Nepal’s tourism industry has shown an impressive recovery from the global downturn caused by the COVID-19 pandemic. The country welcomed 1.147 million international tourists in 2024, which is 96% of the pre-pandemic level and 13.1% higher than 2023.¹These figures not only demonstrate the return of traveller confidence but also the effectiveness of measures taken to stimulate this key economic sector. Tourism has traditionally been Nepal’s largest industry and a major source of foreign exchange earnings.³and makes a significant contribution to the country’s gross domestic product, bringing in about US$471 million per year to the economy.³The share of inbound tourism in GDP is estimated at approximately 8%⁴, although the industry’s overall contribution declined somewhat during the pandemic, it is now actively recovering.⁵

The importance of tourism for the socio-economic development of Nepal cannot be overstated. The industry is seen by the government as an important tool for reducing poverty and achieving greater social equality among the population.³The hotel sector, in particular, is the second largest source of foreign exchange and is estimated to have created about a million jobs across the country.⁶This underlines its role not only as an economic driver, but also as an important factor in social stability.

However, despite the positive dynamics of recovery and ambitious government plans, such as the goal of reaching 5 million tourists by the end of the updated tourism decade 2025-2034.⁶, the investment landscape in Nepal’s hotel sector requires careful analysis. There are significant infrastructural constraints and operational challenges⁶, as well as political instability⁸, which may affect the implementation of investment projects. Thus, potential investors are faced with the task of not only assessing the bright prospects, but also deeply understanding the potential risks and pitfalls of this unique but complex market.

The purpose of this article is to provide a comprehensive analysis of the investment attractiveness of the Nepalese hotel sector, aimed at potential investors. The study will examine in detail the key risks and factors affecting the payback of projects. Particular attention will be paid to identifying and characterizing promising, but still insufficiently developed niches and geographic areas – the so-called “white spots” – for the construction of new hotels and, most importantly, glampings in the period 2025-2027.

Nepal Tourism Market: Figures, Facts and Forecasts

Dynamics of tourist arrivals

An analysis of tourist flows to Nepal in recent years shows a steady trend of recovery and growth. After a sharp decline during the pandemic, the number of international arrivals has begun to grow steadily. In 2023, Nepal received 1,014,882 foreign tourists, and in 2024, this figure reached 1,147,567 people, which is 13.1% more than the previous year.¹This marks the country’s return to the map of popular tourist destinations.

Traditionally, the main source countries for tourists to Nepal are India, the United States, China and European countries. In 2024, the largest number of tourists came from India (317,772 people, despite a slight decrease of 0.7% compared to the previous year), followed by the United States (111,216 tourists) and China (101,879 tourists, showing an impressive increase of 67.3%). Significant flows were also provided by the United Kingdom (57,554), Bangladesh (48,848) and Australia (43,980).¹

An interesting aspect is the change in the average length of stay and expenditure of tourists. In 2022-2023, the average length of stay was 13.1 days¹⁰, which is slightly less than in 2020-2021 (15.1-15.5 days). Average spending per tourist per day also shows a decrease: from $65 in 2020 to $41 in 2023.¹⁰This may indicate a change in the structure of the tourist flow. Perhaps the recovery is due to a larger but less profitable segment of travelers, or tourists have begun to prefer shorter but more frequent trips. For investors, this is an important signal that must be taken into account when setting prices, choosing a hotel concept and assessing potential profitability. A decrease in the average bill may also increase the attractiveness of more budget-friendly but high-quality accommodation formats, such as glamping or modern hostels.

Domestic tourism also plays an important role in Nepal’s economy, although accurate statistics are limited.⁴The World Bank notes the growth of domestic tourism as one of the drivers for the accommodation sector.⁹Developing domestic tourism can help to develop new destinations and provide support to the industry during periods of reduced international demand.

Table 1: Key indicators of tourist flow to Nepal (2019-2024)

Sources:.¹Data for top 5 countries and expenditure/length of stay may vary slightly between sources and require consolidation from the full NTB/Ministry of Tourism annual reports for maximum accuracy.

Main segments of tourism

Nepal offers a variety of tourism activities that attract different types of travelers:

• Trekking and mountaineering: This is the calling card of Nepal. The routes to the Everest and Annapurna base camps, the tracks in the Langtang and Manaslu regions are world famous.¹¹In 2022, about 10% of tourists came specifically for adventure, including trekking and climbing.³
• Cultural and religious tourism: The ancient cities of the Kathmandu Valley, the birthplace of Buddha – Lumbini, numerous monasteries and temples attract pilgrims and history buffs.¹²Religious tourism accounted for almost 13% of all visits in 2022.³Humla district, for example, has significant potential to attract Buddhist pilgrims due to its proximity to Mount Kailash and unique Tibetan monasteries.¹⁴
• Adventure tourism: In addition to mountaineering, Nepal offers white-water rafting, paragliding (especially in Pokhara), bungee jumping and mountain biking.¹²
• Ecotourism and nature observation: National parks such as Chitwan, Bardia and Sagarmatha (Everest) offer unique wildlife viewing opportunities, including elephant safaris.¹²Almost 20% of the country’s territory is occupied by protected natural areas.¹²

Tourism’s Economic Contribution and Growth Forecasts

Nepal’s economy is projected to grow by 3.3% in FY2024 and accelerate to an average annual growth rate of 5% in FY2025-26, according to the World Bank.⁹The key driver of this growth will be the services sector, largely supported by the revival of tourism activity. The accommodation and food subsector is expected to receive a significant boost from the increase in both international and domestic tourism. This is also supported by the active construction of new hotel properties: more than 20 new five-star hotels are currently under construction, which will complement the existing.⁹

Government initiatives and goals

The Government of Nepal has placed great emphasis on tourism development, which is reflected in a number of strategic initiatives. The Tourism Decade programme has been updated to cover the period from 2025 to 2034, with an ambitious target of reaching 5 million foreign tourists by the end of this period.⁶Active promotion of new tourist destinations and types of recreation is planned⁶, and efforts are also being made to improve tourism infrastructure, including upgrading existing and ensuring the full operation of new international airports.²

However, despite the stated ambitious goals and initiatives, there is a certain gap between plans and their implementation. The World Bank points to the slow pace of infrastructure development and the presence of regulatory problems.⁷The Hotel Association of Nepal (HAN) also points out outdated legislation and insufficient government support for the industry.6An example of problems on the ground is the situation with the development of the tourist zone around Lake Rara, where allocated budget funds often remain unused.15This suggests that potential investors should be wary of government announcements, conducting their own thorough assessment of the feasibility of projects and taking into account possible delays and obstacles associated with the workings of the state machinery.

Investment climate and regulatory environment

Government Policy on Foreign Investment (FDI)

The Government of Nepal declares its commitment to attracting foreign investment and increasing the role of the private sector in the country’s economic development.¹⁶In recent years, steps have been taken to revise the regulatory framework and simplify procedures for global investors to enter the Nepalese market.¹⁷In most sectors of the economy, 100% foreign participation in the capital of companies is allowed.¹⁶The key document regulating this area is the Foreign Investment and Transfer of Technology Act (FITTA) 2019, which guarantees foreign investors the opportunity to repatriate profits and dividends in full.¹⁶

Key Incentives, Tax Breaks and SEZs

To attract investment, including in the tourism sector, Nepal offers a number of incentives and benefits:

• Visa preferences for investors: The visa fee for foreign investors depends on the amount of investment. For investments above 100 million Nepalese rupees (NPR), which is equivalent to approximately $750,000, the investor may be exempted from paying the visa fee.¹⁸
• Tax holidays and benefits: Tax holidays and benefits are provided for enterprises operating in certain industries, regions, or corresponding to certain investment scales.¹⁹
• Special economic zones (SEZ): Companies incorporated in FEZs enjoy significant tax incentives. They can receive a full exemption from profit tax for an initial period (5 to 10 years depending on the location of the FEZ), followed by a period of partial exemption.¹⁹Dividends distributed by companies from the SEZ are also exempt from taxation: completely for the first 5 years and 50% for the following 3 years.¹⁹In addition, the SEZ offers VAT benefits (zero rate on export operations) and customs duties (deferral or cancellation of payments for the import of equipment and raw materials).¹⁹
• Incentives for the tourism industry: Tourism sector companies such as international airlines with an investment volume of over NPR 2 billion can expect a 100% tax exemption for the first five years of operation and a 50% exemption for the next three years.²⁰Agricultural and tourism sector companies that capitalize their profits to expand capacity are completely exempt from dividend distribution tax.²⁰

Business registration and permitting procedure

The process of registering foreign investment in Nepal is governed by several key legislations including FITTA 2019, Industrial Undertakings Act 2020 and Companies Act 2006.¹⁷

The procedure begins with obtaining approval for the investment project from the Department of Industry (DoI), which is done through the Single Service Centre (OSSC).²¹The application is submitted electronically through a specialized portal (imis.doind.gov.np).²¹After receiving approval from the DoI, the investor must register the company with the Office of the Registrar of Companies (OCR), obtain a Personal Account Number (PAN) and VAT registration certificate, and obtain permission from the Nepal Rastra Bank (NRB) to inject capital into the country.¹⁷

The stated timeframe for completing all procedures is from 30 to 45 working days, subject to the provision of a complete and correctly completed package of documents.¹⁷Individual stages take: DoI approval – 7-10 working days, company registration in OCR – 3-5 working days, NRB approval for capital injection – 7-10 working days.¹⁷

Despite the creation of the OSSC and the introduction of online applications to simplify the process, investors still have to deal with several government departments. The “single window” may, in fact, serve more of a coordination function, without completely eliminating the multi-step process. This highlights the importance of careful documentation and possibly engaging local legal and financial advisers, as one source recommends, for example.¹⁷, to successfully navigate bureaucratic procedures. The risk of delays and administrative barriers thus remains.

Minimum investment thresholds and restrictions

There is a minimum Foreign Direct Investment (FDI) threshold of NPR 20 million (approximately $150,000) for foreign investors.¹⁷The exception is companies operating in the information technology sector, for which this threshold does not apply.

There is also a list of sectors in which foreign investment is restricted or prohibited. These include: handicraft industry, some types of household services (hairdressing, tailoring, driving schools), production of weapons and ammunition, real estate transactions (except construction), retail trade, travel agency activities (with some reservations), beekeeping, poultry farming, fishing, and some types of consulting and legal services.¹⁶It is important to emphasize that the construction and management of hotels and other tourist infrastructure facilities is generally permitted for foreign investors.

Risk Analysis for Hotel Investors sector

Investing in the hotel sector in Nepal, despite its attractive prospects, is associated with a number of significant risks that require careful analysis and consideration when making decisions.

Macroeconomic and political risks

While the economic outlook for Nepal is generally positive, with GDP growth expected⁹, inflation expectations may remain elevated, which could negatively impact purchasing power and transaction costs.⁹

Political instability has remained the most significant systemic risk to business in Nepal for over a decade.⁹Frequent changes in government lead to a lack of continuity in economic policy and can discourage the flow of private investment.⁸For example, in 2023 there was instability in the new government coalition, as well as incidents that pointed to problems with the rule of law, such as reports of political pressure on investigative bodies and controversial personnel appointments.⁸The Hotel Association of Nepal (HAN) also points to political instability as a challenge to policy continuity and implementation of long-term tourism projects.⁶This chronic problem can lead to game-changing outcomes, delays in project approvals, and increased transaction costs. Investors should factor this risk into their financial models, perhaps by targeting shorter payback periods or developing flexible exit strategies.

Problems of corruption²²and weaknesses in the law enforcement system are also risk factors. An example is the situation when lower courts refused to implement the Supreme Court’s decision on the registration of same-sex marriages⁸, which indicates potential difficulties in protecting investors’ rights and fulfilling contractual obligations.

Infrastructure risks

The state of infrastructure in Nepal remains one of the major obstacles to tourism development and, consequently, to investment in the hotel sector.

• Transport network: Weak competition in the logistics and transport sector, as well as the general poor state of the road infrastructure, limit the accessibility of many tourist attractions and increase costs.⁷The roads are in need of major modernization, and the implementation of current projects to improve them is slow.⁶
• Airports: The country’s main international airport, Tribhuvan International Airport (TIA) in Kathmandu, is operating at capacity. The newly commissioned international airports in Bhairahawa (GBIA) and Pokhara are still not operating at full capacity. This limits the potential for increased tourism and makes air travel to Nepal more expensive.⁶In addition, the country’s aviation safety image has been tarnished by recurring air crashes, which has led to Nepal remaining on the European Union’s aviation safety blacklist.⁶
• Power supply and communication: Despite plans to increase power generation capacity⁹, power outages are still possible, especially in remote areas. Internet and mobile phone service may also be inconsistent outside major cities.
• The World Bank recently approved $150 million for a project to improve the resilience of Nepal’s bridge network, indirectly highlighting the existing problems with transport infrastructure and its vulnerability to natural disasters.²³

Market risks

• Competition and oversupply: The Hotel Association of Nepal (HAN) had already expressed concerns in 2017 about the over-construction of new hotels and the possible oversaturation of the market.²⁴According to the latest data, the current occupancy rate of the country’s hotel stock is only about a third of the available capacity (approximately 3.5 million beds with just over 1 million tourists per year). This leads to increased price competition and a decrease in profitability to a level below the break-even point for many operators.⁶Plans to build more than 20 new five-star hotels⁹may further exacerbate this situation, especially in Kathmandu, where there is already significant competition in the high price segment.²⁵
• Unregulated sector: The rapid growth of short-term rental platforms such as Airbnb and informal homestays, which often operate outside the legal framework and do not bear the same tax and regulatory burden as official hotels, creates conditions for unfair competition and draws away some of the tourist flow.⁶

Operational risks

• Personnel issues: One of the pressing issues in Nepal’s hotel sector is the “brain drain” – the outflow of skilled professionals abroad in search of higher salaries and better working conditions.⁶This leads to a shortage of middle and senior management personnel, as well as high staff turnover. Restrictive labor laws, in particular the lack of flexibility in hiring and firing employees, also create difficulties for employers.⁶At the same time, personnel costs in Nepalese hotels can reach 40% of revenue, which is significantly higher than international standards (10-15%).²⁴
• Seismic activity and building codes: Nepal is located in a seismically active zone, which imposes special requirements on construction. The country has the National Building Code (NNBC 105:1994, updated to NBC 105:2019), which includes mandatory requirements for seismic design of buildings.²⁶The new version of the standards introduces stricter criteria for analyzing structures, materials used, and checking the operational suitability of buildings in seismic conditions. Compliance with these standards increases the cost of construction, but is critical to ensuring the safety and durability of facilities.
• Natural disasters: Apart from earthquakes, Nepal is at risk of floods and landslides, especially during the monsoon season.⁹, which can lead to the destruction of infrastructure and disruption of transport communications.
• Tourist safety: Although Nepal is generally considered a safe country for tourists, there are risks associated with petty crimes such as pickpocketing, especially in crowded areas. Tourists are advised to take standard safety precautions.¹²

Regulatory and legal risks

• Outdated legislation: The main law regulating tourism activities, the Tourism Act of 1978, is significantly outdated and does not meet the modern realities of the industry’s development.⁶
• Bureaucratic barriers and lack of comprehensive government support: The hotel sector is not formally recognized as a “priority” at the state level, which makes it difficult to resolve interdepartmental issues and obtain comprehensive support.⁶
• Taxation: Hospitality businesses are taxed at a higher rate (25%) than most other sectors of the economy (20%) and do not receive electricity subsidies, which increases their operating costs.⁶

Return on Investment: Success Factors and Potential Returns

Assessing the return on investment in the hotel sector in Nepal requires an analysis of current market performance, construction and operating costs, and an understanding of the key factors affecting profitability.

Overview of current hotel occupancy, ADR and RevPAR

Financial statements of publicly listed hotel companies in Nepal for the 2022/23 financial year show significant recovery in revenue and profitability following the pandemic.²⁹Major hotels such as Soaltee Hotel, Oriental Hotels (operator of Radisson Hotel Kathmandu) and Taragaon Regency Hotels (operator of Hyatt Regency Hotel) have shown significant growth in financial performance. For example, Soaltee Hotel’s revenue reached NPR 2.24 billion, while Oriental Hotels moved from loss to profit.²⁹

However, the overall picture of the market, as presented by the Hotel Association of Nepal (HAN), is less optimistic. The occupancy rate of hotels in the country is on average only about a third of the available capacity.⁶This leads to increased price competition and “price wars” between hotels, which negatively affects their profitability. The average daily expenditure of one tourist in 2023 was $41¹⁰, which is lower than the figures for previous years.

This situation may indicate the formation of a two-tier market. Large, often branded hotels with strong marketing capabilities and an established customer base are likely to feel more confident and demonstrate better financial results. At the same time, many small and medium-sized independent hotels, which make up a significant part of the market, may experience serious difficulties due to low occupancy and pricing pressure. Construction of more than 20 new five-star hotels⁹may further intensify competition in the high-end segment. Investors planning to enter this market, especially in the premium segment, need to take this factor into account and develop strategies that will allow them to compete with existing strong brands and a large number of new properties. This may require not only creating a quality product, but also significant investments in marketing, distribution and, possibly, joining an international hotel chain.

In comparison, in neighbouring India, the average hotel occupancy rate in the 2022/23 financial year was 66.1% and the average daily rate (ADR) was ₹6,869.³⁰Seoul’s ADR for five-star hotels hits record high in 2023³¹These data show that Nepal has significant potential for operational growth provided the market conditions improve and effective strategies are implemented.

Estimated construction and operating costs

The cost of building a hotel in Nepal can vary significantly depending on the class of the hotel, its location and the quality of the materials used.

• The construction of a new one is estimated to be five-star hotel with 260 rooms in the upscale area of ​​Kathmandu (Lazimpat) may cost around NPR 4 billion (around $30 million), which is around NPR 15.4 million (around $115,000) per room. The construction period of such a facility is estimated at 3.5-4 years. The construction cost per square foot may be around NPR 16,926.²⁵
• Another source gives a theoretical estimate of the cost of construction100-room hotelin Kathmandu for $5 million (or $50,000 per room).³³This estimate is significantly lower than the previous one and probably refers to a lower class hotel or does not take into account all associated costs (e.g. cost of land, connection to utilities, equipment).
• Operating expenses are also a significant cost item. As mentioned, staff salaries in Nepalese hotels can reach 40% of total revenue.²⁴, which significantly exceeds international standards.

Table 2: Approximate structure of capital (CAPEX) and operating (OPEX) costs for different types of hotel properties in Nepal

Note: Data is approximate and may vary greatly. Based on²⁴and expert assessments for glamping.

Key factors affecting profitability

The success and profitability of a hotel project in Nepal depends on many factors:

• Location: Proximity to popular tourist attractions, transport hubs, uniqueness and picturesqueness of the place play a decisive role.
• Unique selling proposition (USP): In the context of growing competition, it is extremely important to offer guests something special. This could be a unique design, a focus on sustainability, cultural authenticity, or offering specialized services (e.g. wellness programs, culinary master classes).
• Quality of service and personnel management: High levels of service are key to customer retention and positive feedback. Amidst staffing challenges in Nepal6, effective personnel management, training and motivation are of particular importance.
• Marketing and Distribution: A sound marketing strategy, active use of online booking channels, working with travel agencies and creating a strong brand are essential to attracting customers.
• Application of sustainable practices: An environmentally responsible approach not only fits in with global trends, but can also help reduce operating costs in the long term (e.g. through energy and water savings) and attract a specific segment of tourists who value sustainability.³⁴

Long-term prospects

Long-term prospects for return on investment in Nepal’s hotel sector will largely depend on the successful implementation of government plans to increase tourism to the stated 5 million people per year.⁶, significant improvement of transport and tourism infrastructure⁶, as well as from maintaining general political and economic stability in the country.⁹There is significant potential for RevPAR growth if we can increase the average hotel occupancy and average check, including by attracting more solvent tourists and actively developing the MICE (business tourism and events) segment.³⁷

Prospective “Blank Spots”: Where and What to Build in 2025-2027

Despite the existing competition and some market saturation in traditional tourist destinations, Nepal still offers significant opportunities for investors willing to explore new niches and regions. The period 2025-2027 could be favorable for the implementation of projects focused on unique experiences and the growing demand for alternative types of accommodation.

Traditional centres with new potential (Kathmandu, Pokhara)

In Kathmandu and Pokhara, despite the high concentration of hotel properties, there are still unfilled niches. Instead of building standard large hotels, investors should consider opportunities for:

• Boutique hotels: Small hotels with unique design, personalized service and a strong concept (e.g. historical, artistic, cultural) can attract sophisticated travelers looking for an authentic experience.
• Wellness retreat: Hotels specializing in wellness programs, yoga, meditation, Ayurveda can be in demand among both foreign and wealthy local tourists, especially in the picturesque surroundings of Kathmandu and Pokhara.
• Hotels focused on the MICE segment: Taking into account plans for the development of business tourism³⁷, there is a need for modern conference hotels with well-equipped halls and related infrastructure.²⁵analyzes the investment attractiveness of a new five-star hotel in Kathmandu, pointing to high risk but also high potential returns if tourism grows. Pokhara is also seeing a growing hotel industry, accompanied by increased competition.³⁸

Developing regions and new tourism products

The greatest potential for creating truly unique and sought-after projects lies in the less developed regions of Nepal, especially in the west of the country.

• Western Nepal (Karnali Province): This region has enormous, but still poorly realized, tourism potential.

• Lake Rara: Nepal’s largest lake, located at high altitude, offers stunning scenery.¹²However, the development of tourism here is hampered by serious infrastructure problems: the lack of quality roads and regular air service, a shortage of hotels and ineffective use of budget funds allocated for development.¹⁵There is a great need for investment in basic infrastructure and quality accommodation such as eco-lodges or glamping. The region is ideal for ecotourism, trekking, meditation and yoga centres.
• Humla District: This remote area is a gateway to the sacred Mount Kailash and Lake Manasarovar, opening up prospects for the development of cross-border religious tourism, primarily for pilgrims from India and other countries.¹⁴Humla is also rich in unique Tibetan cultural sites, ancient monasteries (gompas) and meditation caves, which attract researchers and spiritual seekers. Tourism development here should be based on the principles of sustainability and careful attitude to the cultural and natural heritage.¹⁴
• Bardia National Park: Offers excellent opportunities for ecotourism, safari and wildlife viewing, including the rare Bengal tiger and one-horned rhinoceros. Development of homestays in the surrounding area of ​​the park⁴⁰indicates growing interest from tourists and demand for more comfortable accommodation options, such as small lodges or glamping.

Tourism development in remote areas like Karnali faces a classic chicken-and-egg problem. Investors are reluctant to go to areas with underdeveloped infrastructure, and infrastructure does not develop due to lack of investment and a stable tourist flow. Overcoming this vicious circle may require either large anchor investors, possibly with government support for basic infrastructure (roads, electricity, communications), or a focus on projects that are less dependent on capital infrastructure. An example of such projects could be glamping, which is more self-sufficient. Public-private partnerships may also be one of the keys to solving this problem.

• Other promising areas:

• Around Annapurna, Sagarmatha (Everest), Langtang National Parks: In these popular trekking areas¹¹There is a demand for more comfortable accommodation than traditional tea houses. Eco-lodges and glamping sites that offer good service and amenities can attract trekkers and nature lovers willing to pay for a higher level of comfort.
• Less explored trekking routes: Manaslu, Tsum Valley, Kanchenjunga, Dolpo, Mustang areas¹²offer unique opportunities for adventure tourism. Some of these areas require special permits and fees (for example, for Upper Mustang, a permit costs $500 for 10 days¹²), which can attract wealthier tourists who seek exclusivity. Here, the creation of glampings or small comfortable lodges is especially relevant.

Glamping as a growing trend

Glamping (glamorous camping) is one of the most promising areas for investment in the hospitality sector in Nepal.

• Advantages: Glamping combines closeness to nature and an authentic experience with a high level of comfort comparable to a hotel. The capital costs of creating a glamping site are usually lower than those of building a traditional hotel, and the project implementation period is shorter. Glamping sites also have greater flexibility in choosing a location, allowing you to explore remote and hard-to-reach, but picturesque corners.
• Target audience: Glamping attracts young travelers, families with children, tourists looking for unique experiences and privacy, as well as eco-conscious travelers who value a responsible approach to nature.⁴³
• Suitable locations: Ideal places for glamping in Nepal can be remote natural areas with beautiful views, the vicinity of national parks, the shores of lakes and rivers, as well as the starting points of popular trekking routes. It is important to consider the season: the best periods for active tourism and trekking in Nepal are October-November and March-April.⁴⁴

Eco-tourism, wellness and sustainability

Global demand for green hotels, responsible tourism and wellness retreats (yoga, meditation, detox programs) continues to grow. Nepal, with its unique nature, rich spiritual heritage and traditions, has all the prerequisites to become one of the leading destinations in this niche.

Successful examples already exist and demonstrate the viability of such models:

• Tiger Mountain Pokhara Lodge ³⁵: This lodge is a model of sustainable tourism. Its philosophy is based on the four “C’s”: Conservation (nature conservation), Community (supporting the local community through education, purchasing products, creating jobs), Culture (preserving and popularizing local culture and traditional architecture) and Commerce (commercial success as a result of a sustainable approach). The lodge actively participates in nature conservation programs and proves that responsible business can be profitable.
• The Pavilions Himalayas The Farm ³⁶: This eco-luxury retreat outside Pokhara runs entirely on renewable energy and has its own organic farm that supplies the restaurant. A significant portion of profits are reinvested in social projects through a related non-profit, Right4Children, which provides education and training to local youth. The hotel’s business model is based on the “three Ws” concept: Work (providing employment to local people), Wealth (reinvesting a portion of profits into community development), and Wisdom (sharing knowledge and experience in eco-friendly practices with guests, staff, and the tourism industry at large).

These examples show that successful eco-projects in Nepal are not superficial greenwashing, but a deeply integrated approach that covers all aspects of the activity: from design and construction to operations, human resources management and community engagement. This approach requires a genuine commitment to sustainability and a long-term vision, which may not suit investors focused on quick returns, but opens up opportunities to create unique and competitive products with high added value.

Table 3: Matrix of Prospective Gap Spots in Nepal (2025-2027)

Sources:¹²and others.

Practical recommendations for investors

Investing in the Nepalese hotel sector requires not only capital but also a deep understanding of the local context and the willingness to overcome specific challenges. Below are practical tips that can help potential investors increase their chances of success.

• Careful research and niche selection: Before starting a project, it is necessary to conduct a comprehensive market research for a specific selected location and target segment. Do not rely solely on general data on the growth of tourist flow to the country. It is important to assess the actual demand, competitive environment, availability of resources and the specific needs of the selected audience.
• Adaptation to local conditions: A successful project must fit harmoniously into the local landscape and cultural context. This applies to both architectural solutions and operational activities. It is necessary to take into account climatic features, and strictly adhere to building codes and regulations, especially in terms of seismic resistance of buildings.²⁶Hiring local architects, designers and builders with a good reputation and experience in Nepalese conditions can help a lot in this regard.
• Focus on sustainability and responsible tourism: In today’s world, and especially in such a unique natural and cultural environment as Nepal, the principles of sustainable development are becoming not just a fashion trend, but an urgent need and a factor in long-term competitiveness. Integrating environmental and social aspects into the business model¹⁴, such as using renewable energy, minimizing waste, supporting local communities and preserving cultural heritage, can not only reduce negative impacts on the environment, but also attract a growing segment of responsible tourists.
• Developing a long-term strategy: The hotel business is usually a long-term investment. Therefore, it is important to develop a strategy taking into account possible economic fluctuations, political instability⁸ and changes in tourism preferences. Flexibility and the ability to adapt to changing conditions will be key factors for success.
• Trusted local partners: Having a strong and reliable local partner can make the process of entering and doing business in Nepal much easier. Local partners can help navigate complex bureaucratic procedures, establish contacts with government agencies, engage with local communities, and manage operations. One source specifically recommends using licensed local audit and consulting firms.¹⁷
• Risk Management: It is necessary to identify key risks associated with the project (infrastructure, operational, political, natural) in advance and develop plans to minimize them. For example, for projects in remote locations, it is necessary to provide for the possibility of autonomous energy and water supply, as well as alternative logistics routes.
• Innovation and differentiation: In the conditions of growing competition, especially in popular tourist areas, it is important to offer the market a unique product and experience that will distinguish your project from others. This may be an original concept, non-standard design, exclusive services or a special approach to hospitality.
• Investments in “soft” infrastructure and human capital: In addition to the construction of buildings and structures (the “hard” infrastructure), “soft” infrastructure is of critical importance – this is, first of all, the quality of service, the level of personnel training and the culture of hospitality. In the context of personnel problems and the “brain drain” that the hotel industry in Nepal is facing⁶, investing in finding, training, motivating and retaining qualified employees becomes a key competitive advantage. Successful hotel businesses like Tiger Mountain Pokhara Lodge demonstrate the importance of a stable and professional team.⁴⁵Investors need to budget for significant resources and efforts to develop human capital, perhaps through creating their own educational programs or partnering with specialized educational institutions. This is no less an important expense than the construction itself.

Conclusion: The Future of Nepal’s Hospitality – Challenges and Opportunities for Brave Investors

Nepal’s hospitality sector is undoubtedly in a phase of active recovery and offers significant growth prospects for investors. Particularly attractive are niche segments such as eco-tourism, glamping, wellness retreats, as well as the development of the tourism potential of less developed, but unique in their natural and cultural characteristics, regions of the country. The projected growth of tourist flow and government support for the industry create a favorable background for new investments.

However, the investor’s path in Nepal is not without serious challenges. Political instability, infrastructure limitations, especially in the transport sector, high market competition in certain segments and operational difficulties related to personnel issues and specifics of local regulation require a balanced approach, careful planning and readiness to overcome difficulties.

The period 2025-2027 promises to be dynamic. On the one hand, a further increase in demand for tourism services is expected, on the other hand, increased competition in the hotel market. In these conditions, success will accompany those investors who can offer the market not just bed places, but a unique, high-quality and sustainable tourism product, deeply adapted to the specifics of Nepal and meeting the needs of modern travelers.

Despite all the challenges, Nepal remains one of the most exciting and attractive tourist destinations in the world, with enormous untapped potential. Smart, strategic investments in its hospitality sector, made with an understanding of the risks and a long-term vision, can bring high returns for those who are ready to work hard and are not afraid to explore new horizons.

Source used

1. Nepal’s tourism sector sees notable recovery with 13% growth in 2024
2. Nepal Tourism Statistics 2024 – Great Nepal Treks & Expedition
3. Tourism in Nepal – Wikipedia
4. Economy of Nepal: Agriculture, Energy, Tourism
5. (PDF) From Pre-Pandemic to Post-Pandemic Struggles to Meet Sustainable Development Goals – ResearchGate
6. NEPAL HOTEL – Hotel Association Nepal
7. Unlocking Nepal’s Growth Potential : Nepal Country Economic Memorandum 2025
8. World Report 2024: Nepal | Human Rights Watch
9. Nepal Development Update – World Bank Document
10. Nepal Tourism Statistic 2023 – Great Nepal Treks & Expedition
11. Nepal Trekking 2025 – YETI TOUR
12. Nepal – Everest – Kathmandu – Annapurna – Mustang – Langtang – DX News
13. ᐉ Nepal Tours (2025) Trekking, Expeditions and Tours – FLIXESS.com
14. Sacred Landscapes and Religious Tourism Potential in Humla – Nepal Journals Online
15. Tourists suffer without support as budgets for Rara, Shey Phoksundo sit idle
16. НЕПАЛ – International Corporate Agents Group
17. Nepal’s Foreign Investment Process: What Foreign Companies Need to Know in 2025
18. How to get a visa to Nepal – Astons
19. Government Incentives and Tax Benefits for Foreign Investors in Nepal
20. Tax Incentives for Businesses in Nepal Remain Unchanged Under Finance Act 2081 –
21. Foreign Direct Investment (FDI) Approval Procedure in Nepal
22. International Investment Agreements (IIAs) and Human Rights | OHCHR
23. Nepal: World Bank Approves $150 Million to Improve Resilience of Bridge Network, Connectivity, and Access to Services
24. Hotel Association Nepal issues white paper to curb booming hotel industry
25. Seize Nepal’s Hospitality Goldrush: OHL’s Premium Pivot or Lazimpat’s NPR 800 Crore 5-Star Powerhouse Investment! – || ShareSansar ||
26. 2b-0036 – National Information Centre of Earthquake Engineering
27. NBC105: 2019 Seismic design of buildings in Nepal: New provisions in the code
28. 202, October 1, 2024, Regarding the floods in Nepal / REPUBLIC OF TURKEY MINISTRY OF FOREIGN AFFAIRS – mfa,gov,tr
29. Hotel Industry – Bouncing Back StronglyHotel Industry – The HRM Nepal
30. 2023 Indian Hospitality – Trends & Opportunities – Hotelivate
31. South Korea, Singapore, Japan, India, Thailand, Malaysia, and the Philippines are Leading the Asia Tourism Sector Boom with Record Tourist Arrivals, Unforgettable Luxury Experiences, and Pioneering Sustainable Practices
32. FAOLEX
33. Dusit International Debuts in Nepal with Two Distinctive New Resorts
34. Eco-friendly Treks and Tours, Nepal, Travel Costs, Travel Guide, 2024
35. The Long Run | Tiger Mountain Pokhara Lodge
36. Luxury eco-resort in Pokhara: The Pavilions Himalayas​ The Farm
37. TOR for 5 Star Hotel – CAAN
38. Hotel Study Pokharapdf | PDF | Data | Marketing – Scribd
39. Rara Lake tourism season begins – The Rising Nepal
40. Bardia National Park – Full Circle from Tent to Homestay – Inside Himalayas
41. Nepal Tour Package 2025 & 2026, Best Price Guarantee – Peregrine Treks
42. All about trekking in Nepal – Kovinov.com
43. Glamping Market Size and Share, Growth Analysis Report 2032
44. Trekking in Nepal | The coolest tracks on the planet with PohodVGory
45. Tiger Mountain Pokhara Lodge at 25 | Nepali Times
46. Nepal Reaches New Milestones in Sustainable Development as The Pavilions Himalayas and Right4Children Create Lasting Impact Through Social and Educational Initiatives