August 2005
COVER STORY

“The good thing about tourism is that arrivals can increase at the rate it fell—very much different from other business sectors,” said Prabhakar SJB Rana, Chairman of Soaltee Group in a focused group discussion among tourism industry experts organised by New Business Age early July in association with Buddha Air. The question was whether Nepal could hope to get one million tourists by the year 2010 despite the recent slump in arrival number. Basant Mishra, the President of NATO (an organisation of big value tour operators), responded more cautiously, “Bringing in one million tourists before 2010 is a good subject to ponder upon. To set an ambitious target is good, but we have to understand our present reality.” However, the caucus agreed that it is an attainable target given that we approach it doing the things right.

After almost achieving the 0.5 million mark in 1999 post a successful ‘Visit Nepal 98’ campaign, tourist arrivals plummeted to almost one third by 2002 to 0.328 million in Nepal, largely due to internal circumstances which were aggravated further by a number of events world-wide.

Globally, tourism grew by 10 percent in 2004. In Nepal it was 15 percent—i.e. exceeding the world average. Are we at any different position than where we were in 2000, 2001 or 2002 or did the tourist originating countries refrain from issuing negative travel advisories? Or are we getting positive news coverage in the international media? “None of the above” was almost the unanimous response from the participants in the discussion.

“If the type of negative press coverage received by Nepal had been a decisive factor, the arrivals should have been zero,” said Birendra Basnet, Managing Director of Buddha Air. The negative growth rate in arrivals had stabilised in 2003 and it even grew to double digits in 2004. These facts question the assumption many of us have that the downward spiral was due to the ongoing conflict, and therefore it cannot be stopped as long as the conflict is not resolved.

Amidst all these circumstances and given that the factors that govern tourism arrivals will continue to remain constant, the Nepal Tourism Board (NTB) is on the verge of launching a new campaign to rejuvenate brand Nepal. “NTB is working towards a branding exercise. The company has been finalised. In a few months we will have a new brand image for Nepal,” said Tek Bahadur Dangi, CEO, NTB.

But some participants pointed out that while brand development would be a good medium or long-term strategy, the more urgent attention has to be focused on infrastructure.

“Besides branding, what Nepal needs is a serious work on product attributes and facilities. Now while arrivals are down, industry planners and the government should work to streamline infrastructural supports like immigration, airports and transports instead of spending heavily on creating the imagery,” said Rabi Poudel, the president of the Nepal Association of Travel Agents (NATA).

But when the very macroeconomic fundamentals are shaky due to the heavy cost of conflict, it is unlikely that the government will come up with any proactive intervention, pointed out Prabhakar Rana adding a dimension to the constraints. Therefore, while the political conflict in the country is heading towards zenith, it sounds almost like loose talk to propose one million arrivals.

To assess how likely or unlikely it would be to achieve the one million arrival target by 2010, Nubiz and Orion Associates undertook an appraisal using the present arrivals as the base. It was established that a 17.5 percent annual growth from now on is needed to attain that magic figure. Casting the scepticism aside for a while, it can be assumed that for a tourism product like Nepal with an established proposition and vast global markets, it may not really be too much to desire.

But First Things First

Tourism being a volatile industry with way too much dependency on external factors, Nepal’s tourism fortune took a drastic turn post 9/11 and due to this combined with the internal political turmoil plaguing the country for the last decade, the tourism planners have obviously lost the zeal to carry on the work.

But optimist Basnet says, “According to the 2003 WTO data, in Bali, Indonesia where the bombing took place killing hundreds of tourists, tourist arrivals was 4.4 million. The same year, Myanmar got two lakh tourists. Philippines, where the Abu Sayyaf group regularly takes tourists for ransom, received 1.9 million tourists. Thailand gets around one crore tourists. Sri Lanka got five lakh tourists. The security situation in Nepal for the tourists is not as bad as in those countries. Therefore, there is no reason why we can’t increase tourist arrivals.”

The Sri Lankan case may be more pertinent in this connection. After almost two decades of suffering internal conflict and losing six jets to terrorist bombing at the Colombo international airport, Sri Lanka appointed a New York based public relations agency spending more than 300 million Sri Lankan rupees to carry out a marketing campaign to rectify the tarnished image. This along with other drastic measures, are listed in an article by the Sri Lankan Ambassador to Nepal Grace Asirvathan (printed in the previous issue of New Business Age) as factors responsible for the turnaround achieved in Sri Lankan tourism. Can’t Nepal emulate Sri Lanka?

Perception and Reality

Post 9/11, when travel patterns changed drastically and the word “terrorism” got etched into the psyche of individuals, Nepal has been at the core of this terrorism debate though the underlying reasons are different than global perception of the issue. Hence frequent negative media coverage further fuelled by negative travel advisories by the governments of major tourism markets has placed Nepal as an unsafe holiday destination across the world. However, as time goes by and some people keep visiting Nepal, the tarnished image of the country will be rectified. A survey conducted by NTB among Indian tourists revealed that though the international media has been portraying Nepal as an unsafe destination as a result of which many tourists stay away from Nepal and even those actually coming to Nepal think of it as not a very safe destination, that perception changes drastically after he or she visits Nepal. According to that survey, 47 percent of the tourists felt that Nepal was unsafe before coming to Nepal, whereas after the visit only 13 percent felt the same (TISS 2005, NTB).

Among those tourists who stated that they felt Nepal as unsafe before visiting it, 62 percent said that the news on Nepal they read back home was not entirely true; 98 percent of them said that the news they had received was somewhat or highly exaggerated.

While this indicates to the hope that the arrivals will pick up gradually as the positive word-of-mouth spreads, it also indicates to the need to focus on media management by the Nepali tourism industry. However, as the media battle in the respective markets becomes fierce, this has a direct fall out on the type of coverage seen and read. “How do you give a right perspective to a young zealous and self righteous journalist from one of those private television news channels from India?” questions a media analyst. Yellow journalism is the norm these days and small isolated events are shown as the custom, therefore the traditional idea of managing the media becomes very difficult to implement these days.

To address the problem by handling the public relations front, a Crisis Management Cell and Media Centre were established in NTB some years ago. These two departments supported by the Royal Nepalese Consulates abroad need to work together in creating good relations with the international media and providing them with timely and correct information. But when one looks at it holistically, the PR bodies tend to become ineffective if they operate in isolation while not being able to answer the burning question of public safety posed by the popular media.

“The myth about Nepal being an unsafe destination is a media creation,” pointed out Basant Mishra emphatically and suggests a sustained and proactive programme to organise press familiarisation trips with participation of cross cutting media representation.

Though NTB is bringing in media persons of FAM trips, Mishra said, “We need to be cautious about bringing in the right people for the FAM trips. All our efforts have to be result oriented. Let’s not do things just for the sake of doing it.”

Brand Nepal: the evolving image

While good public relations may be effective in countering negative publicity, it surely is not enough to bring about the required growth in the arrivals, especially in the view of competitive posturing from other destinations in the region vying for the same piece of market share. As the global travel market consolidates its distribution, it becomes critical to develop a brand image to position your offering in the markets. Countries and destination have developed apex bodies as tourism boards as facilitators to regulate and promote themselves as attractive destinations.

Taking on this cue, Nepal Tourism Board was formed in private-public partnership model primarily to promote and regulate Nepal’s tourism. But brand Nepal had evolved long before the existence of NTB. Nepal, since the 1950s, has been branded as the land of the mountains/Himalayas or land of the Sherpas after Hillary and Tenzing scaled the Everest in 1952. In the 60s and 70s Nepal was inadvertently branded as a destination for quick nirvana with the Hippie movement descending in central Kathmandu for the easy access to marijuana.

Thus the brand Nepal always had its attributes and perceptions in the mind of prospective travellers and it would have been erroneous for NTB to disregard Nepal’s tourism heritage. Hence, when NTB started its innings with the tag line of “Mount Everest and more”, this image found many sceptics in the traditional school as they felt that Nepal was being given a mono attribute of adventure tourism through Mount Everest while downplaying its other attributes.

Then about three years ago “Mystical Kingdom” was adopted as its primary image and even this strategy was criticised by many as they felt that it was a cliché and overused and had the run-of-the-mill approach considering the competitive environment. Many felt that “Mystical Kingdom” was susceptible to easy duplication by destinations such as Bhutan, Sikkim, Laos etc. and thus it is not a good value proposition for Nepal.

“Branding is not just about creating advertisements, it is about creating a framework to create stimulus to communicate with the audience. A brand can mean different things to different people, therefore the idea is to create a right stimulus by studying the attributes and closely linking it to the needs and wants of the audience with the right imagery,” says a Kathmandu based branding enthusiast.

“God’s own country” is used as the tagline for promoting Kerala of India and it means different things to different people—a lazy break for a yuppie from Bangalore, an exotic destination for a German factory worker, a blissful holiday for a young couple in Dubai. Yet the consistent message of great holiday remains intact. Taglines can change but the core values and principles of a product should remain consistent and that becomes the brand promise.

Tourism data illustrate that only 5 percent of the total world travels account for adventure travel while in Nepal, despite its product feature as an attractive trekking and mountaineering destination, only 25 percent of the tourist arrivals account for adventure travel. Therefore, promoting adventure travel as a mainstay of the product may even have negative implications and create obstruction for the desired growth.

A recent study conducted by NTB among Indian tourists in Nepal revealed that the top five image attributes for Nepal were easy accessibility, easy visa availability, good religious destinations, friendly and hospitable people and good scenery and nature. Our regional competing destinations Thailand, Singapore and Malaysia were, however, found to be strong in a completely different set of attributes, namely good shopping destination, destination offering high quality services, good accommodation and good entertainment facilities. Safety issue was certainly a plus for all the three destinations vis-à-vis Nepal.

Image attributes are likely to differ from market to market and the demographic segments of these markets. Therefore, the critical challenge for NTB will be to identify the most promising markets and develop and implement strategies to penetrate these markets while adjusting the relevant product offerings and attributes.

Resources, Resources….

Singapore Tourism spends over 15 crores of Indian rupees for a single geographical market of India. Destinations like Mauritius, Hong Kong and Thailand spend similar figures in that market. This indicates the need for resources to conduct professional marketing exercises. Given the resource crunch currently faced by Nepal, it is unlikely that the government will make any substantial contribution towards meeting the resource requirement. Then how will these problems be addressed?

“The IMAX movie on climbing Mt. Everest filmed in 1996 really gave a boost to the number of tourists coming to Nepal to climb Everest,” said Ashok Pokharel, Director, Shangrila Tours, a big volume tour operator specialised in handling adventure tourists from the USA and Europe. Thus inviting international movie producers to shoot in the locales of Nepal can be one effective alternative marketing avenue that needs relatively less expenses.

“I was surprised to note that the Indian arrivals are the biggest segment for Swiss tourism,” remarked Prabhakar Rana. This happened perhaps because of Hindi films shot in Switzerland.

The Lord of Rings trilogy were all shot in New Zealand which brought unparalleled visibility and returns to New Zealand tourism and reinforced New Zealand’s brand image of pristine natural beauty. To tap the Indian market, New Zealand also went to Bollywood and invited Indian film producers to shoot in New Zealand. Films such as Daud and Kaho Na Pyaar Hai shot there led to unprecedented arrival of Indian tourist to this island nation prompting New Zealand Tourism Board to pronounce the lead artists of Kaho Na Pyaar Hai as the Brand Ambassador of New Zealand in India.

“Creative” instead of “integrated” seems to be the buzzword for the marketing planners. Besides film shootings, destinations are also actively vying for events like award ceremonies, film festivals, beauty pageants and the like that give impetus to Meetings, Incentive, Conference and Exhibitions (MICE) segment arrivals.

One Million Tourists: fast and how?

“Nepal should focus on short haul destination (regional markets) for now,” says Tek Bahadur Dangi, CEO of Nepal Tourism Board, while Basant Mishra feels that we should not move our focus from our traditional markets of Europe and the USA as he feel that Nepal has a good equity there. This debate of short versus long haul travellers will be crucial in defining Nepal’s segmentation strategy. Even today, Europe contributes about 30 percent of the tourist arrivals to Nepal but it is on a declining trend and the cost of enhancing the numbers will be very high and will also be dependent on other variables such as connectivity and geo-political conditions of the whole region.

Globally 80 percent of the total tourism movement is short-haul tourism like Americans flying to Cancun in Mexico or Canadians moving to the Caribbean or Germans hopping over to sunny Spain or Greece during the gloomy European winter. Furthermore, only 10.6 percent of the Europeans and 23 percent of the total outbound Americans actually travel beyond their respective regions.

Traditionally, Nepal’s major tourism markets have been Europe, the US and Japan. The reluctance on the part of our tourism entrepreneurs to change, renew or start marketing networks in the nearby Asian markets is understandable. Short-haul markets such as India, Bangladesh or the ASEAN countries were always treated as filler during the low and shoulder season; therefore they never warranted active promotions and networking. Considering the huge shift in the socio-economic trends in India and China, it may actually be the time to take a look at our strategy for these markets for quicker returns. India and China are certainly destined to be among the major tourism generating countries and our strategic location certainly gives us an edge.

While the dream of bringing in high-end tourists is no doubt worth dreaming about, the current frame conditions imply that the volume will drive the business as a substitute of quality. Since a large percentage of Nepal’s population is directly and indirectly reliant on tourist arrivals, this strategy may also contribute to equitable distribution of wealth. The high-end tourism rides on a structure which excludes participation of certain classes in the wealth generation process from tourism.

Connectivity and Bottlenecks

The role of a national carrier becomes pivotal in the pursuit of the million tourist target since the connectivity deep into the heart of the identified market will be critical in this regard. Singapore is serious about accessing the Indian market and has started flying into the Indian heartland such as Ahmedabad and Amritsar where a new generation of Indians possesses large disposable income.

This highlights the role of RNAC as the national carrier to provide the vital connectivity. But due to a number of reasons RNAC at best is a doubtful entity. "The least the government can do is to restructure RNAC as a committed organisation for the cause of larger national interest," said Birendra Basnet. "It is not really necessary to privatise RNAC. The important issue is to develop the commitment. The complaint of funds not being available to acquire new planes is just hogwash. There are hundreds of 757s waiting for takers in markets on very easy terms." He further said that since RNAC has a large number of 757-rated pilots, that is the equipment RNAC should go for. Furthermore, looking at the congestion TIA has in the afternoon slot for landing and takeoffs, these RNAC pilots will be of strategic advantage as they can land and take off during the off-peak hours too as they know the terrain like the back of their hand.

To fulfil the larger tourism objectives, five 757 jets are said to be the ideal fleet size for RNAC to start with. "Regarding RNAC, it is now time to take a concrete decision either this way or that as this impasse is hurting the tourism on an everyday basis," said Tek Bahadur Dangi.

Nepal at present has Memorandum of Understandings (MoUs) and Air Service Agreements (ASAs) with 35 countries (2005) and 1,052,636 annual available air seats (two ways). We are, however, flying to only 10 countries and using only 45.82 percent of the annual available air seats (Economic Survey 2005). This figure in itself tells a story.

Another dimension of connectivity constraint is the high fares for the Kathmandu sector by foreign operators thereby constraining market penetration and market diversification.

"Chinese people visit other countries in large numbers but in Nepal their arrival figure stands at only about 7,000. For the Kathmandu-Lhasa-Chengdu flight, which is of about 3:30 hours, the fare is about USD 600. For the same fare (USD 600) six night and five day packages are available from Beijing, Shanghai or Chengdu to Bangkok-Singapore or Bangkok-Malaysia. So, airfare is the other main problem," said Rabi Poudel, President of NATA.

Birendra Basnet added, "If RNAC were to have more aircrafts and fly to more destinations, the costs would definitely come down. The basic principle in the airlines industry is that the more an aircraft is left idle on the ground, higher the costs. Similarly, more destinations would also mean that the fixed costs would be spread more evenly. Hence, with more aircrafts flying to more destinations, RNAC will be in a position to offer more attractive airfares, thus bringing in a competitive environment in the industry."

Nepal as a Product

From a product offer perspective, Nepal still has a very restricted portfolio. From undisciplined immigration operations to chaotic airport management to disorganised transports to almost non-existent regulatory mechanism on hygiene and sanitation, all of these further complicate this significant area.

Today in most domestic airports essential services like telephones, cafeteria, general cleanliness and clean toilets are missing and they present an unfavourable image of Nepal as a product while NTB has embarked on a serious product development. Subash Niraula, Director of Product Development of NTB, said, "So far, our focus has been only on nature, culture and adventure-based products. We have to gradually expand to many more emerging segments. Sports, health, education, ecology and entertainment are emerging as new attractions."

This situation perhaps reflects the gap between the planning and the implementation circle of government authorities. Agreed that the new product development will attract new segments, but as long as the airport toilets continue to be filthy, airport cafeterias continue to serve foul smell and immigration officers view every tourist as a fleecing opportunity, the bottleneck in the arrival will possibly continue.

"However vigorously may Janakpur and Lumbini be endorsed as the birthplace of Sita and Buddha respectively in their respective marketing constituents, the airport facility in the towns of Janakpur and Bhairahawa just doesn't cut the deal," said a prominent tourism entrepreneur. "In Janakpur, they do not even clean the cobwebs from the terminal roof and their toilets are filthy, really filthy," he added.

In light of the present circumstances, some of the activities that planners need to undertake could be:

# Conduct a detailed evaluation of our existing portfolio with respect to our marketing strategy and target segments we are catering to and intend to cater to in the near future

# Strengthen our existing portfolio by making infrastructure improvements and market them in a more attractive manner

# Identify short term and long term product development objectives

While packaging Nepal as a destination despite the ongoing conflict, one important stumbling block in the present context has been the international tour operators. "Based on the study we carried out and the experience of our participation in travel trade fairs we realise that our clients in the global markets have started to exclude Nepal from their sales brochures. Traveller's website amazingly skip Nepal while Bhutan and other countries are there," says Prabin Pandey, Chairman, PATA Nepal Chapter.

Travellers' security is not the only concern for this type of behaviour of the tour operator. All types of insurance coverage is available in Nepal or can be made available within days from anywhere in the world if needed," said Khem Raj Baral, General Manager of Shikhar Insurance. Birendra Basnet agreed and shared the experience that when Nepali airlines stopped getting insurance coverage after 9/11, the insurance companies of Nepal quickly found an alternate which was as prestigious as before and more reliable and cheaper as well.

Therefore, the real reason is something else. According to Rabi Poudel, "Big tourism companies hesitate to send their clients to such countries, lest their reputation be hampered in case something happens to the client. The present problem we are facing is because these big companies do not want to take the risk. Insurance coverage is still available; but this is not the only reason for the tourists not coming. If I give an itinerary to the client and I cannot take the client to the destination on the date scheduled in the itinerary, the client can sue the foreign tour operator unless the delay is caused by some natural calamity. This is the risk that the big travel companies do not want to take."