(Part II) The Gorkha Earthquake 2015: Economic Impact on Nepal Tourism

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3. Impact Indicators & Post Disaster Context

3.1 Gross Domestic Product (GDP):  

With hotels and restaurants contributing about 1.9 percent to GDP in 2012, international tourism contributed about 2% to GDP. The 2015-World Tourism and Travel Council (WTTC) report indicates that the direct contribution of tourism to the national GDP is 4.3 percent in 2014. The same report shows a GDP contribution of 8.9 percent in 2014 aggregating the contribution of hotels and restaurants including domestic tourism as well as other subsectors of tourism. Before the Gorkha Earthquake, the hotel and restaurant sector was expected to grow its GDP contribution by 6.6% while after the earthquake the estimated growth is only 3.9%.

3.2 Employment:

Tourism in Nepal creates employment thru various formal businesses such as hotels, airlines, restaurant, tours & travels, trekking, etc. while at the same time there are a number of informal value chain businesses such as guide, porter, taxi, handicraft, money exchange, food chain and many more helping create indirect jobs. Due to the earthquake the total workdays lost in tourism sector is estimated to be 29,662,443 including men and women. Likewise the losses in personal income stands over NPR 6 billion.  

The Tourism Employment Survey, 2014 of the Ministry of Culture, Tourism & Civil Aviation (MoCTCA) estimates that approximately 138,148 persons were engaged in the tourism sector. For the estimation, the survey utilized the data from 192 sampled industries out of the total 4,819 registered tourism industries(Table 3.2).

Table 3.2: Estimation of employment generated by tourism industries in NepalTable 3.2

 Source: Tourism Employment Survey, 2014, MoCTCA

The WTTC 2015 report, based on pre-earthquake data, indicates that in 2014 travel and tourism in Nepal directly supported 487,500 jobs (3.5 percent of total employment) and an additional 608,000 indirect jobs creation was estimated in the report. In the pre-earthquake scenario, the number of jobs was expected to rise by 4 percent in 2015 and by 3 percent per annum to 681,000 jobs in 2025.

As per MoCTA, about 80% workers in tourism are male. Likewise the proportion of male workers is higher than female workers in all types of tourist businesses, except in homestays, which employs 57% women. After the earthquake, more women have lost jobs than men, particularly when one considers that women occupy less skilled jobs such as housekeeping which can be easily taken over by men.

3.3 Tourist Arrival:

In recent years, the two main volume markets, India and China, have shown encouraging trends in arrivals to Nepal. In the past five years, the average annual growth rate of Chinese and Indian visitors has been 26 percent and 14 percent respectively. The growth from the rest of the world has been about 8 percent a year. As share of visitors from India and China accounts for about 36 percent, the overall growth in tourist arrivals has been pulled up to 10 percent a year over the past five years. The statistical survey in 2014 by MoCTCA shows an increasing trend of tourist arrivals in Nepal since 2000 (Table 3.3) and (Figure 3.3).

Table 3.3: Tourist arrival and average length of stay, 2000-2014Table 3.3

Source: Nepal Tourism Statistics, 2014, MoCTCA

Figure 3.3: Tourist arrivals in Nepal, 2000-2014Figure 3.3

Source: Nepal Tourism Statistics, 2014, MoCTCA

Post-earthquake, the number of tourist arrivals to Nepal has declined by 90 percent compared to May of 2014. The industry expects visitor numbers to be 40 percent lower in the fiscal year 2015-16 compared to 2014-15 and another 20 per cent reduction in the following 12 to 24 months. Thus a significantly reduced number of tourist arrivals is likely to be observed over the next two to three years.

In the long term, a sustained absence of visitors from highly affected areas is likely to lead to a permanent relocation of local residents to other areas, resulting in their livelihoods getting disconnected from their place of origin. In the long run, this could produce significant socio-cultural impacts to the people living in those regions.

3.4 Foreign Exchange Earnings:

At the macroeconomic level, after remittances and export of goods & services, tourism is the third largest economic sector for foreign exchange earnings. As per Nepal Rastra Bank data, in the year 2012-2013, the total foreign exchange earnings from tourism was over NPR 34 billion which is 4% of the total foreign exchange earnings or 2% of the national GDP as shown in the table below (Table 3.4). Further, based on eight months of FY 2013-14, the total foreign exchange earnings from tourism is still over NPR 34 billion, although the numbers won’t look promising after the Gorkha Earthquake.

Table 3.4: Foreign exchange earnings from tourismTable 3.4

Source: Nepal Rastra Bank, 2012-2013

3.5 Government Revenue:

Following the increasing trend of the government’s revenue generation from tourism sector, the directly visible government revenue from the tourism sector in 2012 was nearly NPR 9 billion which represented about 3.6 % of the total government revenue that year (Table 3.5A).

Table 3.5A: Tourism sector’s contribution to the Government’s fiscal revenueTable 3.5A

Source: Post Disaster Needs Assessment (PDNA), National Planning Commission, GoN

Due to the earthquake there are losses to the government revenue streams such as national park permit fees, mountain trekking fees, tourist and tourism related fees, tax revenue to the government, etc. Nepal Mountaineering Association (NMA) received over NPR 51 million in royalty for mountain expeditions in 2014(Table 3.5B). The past data from the Department of National Park and Wildlife Conservation (DoNPWC) show an encouraging number of tourist arrivals every year in the national parks and protected areas (Table 3.5C). In the post-disaster days, these figures are certainly going to get impacted heavily.

Table 3.5B: Royalty received by peak, 2014Table 3.5B

Source: Nepal Mountaineering Association (NMA)

Table 3.5C: Tourist visitors on national parks and protected areasTable 3.5C

Source: Department of National Park and Wildlife Conservation (DoNPWC)

3.6 Tourism Revenue:

The revenue losses result from losses in tourism revenues, air transport revenues, tour operator revenues, trekking revenues and restaurant revenues. It was estimated that the decreased tourism arrivals would affect tourist spending and subsequently would lead to a revenue loss of over NPR 21 billion between May and December 2015. This is estimated to decrease by about half (to nearly NPR 13 billion) in the next six-month period in 2016. Another nearly NPR 13 billion is expected to be the tourism revenue loss during the year 2016-17. Due to the earthquakes the loss of tourism revenue is estimated to be over NPR 47 billion by the end of 2017.

Other impacted revenue sources are from various tourism sub-sectors such as airlines, travels & tours, trekking, restaurant, etc. After the earthquake disaster, a total of over NPR 62 billion of revenue losses is estimated due to a combination of destruction and non-availability of tourism facilities and the drastic decline in foreign tourist arrivals (Table 3.6).

Table 3.6: Summary table of estimates of lossesTable 3.6

Source: Post Disaster Needs Assessment (PDNA), National Planning Commission, GoN

3.7 Hazards & Vulnerabilities:

After the Gorkha Earthquake, there is increased potential of loss due to the hazards such as, landslides, outbursts of glacial lakes, avalanches, rock falls, floods and more aftershocks. Mountain tourism and the communities in those areas are more vulnerable to calamities due to geophysical challenges, weather conditions, climate change, etc. On one hand, the mountain residents and workers are exposed to the general increased risk of landslides, rock fall, floods, etc. associated with mountain settings, while on the other their families are highly vulnerable to changes in visitor numbers and travel patterns that directly affect their incomes and livelihoods. If no alternative income sources are available to the households, their condition is likely to become severe in the coming days.

Many trail and trekking sections are declared insecure based on assessments by trekking companies. National parks and conservation areas do not have an inventory system in place that assesses the safety of their areas with respect to natural disasters. There is an increased need to invest in an early warning system to ensure safe tourist experiences for all market segments.

At present the clear risk is the sustained loss of income due to the absence of tourist in the aftermath of the earthquakes. This risk is not limited to actual earthquake-affected areas but to the whole of Nepal. The risk is even higher due to our own vulnerabilities and lack of capabilities to timely respond to such disasters. Safety has risen as the biggest concern for the entire fraternity of tourism stakeholders and it will certainly cost money and extensive planning to address those critical issues.

(To Be Continued…)

(Part I) The Gorkha Earthquake 2015: Economic Impact on Nepal Tourism

(Part III) The Gorkha Earthquake 2015: Economic Impact on Nepal Tourism

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