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Economy

Nepal tourism hit hard by crises in mountaineering, casino industries

Protesters participate in a hunger strike in front of the Nepal Tourism Board offices in Kathmandu on May 28.

KATHMANDU -- Temba Tsheri Sherpa, managing director of expedition operator Dreamers' Destination Treks and Expedition, was shocked when he heard reports of a deadly avalanche on Mount Everest's Khumbu Icefall, but confident that the April 18 disaster would have little effect on the popular spring mountaineering season.

     Temba Tsheri could not have been more wrong. But it was not the tragic deaths of 16 climbing guides that brought the industry to a near standstill. It was an unexpected moratorium on guiding imposed by grieving Sherpas demanding better pay for working at high altitudes.

     The unprecedented halt to climbing on Everest, the world's highest mountain, has dealt a serious blow to Nepal's tourism industry, still recovering from a decade-long Maoist insurgency which ended only in 2006. But the mountaineering dispute is not the only area of conflict in the country's troubled travel and tourism sector.

     Hopes of a casino-led gambling boom have faded as all 10 of the country's casinos have either shut for lack of business or closed their doors in a row over government regulations. The national tourism board has only recently reopened after months of conflict with private businesses alleging official corruption and incompetence.

A poster welcomes a Chinese expedition team on the gates of Dreamers’ Destination in Kathmandu.

     For Dreamers' Destination, the ban on Everest expeditions could hardly have come at a worse time. The company was established only in 2013, by Temba Tsheri and four other members of the ethnic Sherpa community, which migrated from Tibet to settle in northeastern Nepal around 400 years ago.

     After successfully organizing two 2013 expeditions, to Mount Everest and Kangchenjunga, the world's third-highest mountain, the company moved into smart new offices in Kathmandu. It invested more than $40,000 in equipment to fulfill a contract to work for a Chinese climbing group in the 2014 spring season.

     "We spent a lot of money. We tried to provide a unique service to our clients, and hired young and well-trained Sherpas to support the expedition," Temba Tsheri said. "Unfortunately, the avalanche occurred and we had to cancel the expedition. It was a huge loss."

     According to the tourism ministry's mountaineering industry division, 300 climbers from 32 expedition teams were at the Everest base camp when the avalanche struck. They promptly left the country. Another 500 had received permits to climb Everest and nearby mountains Lhotse and Nuptse in the spring season. They cancelled their Nepal visits outright.

Season in jeopardy

With the onset of summer, Nepal's big spring tourist season has wrapped up, but hospitality industry analysts say the Everest moratorium will hit the start of the autumn season in September unless a deal is reached with the Sherpas.

     "It will definitely bring down (by) 20% to 25% (the number) of rooms filled by trekkers and climbers," said Saurabh Kalra, a senior analyst at JLL India Hotels & Hospitality Group in New Delhi. "There is also a lack of information on how the next season would unfold. There is much uncertainty as far as Everest expeditions are concerned," he said.  

     The cancellation by a few hundred foreign climbers per season is a bigger issue for Nepal than it may seem. Mountaineering experts say that the livelihoods of thousands of people along the trekking routes hinge on the business they provide.

     "It is estimated that after a tourist arrives at the airport, he or she would be engaged by 13 different businesses until he or she reaches the destination," said Damber Parajuli, president of the Expedition Operators' Association.

     Parajuli was one of several industry experts who said the Nepali government was eager to collect fees from climbers, which amount to about $2.4 million a year for Everest, but had shied away from responsibilities, such as providing security for climbers and a decent living for their guides.

     He also criticized government attempts to persuade the Sherpas to resume work, including a dramatic intervention by Bhim Acharya, Nepal's tourism minister, who flew from Kathmandu to Everest base camp for talks that failed to resolve the issue.

     "The events of these past months have not only impacted the tourism (industry) but have also raised questions about the future of climbing on Everest. Acharya's intervention was too little and too late," said Parajuli.

     Chandan Sapkota, a Kathmandu-based economist, said the Everest problems could even force some Nepalis to emigrate. "The slowdown in this sector affects government revenue, foreign exchange earnings, seasonal employment, hotel and restaurant businesses in key tourist hubs around the country, trekking activities, and the aviation sector," he said. "If the slowdown persists, then in the absence of alternative employment opportunities, low-skilled workers might be forced to seek employment abroad."

     Travel and tourism contributed more than 8% to Nepal's gross domestic product in 2013, according to the World Travel & Tourism Council, based in London. By some estimates, more than a million Nepalis are directly or indirectly employed by the travel and tourism sectors.

New casino rules, fees

Alongside the problems in the mountaineering industry, however, Nepal is also facing a crisis in its 40-year-old gambling industry. Seven of the 10 casinos shut in April after the operators failed to comply with new regulations introduced in 2013. Three closed last year -- two because of the revised rules and one after a labor dispute.

     The new rules require casinos to have paid-up capital of at least $2.5 million, with a minimum of $1.5 million for the country's 17 slot parlors, known as mini-casinos, which are located along the porous Indian border. All of these also shut their doors because of the new regulations. There is also a new annual license fee, paid to the tourism ministry, set at about $207,000 for casinos and just over $100,000 for mini-casinos.

     Some operators accept that Nepal simply has too many casinos. Others blame the closures on a combination of overregulation, competition from mini-casinos and the continuing costs of overstaffing, forced on the industry by government ministries and Maoist rebels during and after the insurrection.

     Amba Datta Bhatta, executive director of the Casino Association of Nepal, said the industry's troubles began when the mostly foreign former owners agreed to employ workers nominated by the government or the ruling party as an alternative to paying higher taxes.

     "In the early 2000s, casino workers had the most attractive jobs in Nepal. Their salaries were more than those of the hotel workers. They received a lot of benefits, including medical insurance for their families and education for children. It significantly increased the operational costs," he said.

     Bhatta said the overstaffing was worsened by further hiring forced by the Maoists, who in the case of one casino forced it to hire 200-300 people from 2008 to 2009. The Maoists' demands "proved damaging to an already overstaffed operation," Bhatta said, estimating the excess labor force at about 40%.

     Officials say that about 11,000 casino employees have lost their jobs. But there is also a serious impact on the wider tourism industry. The casinos drew an estimated 150,000 tourists a year, filling about 15% of rooms in five-star hotels in Kathmandu. Occupancy levels are down by about 10%, according to analysts.

Signs of hope

There are some signs of an end to the crisis. Nepal's Supreme Court issued an interim order in June requiring the government to allow mini-casinos to resume operations. The court was responding to a case filed by Central Media, which is run by a lawmaker who operates three mini-casinos in Nepal's southern plains.

     At least one of the big casinos also appears to be preparing to reopen. Madhu Sudan Burlakoti, joint secretary of the tourism ministry, said the Casino Royale operation, owned by the Nepali company Gilt International, had applied to renew its license after producing documents showing it had paid taxes due up to 2013.

     However, in a stark illustration of the tensions afflicting the tourism industry, the Nepal Tourism Board itself has been hit by protests alleging misuse of funds by Subhas Niraula, its CEO. Niraula denies the allegations but on June 25, Nepal's anti-graft body decided to launch a full investigation.

     The allegations have prompted demonstrations that have hampered services such as the issuance of permits to trekkers. Private businesses also threatened to halt all tourism services in Kathmandu, Pokhara and Chitwan. These actions have been put on hold since the investigations started.

     Prachanda Man Shrestha, a former head of the Tourism Board, said the industry's problems emanated from tensions between the government and the private sector businesses that provide most of the services.

     "Be it casinos, the Everest climbing or the board, there's a thread that connects them all: The government has not succeeded in implementing the rules and in bringing the private sector on board in decision-making," Shrestha said.

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