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the british college

Customer Preference
towards Budget Hotels in Nepal

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Nidhi Madhogaria

Pre–masters MIBM











Table of Contents


Abstract. 1

Title. 2

Aim.. 2

Objectives. 2

Introduction. 3

Literature Review.. 4

Conceptual Framework. 5

Research Methodology. 6

Data Analysis and
Interpretation. 7

Conclusion. 8



















This study
was carried to identify the need and influence of budget hotels in the city of
Kathmandu, Nepal. The
main objective of this research is to critically examine the economic impacts
of budget hotels in the tourism sector of Nepal, the employment generation
prospective of the budget hotels and the customer satisfaction towards the
same. The research methodology is a mixed approach combining both qualitative
and quantitative aspects. The primary data was collected using questionnaire
and participant feedback method. Moreover, for analytical purpose some
statistical data were studied. The pertinence and scope of this study is to
analyze the importance and issues faced by budget hotels in Nepal as Nepal has
high potential for tourism. With the response from the customers appropriate
measures can be taken according to their preference for improvement in the
hospitality sector of Nepal.

















A study in depth of the factors affecting the preference of
customer’s in relation to budget hotels in Nepal.


research mainly aims on focusing on the impacts and scope of budget hotels in Nepal.



The objectives are as follows:

analyze the economic impact of budget hotels in tourism sector of Nepal.

review the employment generation potential of the budget hotels in Nepal.

evaluate the customer satisfaction towards the budget hotels in Nepal.
















The country of the highest peak in the world
and also the birth place of Gautam Buddha, Nepal is a popular tourist
destination. Nepal is dependent much on tourism with its wide scenic beauty of
the Himalayas and its popular cultural heritage sites which are also recognized
by UNESCO. The country also offers a blend of
rich holy, divine and cultural experiences. Moreover, the country came out on
the fifth place among top ten countries of the list according to Lonely Planet’s annual best in travel
list. Likewise, USA Today has ranked Everest in the seventh
position in the list of top tourist destinations in Asia. Similarly, Lonely Planet and Exodus UK ranked Everest Base Camp Trek on 4th and 3rd respectively in their lists of most
wonderful treks in the world. Annapurna Circuit is ranked first and third
respectively by Travelchannel and Bootsnall in their lists of best
treks in the world. There are plenty of temples, stupas, pagodas and monuments
inside the valley of Kathmandu  making it
famous in the world and is also known  as
the City of Temples. Nepal is the hottest destination for all budget travelers
which includes backpack travelers also. Most of the tourists visit Nepal for
trekking purpose which increases the need for budget hotels because it is not
feasible to construct five star hotels on all the remote locations of the
Himalayas due to which need for budgeted hotels is increasing. Furthermore,
budgeted hotels facilitate the stay of every class of tourists like backpackers
who are not willing to spend more. In this way income could be generated in
tourism in the long run by attracting more tourists of all classes and tourism
industry could flourish more in Nepal. The travel and tourism industry’s success
factors mainly depend on the accommodation sector which plays a vital role .This study
focuses on specific areas such as the benefaction of budget hotels towards the
tourism industry, customer loyalty, financial advancements and employment
generation opportunity due to the emergence of budget hotels in Nepal.
Customer’s satisfaction plays an important role in retaining customers in the
long run by loyalty, repeat purchases and words of mouth to mouth which help in
attracting more customers.







Literature Review

Development of Budget Hotels in Nepal and Customer

The origin of the budget hotel may be traced back to the
1920s in the US (Shen, 2006). In the recent years, there is worldwide development of
budget hotels and the terms “economy” or “customer service” or “budget” is used
frequently throughout the hospitality sector, there are no formalized standards
which are widely accepted definition of this segment. (Davidson, 1993) concluded that the concept of the budget hotel is a difficult and complex
hospitality phenomenon to describe. Hotels with superior service quality will
ultimately improve their profitability (Oh & Parks, 1997). In industry like hospitality sector, which is very
competitive, and where the services are homogenous, individual
hoteliers must be able to satisfy costumers better than
their counterparts (Choi & Chou, 2001). In order to
retain customers and outweigh other competitors, hoteliers must be able to obtain high levels of customer satisfaction
by excelling in the service supplied. Several studies analyze the needs and the
desires of tourists. Research by (Wuest, 1996) defined the
perception of hotel attributes as the degree to which
guests may find various services and facilities critical for their stay in a hotel. The main distinctive features of the hotel are hygiene factors, charges, location, security, personal
service and goodwill which are recognized as decisive by
travelers to assess the quality of the hotel.




















Conceptual Framework


For analyzing this case we adopted conceptual
framework based on few parameters such as economic impact, employment
generation and customer satisfaction as the primary dimensions for exploration.
We adopted the general framework which included qualitative and quantitative
data collection both the hotel staffs as well as hotel guests and local
resident also. The following section will explore these three foundation
concepts in detail.


Economic Impact

economical impact plays a major factor upon which the success of accommodation
industry depends. The amount of money spent by tourists has an immense impact
on local economies as there are earnings in foreign currencies. Moreover, it
also helps to support the local communities by generating new business
opportunities in various sectors of society and by providing empowerment also.
It also stimulates spending, creates new jobs opportunities thereby increasing
the Gross Domestic Product of the country. From vendor’s perspective it is a
good investment opportunity due to low-startup cost, low requirement of working
capital and high occupancy rates which accelerates the profit which results in
more return on investment.




is a direct relationship between growth of tourism and increasing employment
opportunities. In a country like Nepal which lacks infrastructure facilities,
there is need for both skilled and unskilled workforce for flourishing tourism.
Human resources tend to be an asset in the sector of tourism. Tourism industry
creates both direct and indirect job opportunities for the local residents. It
also helps in flourishing the handicraft and handloom industries, thereby
helping the empowerment of household women in Nepal. The emergence of budget
hotels will help to facilitate the former.




satisfaction is the result of difference between expectation and real performance.
The main aim of the accommodation industry is positive customer satisfaction
and is majorly the determinant of the success factor on which the existence of
budget industry depends. The budget hotel’s core motive should be to excel in
customer satisfaction as budget hotel provide average infrastructure.






Research Methodology


The research method used is a mixed
approach combining both qualitative and quantitative aspects. The primary data
was collected using questionnaire and participant feedback method. Moreover,
for analytical purpose some statistical data were studied.


questionnaire was formulated to collect primary data. It consisted of two sets:
one for local people and the other for the tourists. The major components of
the questionnaire for local people were the demographic profile of the former,
the employment generation potential of budget hotels and the economic impact on
the country. For the tourists, the main focal area was the customer’s
satisfaction towards the budget hotels’ service quality. The questionnaire used
the five-point approach and some feedback too. The Scaling is done ranging from
Strongly Disagree (1) to Strongly Agree (5).The feedback seeked suggestions
which in turn would help us to know the customers preference.


of  Respondent











Analysis and Interpretation


demographic profile of Nepal showed that majority of local residents who worked
in budget hotels are of the younger generation. This brings into an observation
that budget hotels provide jobs for all categories whether skilled or unskilled
people. The role of budget hotels in solving unemployment problems is very
substantial for the economy of Nepal. Another thing which could be analyzed was
division of gender, where males owed to larger proportion in this industry as compared
to females. The fact that safety and working conditions in the budget hotels
are not conducive for female job seekers is the main reason behind lower female












hotels aid in providing a lot of job opportunities to the local people with or
without any educational qualification. So it can help in solving unemployment
problems of the country to some extent. Moreover, the college students are able
to take part-time job as well due to flexibility of working hours in budget
hotels. Most of the tourists visiting Nepal are for trekking purpose or to
explore the rich cultural heritage and natural beauty of the country. The
feedback from tourists indicated higher proportion of tourists satisfied from
the service quality, accessibility and hospitality services provided by budget
hotels. The role and functions of these budget hotels provide a positive
outcome in Nepal’s tourism sector. Any category of tourists from any class can be
accommodated in these hotels.
































Choi, T. Y. and Chu, R. (2001) Determinants
of hotel guests’ satisfaction and repeat patronage in Hong
Kong hotel industry. International
Journal of Hospitality Management.20, pp. 277-297.

Davidson, R. (1993)
Budget hotels in Europe. Insights.4, pp. A141–144. Google

Oh, H. and Parks, S.C. (1997) Customer
satisfaction and service quality: a critical review of the literature and research implications for the hospitality industry. Hospitality Research Journal.20 (3), pp.35–64.

Shen, H. (2006) The history and
future of budget hotels in China. Available from: Accessed 05.01.2018

Wuest, B.E.S. (1996) What do mature travelers
perceive as important hotel/ motel customer service? Hospitality Research Journal. 20(2), pp.77–93.









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