio of the Prudential Insurance Company as it is focusing and specializing in marine insurance and the premium collection in this portfolio increased by 54 per cent this year.
Upon joining the organization a year and a half ago, Pant had discovered that even though Prudential's premium collection was good, its underwriting and reinsurance treaty needed a lot of improvements. Prudential was making underwriting losses in almost all classes of insurance business. The only exception was the fire insurance portfolio which is regarded as the most profitable insurance business for Nepali insurance Market. "But now we are not looking at premium volume only," says Pant, "We look at profits, moral hazards and the nature of insurance to determine quality."
And what are Prudential's plans for the future? Pant expects that with restoration of peace, though terrorism insurance will decline, the business in other classes will boom as manufacturing and tourism will flourish. So Prudential is preparing for that. "Fire insurance will increase. There will be more mountaineering insurance and insurance for trekkers, porters, rafters, etc.," he says, "We are also looking at liability insurance policies like product liability and professional indemnity insurance. For example, there will be insurance for claims against doctor's carelessness. So we have made strategies to enter these areas." And of course Prudential has not forgotten its specialty, i.e. the marine insurance, because it is coming up with Custom Duty insurance for the marine insurance clients. There will also be a comprehensive insurance policy for traders. For the fiscal year 2006-07, the target for premium collection is Rs. 125 million. This figure is Rs. 150 million next year and Rs. 185 million for the year after that.
To achieve such a lofty target, Pant has to motivate his employees. So what policies are in place for this? "To make our staff professional, we have continuous internal training. This happens for about an hour each day," responds Pant. Prudential also encourages people to gain higher academic qualifications in insurance. For example, the company is encouraging them to appear in the exams for Licentiate, Associate and Fellowship exams of Insurance Institute of India and promises special salary increases for those who pass these exams. "We have recently started sending two to three people every year to the College of Insurance in India , so that they learn more about insurance and become more knowledgeable and professional in their work ."
Panchakanya's Forward Integration
Construction material major Panchakanya Group, has started a new company as forward integration of its core business. Concrete Premix Pvt. Ltd., set up with an investment of Rs. 50 million, will supply readymade concrete mixture aimed at solving problems like finding space to store building materials, lack of water, difficulty in finding quality materials, wastage of raw materials at construction sites and the difficulty in hiring labour on the required day. The service is to be made available within the Kathmandu Valley and even beyond if the distance is within 30 km from the Naikap factory.
According to Pradip Kumar Shrestha, managing director of the group, the company is planning to distribute 65,000 cubic metres of Panchakanya Ready-mix (as the product is branded) in the first year of operations by utilising 60 per cent of its production capacity. The two Italian SIFA machines which the company has acquired can produce 300,000 cubic metres of Ready-mix concrete every year with single shift operations. The company is targeting household customers as well as big projects. Prices of the mixtures will vary according to the customers' specifications. They will also vary according to the distance of the construction site from the factory.
Shrestha claims that the main advantage of Ready-mix is its quality. He says that all the materials used in the mix are tested in a laboratory and it is also prepared through a computerised process so the proportion of raw materials in Ready-mix is precise. Cement, aggregates, water and other ingredients are weigh-batched at a centrally located plant and then delivered to the construction site in transit mixtures (trucks fitted with rotating drums for carrying Ready-mix).
After a customer contacts the company and specifies the amount of Ready-mix needed, the company will deliver the mixture at the exact time and place agreed upon. "It is just like going to a department store and buying goods," says Shrestha. The company currently owns 10 transit mixtures and two pipes. The transit mixtures are of different sizes so they can access both the wide and narrow roads in the Valley and the concrete can be pumped from a distance of 200 metres. The pumps can pump up to 300 metres horizontally and 70 metres vertically. Within the next four to five months, the number of pipes will be increased to 14.
The Challenges
The main challenge for the company is to overcome the haphazard traffic system of the Kathmandu Valley because costs will rise if the concrete does not reach construction sites on time. If there are delays, workers on stand-by will have to be paid more so the cost for the buyer rises and the company will have to bear extra costs if its trucks get stuck in traffic. Shrestha says authorities should help the company in this matter because this business will benefit the country a lot. Until now, the businesses in construction materials like sand and coarse aggregates have being done in an unregulated way. However, this new method gives the government a chance to regulate this sector and earn revenue.
Further Plans
To expand its services, Panchakanya will build factories in different parts of Kathmandu . After some years, it is also planning to manufacture readymade concrete slabs. Currently, this service is being provided to customers who do not use Panchakanya's TMT iron rods. But as the demand rises, the company will supply Ready-mix only to customers who use TMT. The company also plans to start producing concrete pre-cast products such as concrete slabs.
Nepal Development Bank Recharging
After maintaining a low key, Nepal Development Bank Ltd. (NDBL), the first development bank set up in the private sector, has recently been in a media blitz. The immediate purpose of this activity of the bank, so active in the past that it was recognised by the Association of Development Finance Institutes of Asia and Pacific (ADFIAP) with the ADFIAP award in 2004, is to increase the capital in line with the requirement of the law. However, the company is also coming up with plans to be more active in the investment field, being inspired by the restoration of peace.
Under this plan, the bank has decided to increase its capital to create funds for investment and in the first week of January, its Board of Directors announced a 1:1 rights share issue to increase the paid up capital from current Rs. 160 million to Rs. 320 million.
“Our activities will gain massive momentum in the coming days,” says the Director of the bank Sanandan Singh. “The political and economic situation in the country has changed and our role in the development sector will increase because development projects are the need of the hour.” So the bank will search for long-term investment opportunities. As Singh informs the bank is currently looking to identify opportunities in sectors like education, health, tourism and infrastructure. However, the bank will continue investing in real estate due to its high profitability. In this, the bank will be developing housing projects to sell to individuals and business firms, he says.
The peace dividend will also come to the bank in another form. With the progress in peace, it is expected that India’s apex development bank Industrial Development Bank of India (IDBI) will start injecting capital in NDBL too. Hiranmoy Biswas, who represents IDBI in the management of NDBL, says: “We hope IDBI will increase its investment in Nepal because of the positive investment climate that is unfolding here.” The recent change in the responsibility entrusted to him (earlier he was Advisor and now he is given management responsibility) is a strong indicator that IDBI really wants to increase its investment here. As Biswas informs, a number of projects are already in the pipeline with a view of investing in them by using IDBI expertise in financing in such projects.
With IDBI’s involvement, Singh hopes, NDBL will benefit from the technology transfer. This will also help NDBL to hook to the IDBI network in India so that NDBL’s cards would be acceptable in India also.
Though the effectiveness of the new investment plans will be seen only in the future, it has already scored good points in term of women’s development. Out of 100 employees on its payroll, 40 are women though only one of them is in the managerial level.
NDB has also recently started the transaction of travellers’ cheques as well as electronic debit cards. The bank has plans to open various ATM kiosks throughout the country too. Currently its kiosks are located only at Darbar Marg and Amarsingh Chowk in Pokhara. Singh says that they have not yet decided on the locations for installing the new ATMs but the plan is to place them in areas where the density of customers will be large.
Similarly, the bank has partnered with Western Union Money Transfer in handling inward remittance.
