CARE Ratings Nepal Limited (CRNL) has reaffirmed the credit ratings of International Himalaya Hospitality and Hotel Limited (IHHL), recognising the successful commencement of operations of its Marriott-managed Moxy Hotel in Kathmandu while highlighting the challenges associated with stabilising operations in Nepal’s competitive hospitality sector.
The rating agency has reaffirmed the company’s long-term bank facilities of Rs. 643 million with a CARE-NP BB+ rating and maintained the CARE-NP A4+ rating on its short-term bank facilities of Rs. 90 million, according to CARE Ratings Nepal. The total rated banking facilities now stand at Rs. 733 million, slightly increased from the previous Rs. 730 million.
According to CARE Ratings Nepal, the reaffirmation reflects confidence in the company’s experienced promoters, strategic partnership with Marriott International, favourable hotel location and Nepal’s improving tourism outlook, while acknowledging that operational stabilisation will remain the key challenge over the next few years.
Ratings Reaffirmed Despite Increase in Banking Facilities
CARE Ratings Nepal reaffirmed the CARE-NP BB+ rating assigned to IHHL’s Rs. 643 million long-term bank facilities, which increased from Rs. 640 million. Similarly, the agency maintained the CARE-NP A4+ rating for the company’s Rs. 90 million short-term banking facilities.
The reaffirmation by CARE Ratings Nepal indicates that while the company’s credit profile remains stable, its future performance will largely depend on its ability to achieve projected occupancy levels, improve profitability, and strengthen debt servicing capacity following the commencement of hotel operations.
Commercial Operations Successfully Commence
One of the major factors supporting the reaffirmation is the successful launch of the company’s flagship hotel. International Himalaya Hospitality and Hotel Limited officially commenced commercial operations of the Moxy Hotel Kathmandu on 12 December 2025. Located in Kamaladi, Kathmandu, the hotel operates under the globally renowned Marriott International brand and has a capacity of 101 guest rooms.
The property offers a full range of hospitality services, including modern accommodation, food and beverage facilities, a gymnasium, a swimming pool and meeting halls designed to cater to both business and leisure travellers. The hotel occupies approximately 4,873 square metres of land in one of Kathmandu’s busiest commercial and tourism districts.
Stabilising Operations Remains the Biggest Challenge
While the successful commencement of hotel operations has strengthened the company’s business profile, CARE Ratings Nepal noted that operational stabilisation will be critical in the coming years. According to the rating agency, premium hotels generally require a long period before achieving stable occupancy rates and sustainable profitability.
Hotel projects typically take three to four years for construction, followed by another two to three years before operations fully stabilise and fixed costs are adequately recovered. As a result, the company’s ability to gradually increase occupancy levels, improve average room rates (ARRs) and generate steady cash flows will remain the most important factor influencing future rating actions. The agency stated that achieving sustained revenue growth and improving debt servicing indicators will be essential for strengthening IHHL’s financial profile.
Hotel Project Completed Below Planned Debt Level
The Moxy Hotel project was initially estimated to cost Rs. 1.85 billion, with financing planned through Rs. 640 million in debt and Rs. 1.21 billion in equity, representing a debt-to-equity ratio of 35:65. However, the actual project cost increased slightly to Rs. 1.896 billion. Despite the higher project cost, the company financed the project with only Rs. 582 million in debt and Rs. 1.314 billion in equity, improving the debt-to-equity ratio to 30:70. The higher equity contribution has helped reduce leverage and strengthen the company’s capital structure.
Competition in Kathmandu Hospitality Market Remains Intense
CARE Ratings Nepal also identified intense competition as one of the principal challenges facing the company. Kathmandu remains Nepal’s largest hospitality market, with numerous domestic and international hotels competing for both business and leisure travellers.
The rating agency noted that increasing hotel supply could result in competitive pricing, potentially limiting average room rates even if tourist arrivals continue to grow. Furthermore, hotel revenues remain closely linked to domestic and international economic conditions, making the sector vulnerable to fluctuations in tourism demand.
Floating Interest Rates Pose Financial Risk
Another key concern highlighted by CARE Ratings Nepal is the company’s exposure to floating interest rates. The company’s borrowings are linked to the base rates of Nepal’s banks and financial institutions, with lending rates adjusted periodically according to changes in market liquidity. Although lending rates have shown a declining trend over recent quarters, any future increase in interest rates could raise financing costs, reduce profitability and place additional pressure on cash flows. The agency nevertheless noted that near-term interest rate prospects remain relatively favourable.
Experienced Promoters Provide Strong Support
A major strength supporting the ratings is the company’s experienced promoter group. International Himalaya Hospitality and Hotel Limited is promoted by the MS Group of Companies, one of Nepal’s diversified business conglomerates with investments in steel, sugar, chemicals, paper, textiles, real estate, hospitality, banking and insurance.
CARE Ratings Nepal believes the group’s financial strength, extensive business experience and diversified operations provide important support for the hospitality venture. The company is overseen by a seven-member Board of Directors chaired by Gaurav Agrawal, who has more than three decades of cross-sector business experience. He also serves as Chairman of Shikhar Insurance, Prabhu Bank and Reliable Life Insurance. Meanwhile, Sumit Kumar Agrawal, the company’s Managing Director, oversees the hospitality businesses under the MS Group.
He is also associated with several hospitality and manufacturing companies, including Everest Hospitality and Hotel Limited, Bhagawati Steel Industries, and Nepal Hospitality and Hotel Private Limited, which operates the Fairfield by Marriott Kathmandu. CARE Ratings Nepal stated that the experienced management team is expected to play an important role in successfully expanding hotel operations.
Marriott Partnership Strengthens Business Prospects
One of the company’s strongest competitive advantages is its management agreement with Marriott International, one of the world’s largest hotel companies. Under the agreement, Marriott manages the hotel’s operations while providing technical expertise, staff training, reservation systems, international marketing support, and operational standards. Marriott International currently operates more than 9,300 properties across 144 countries under approximately 30 hotel brands.
CARE Ratings Nepal believes the partnership significantly enhances IHHL’s market positioning by providing access to Marriott’s global reservation network, established customer base, international brand recognition and operational expertise. The association is also expected to improve occupancy levels and enhance long-term revenue generation.
Prime Location Offers Competitive Advantage
The rating agency highlighted the hotel’s strategic location in Kamaladi, Kathmandu, as another major strength. Situated approximately four kilometres from Tribhuvan International Airport, the hotel enjoys convenient access for international travellers. Kathmandu serves as Nepal’s primary gateway for foreign tourists and remains the country’s largest tourism market. The hotel also benefits from its proximity to several UNESCO World Heritage Sites, Kathmandu’s historic Durbar Squares, major commercial centres and popular tourist attractions. In addition, destinations such as Nagarkot, one of Nepal’s premier Himalayan viewpoints, are located within easy driving distance.
Positive Outlook for Nepal’s Tourism Industry
CARE Ratings Nepal also pointed to the Nepal Government’s continued emphasis on tourism development as a positive factor supporting the hospitality industry. The FY 2026/27 national budget allocated approximately Rs. 7.34 billion for culture and tourism programmes and Rs. 2.93 billion for civil aviation development.
Government initiatives include the expansion of the Greater Lumbini Development Programme, promotion of Janakpur as a wedding tourism destination, development of the Great Himalayan Trail, conservation of heritage sites and continued investment in airport infrastructure, including Tribhuvan International Airport, Pokhara International Airport and Gautam Buddha International Airport. CARE Ratings Nepal believes these measures will strengthen Nepal’s position as a global tourism destination and support medium-term growth in the country’s hospitality sector.
Future Performance Will Determine Rating Direction
According to CARE Ratings Nepal, the future trajectory of IHHL’s ratings will largely depend on the company’s ability to steadily increase occupancy levels, improve average room rates, enhance profitability, and strengthen debt-servicing capacity. While the Marriott partnership, experienced promoters and favourable tourism outlook provide a solid foundation, the company’s success will ultimately depend on how quickly the newly opened hotel can establish itself in Kathmandu’s increasingly competitive hospitality market. The rating agency concluded that sustained operational performance over the coming years will remain the most important factor in determining the company’s future credit profile.
