While Nepal has put restriction on digital wallets like WeChat Pay, growing proliferation of Airbnb is threatening to disrupt the hospitality industry

BY Tamish Giri

Amanda Davids and Michel Lynn, two American teachers, completed their Mardi Himal and Annapurna Circuit Trek in Nepal in October 2022. During their stay in Nepal, they opted to stay in rooms and apartments listed on Airbnb. Similarly, Rebecca from London, UK, and Theresa from Hong Kong also stayed in Airbnb accommodations while in Nepal. The popularity of Airbnb among tourists in Nepal has been on the rise, which has raised concerns among hoteliers who feel that it is impacting their potential revenue and the country's tax revenue. While some hoteliers believe that Airbnb can increase the number of tourists, there are concerns about reliability, poor services, trust, and complaints related to such services.
Airbnb is a leading global platform that offers a wide range of unique accommodations and activities - over 7 million listings and 40,000 activities - provided by local hosts. As an economic empowerment engine, it has enabled millions of hospitality entrepreneurs to generate income and contribute to the financial growth of their communities.
However, hoteliers in Nepal have raised concerns about the legality of hosting guests through Airbnb, arguing that hosts are not registered in the country and do not pay taxes. It is worth noting that Nepal has previously banned digital payment platforms, such as WeChat and AliPay, due to similar concerns raised by tour operators.
In 2020, Pukar Galyan, a trekking guide, received a tip of 1,000 RMB from a Chinese couple who he had guided on the Annapurna Circuit trek. However, the couple had provided the tip through a WeChat Pay code, which Galyan was not aware of at the time. Despite his efforts to receive the cash, Galyan struggled for several months as using WeChat Pay is illegal in Nepal. Eventually, he had to settle for a gift in return. Nepal banned WeChat Pay and AliPay on May 22, 2019 realising that payments made through unregistered systems were illegal and resulting in a loss of income for the country.
WeChat Pay and AliPay were not registered with the regulatory authorities in Nepal. These digital payment platforms were widely used by Chinese tourists for making payments to Chinese-run hotels, restaurants, and other businesses in Nepal. Despite using Nepal's internet connectivity, transactions made through WeChat Pay and AliPay were processed in China. As a result, the Government of Nepal was unable to tax these transactions, nor could it investigate any crimes related to these unregistered payment systems.
Airbnb has become an increasingly popular platform for booking homestays and apartments in Nepal, with the number of listings growing each year. Hosts on Airbnb offer a wide range of accommodations, from rooms that cost as little as $15 per day to luxury condos that can cost up to $2,000 per day.
When guests make reservations through Airbnb, the platform charges hosts a commission of only 5% on each reservation. Currently, rooms and apartments in cities such as Kathmandu, Bhaktapur, Lalitpur, Pokhara, and Chitwan are widely available on the Airbnb website and mobile app.
Tanani Newa Homes, located in Patan Dhoka, is a property listed on Airbnb that offers authentic Newari rooms for tourists visiting Nepal for longer stays. The rooms come with attached bathrooms and some also offer shared kitchens. According to the owner, Shova Maharjan, the rooms are popular among tourists, and a double bedroom with a shared bathroom is available for $32 per person, with breakfast included. “Platforms like Airbnb and Booking.com have helped to attract more customers by charging a small commission on bookings, making it more economical for hosts and easier to manage bookings,” she added.
Like Tanani Newa Homes, Sayami Homes in Lalitpur and Mason De Kathmandu in Lazimpat are also listed on platforms like Airbnb and Booking.com. These properties are popular among tourists and usually have guests checking in all year round.
According to the owners who have listed their properties on Airbnb, the online platform has helped to promote their properties globally and attract guests from both locally and abroad.
A property owner said, requesting anonymity, that he has been able to earn a satisfactory income from it. 
The owners believe that the platform has helped to provide comfortable accommodation for guests while also providing an additional source of income for themselves.
During peak tourism season in Nepal, which typically falls between March-April and September-December, owners of rooms and apartments listed on Airbnb offering bed and breakfasts can make a good income. Before the Covid-19 pandemic forced him to shut down his apartment, one host said he was making around Rs 1.5 million annually through Airbnb.
A travel agent expressed concerns about the quality of service offered by Nepali properties listed on Airbnb, noting that the platform does not conduct inspections. He also stated that Airbnb is impacting the business of small and medium-sized hotels, as they sell their rooms at cheaper rates and do not pay tax.
Research on the impact of Airbnb on the hotel industry shows that the platform's increased service quality has a direct negative impact on hotel performance. The higher the average satisfaction scores of an Airbnb property is, the lower is the revenue per available room (RevPAR) for hotels. Specifically, the study found that every increase in the review score of an Airbnb property had a negative impact of $25.54 on hotel RevPAR.
Shradha Shrestha, manager of the Nepal Tourism Board (NTB), said Airbnb has provided opportunities for a variety of accommodations. However, some hoteliers argue that Airbnb has not only disrupted the hotel industry, but also impacted the overall tourism economy. They claim that hotels are a major economic contributor to the tourism industry and generate foreign exchange.
Shreejana Rana, outgoing president of the Hotel Association of Nepal (HAN), acknowledges the disruptive influence of Airbnb in the hotel sector. "Airbnb rooms and properties in Nepal are not registered with any governing body and there is no official body to monitor this kind of business. Property owners using the Airbnb platform are free to charge any price per night to their guests without considering the quality of services and facilities they offer," she adds.
Likewise, hoteliers express concern that without proper regulation, taxes paid by apartments listed on Airbnb are not scrutinised and their guests have no guarantee of receiving quality services. They also argue that the presence of Airbnb properties of varying quality has a negative impact on the overall development and quality of the hotel sector in Nepal.
A hotelier further said Airbnb was affecting employment in the hospitality industry. Hotels offer a variety of job opportunities, including room attendants, cleaners, clerks, chefs, and drivers, among many others. As tourists switch to Airbnb, it could lead to a reduction in job opportunities as apartments only provide jobs for a limited number of individuals, the hotelier added.
Airbnb listers, on the other hand, argue that they are not distorting the hotel business. They claim that hotels have their market segments, and Airbnb cannot compete with them in terms of marketing and service. “We are offering a unique experience that cannot be found in hotels,” Maharjan said. Although Nepal has restricted payment through WeChat, government officials appear to be unaware of the operation of Airbnb and its impact on tax revenue.
Hoteliers and hotel owners have been leveraging their influence to encourage the government to regulate services like Airbnb. They cite examples from other countries where Airbnb properties have not only disrupted the hospitality industry but also the neighbourhoods in which they operate.
Several countries and cities around the world have implemented strict laws to control the short-term rental industry. Regulations range from prohibiting short-term rentals in apartment buildings to requiring all those providing lodging services using the Airbnb platform to obtain a licence.
With the growing presence of Airbnb, hoteliers have been urging the government to bring services like Airbnb into the tax net. Currently, there is no established legal framework for hosting guests through Airbnb in Nepal. However, there have been instances of local authorities cracking down on unlicensed hospitality businesses, including those using Airbnb.
In 2019, the Nepali government issued a directive aimed at regulating online booking and hospitality services, including Airbnb. According to the directive, hosts on Airbnb are required to register with the local tourism board, obtain a licence, and pay taxes. However, the implementation of the directive has been slow. Also, there is no clear guidance on how to comply with the regulations.
Hosting guests through Airbnb in Nepal can be a legal grey area. Hosts may face fines or penalties for operating without the proper licences or approvals. Therefore, it is essential for individuals considering hosting guests through platforms like Airbnb in Nepal to consult with local authorities and seek legal advice to understand the requirements and risks associated with this activity.
The Hotel Association of Nepal (HAN) is concerned about the detrimental effect that Airbnb can have on the established hotels in Nepal. The umbrella organisation of Nepali hotels has been urging the government to bring needful laws to address this unregulated sector.
Airbnb has already emerged as a new disruptor of the hospitality business. The main concern for Nepal is its impact on the country's revenue. Hoteliers argue that Airbnb can also result in a loss of income to the country if not brought under regulatory purview, especially at a time when the country is already suffering from the impact of platforms like WeChat.