At a crossroads: Tourism development in Bhutan

Having availed many years of work experience and research opportunities in the field of tourism and aware of the present concerns raised on the future of tourism I feel responsible to share my views. However, recognising the complexity of tourism I would like to dwell only on the fixed minimum daily pricing system which seems to be the most contentious issue and probably has the maximum implication on the growth of tourism in our country.

Tourism as many of us would agree offers immense potential to be a positive force for sustainable development but only under the precondition of sound planning and management. Retrospect on our nation’s tourism journey and one can only be inspired and grateful by the visionary leadership of His Majesty The Fourth Druk Gyalpo under whose enlightened guidance a cautious approach was adopted.

This cautious policy not only generated substantial revenue but also shielded us from many of the negative impacts and pitfalls of tourism growth. We remain fortunate to enjoy this continued flow of both tangible and intangible benefits. Now we are at a critical time with continuous debates on the outcome of which is making me increasingly apprehensive over myopic decisions that could have far reaching implications to impair the future potential for tourism development.

While there is general consensus on this cautious policy of “High value, low impact”, there are differing views in its interpretation. In the interest of making quick benefits some are inclined to believe that the minimum pricing system has served its purpose and is now become redundant. Conveniently people are beginning to delink the connection between the policy and the pricing system.

What we must understand is that the policy is actually anchored by the minimum pricing system and they are part of each other and therefore liberalising this system would only weaken the sustainability of tourism growth. We must realise that the high value low impact policy has been successful largely because of the pricing system. While differences arise between many stakeholders it seems to be more apparent between the tour operators and hoteliers.

It is a misconception that this system only benefits the tour operator and that the hoteliers are completely in the hands of the tour operators. We need to be rationale to see a mutual benefit between the two. Hoteliers should not be misled to believe that the present system is crippling their growth and that a liberalised pricing system would be to their advantage.

Essentially we have the opportunity to compare both the situations in practice. Having the pricing policy applied through the international visitors and a liberalised pricing system applied through the regional tourists. With both the situations happening concurrently we can see for ourselves the rising negative impacts becoming increasingly evident from a liberalised pricing system.

Some hoteliers also claim that they are compelled to sell their rooms at rates to suit the tour operators. This problem can be addressed through the hotel and accommodation classification system implemented by Tourism Council of Bhutan. Past studies on tourism has indicated that under-cutting (a practice of selling tours below the minimum daily rates) is a serious problem that needs to be contained.

Ironically instead of looking into solutions to address this problem liberalising the pricing system only means we are legalising an unhealthy practice. No system is perfect and though there may be some flaws with the current pricing system, removing it entirely will only take away our tool for the long term sustainability of tourism development.

The pricing system has helped us buy time to prepare our capacity in managing tourism development. Unfortunately while we may not have progressed far in strengthening our tourism product on the other hand the pricing system has effectively safeguarded our tourism resources. We have secured an image brand as one of the top travel destinations, an envy for many countries. The government should not be deluded in thinking that sustainable tourism development can be achieved by merely increase in revenue through royalty and accomplishing set target arrival numbers. Sustainable tourism development requires achievements far beyond these indicators.

Considering all our advantages Bhutan has the best chance of being a model for sustainable tourism. We do not need to depend on any external consultants like  Mckinsey & Co making ludicrous recommendations without properly understanding the context of our tourism growth. We understand our situation best and the solution lies within our existing capacity. Tourism is a multi dimensional sector and it is only logical that the starting point for a successful journey to sustainable tourism is through effective partnerships and collaborations between all the stakeholders. We need to trust each other and enhance our communication. The sheer diversity of tourism involving people from different disciplines means a holistic or systematic approach is necessary.

In conclusion I would like to reiterate that too much time has gone by squabbling over the minimum pricing system. It’s time we gather our wisdom to acknowledge this as a valuable tool to be used for sustainable tourism growth. Let us be prudent and appreciate the benefits we are reaping of a system founded on the visions of our Fourth Druk Gyalpo.  Removing the pricing system will only provoke mass tourism and cause irreparable damages impeding future sustainability.  It is high time we focus our discussions and debates on other more meaningful issues to enhance sustainable tourism growth in our country.

Some of the advantages in retaining the fixed minimum daily pricing system

The demand for Bhutan as a travel destination is very high. However the limited carrying capacity due to the ecologically and culturally sensitive disposition of attractions and services means we are already close to achieving our upper limits of visitation numbers. When these numbers can be easily achieved with a minimum pricing why dismantle the pricing system. This will only mean achieving the higher numbers at a faster rate with cheaper costs offering less benefits and more negative impacts.

The system has contributed in substantial revenue generation making it the highest contributor of foreign exchange and at the same time contributing to employment and prosperity of many of our own people.

Besides the earnings from daily royalty deducted from the tour operators the transparency of the online system enables further substantial contributions through taxation. Removing the minimum tariff system would leave room for manipulation leading to lesser contribution through taxes.

The present system makes it easier to enforce proper regulation and curb revenue leakage, a major concern faced in many developing countries promoting tourism.

It gives our own locals the advantage of having a stronger hold on our system limiting the external agents to exploit our resources.

We have the advantage of seeing the problems created  through a liberalised policy implemented for regional tourists. Removing the minimum daily tariff will lead to further surge of mass tourism from other regional visitors presently paying the minimum tariff.

Contributed by Karma Tshering a freelance tourism specialist. Karma obtained  his masters and PhD in sustainable tourism development from the University of Sydney. He previously worked in the conservation sector under the Department of Forests and Parks advocating nature recreation and eco-tourism programs.

3 replies
  1. sailoo69
    sailoo69 says:

    As a tour operator, it is a big concern for me where the tourism industry will land up in future? Bhutan is unique, people are unique, our environment, culture and tradition are unique and besides our tourism industry regulation is unique. This is the reason that our international visitors appreciate and cherish our visionary and far sighted leaders who put their sincere effort to keep our country safe from unwanted mishaps with proper planning and wise decisions.
    Tourism industry is very sensitive and very fragile and it will be destroyed if proper care and attention is not given. A slight mistake from decision makers will have a huge impact and irreparable damage to this industry. Our 4th Druk Gyelpo is not an ordinary human being. He has initiated this policy in the early 70s and the same practice is still going on without much negative impact in 40 decades. Only very recently this issue of uplifting the daily tariff came up just because of few tour operators who started the practice of under cutting undermining the government regulation. Instead of finding a solution for this issue, we are now talking of uplifting the tariff. This is not a right decision. Being a very small country with limited space and infrastructure, we cannot think of having a mass tourism in Bhutan. Bhutan cannot hold it for even a year and there after the very charm of our country will be gone away forever.
    From my own experience i can say that 90% of the international visitors suggest us to keep the same policy which they say is the only tool to control the visitors at a manageable level. Tourism is the future of Bhutan and must keep this way for many generations to come. “No MASS tourism” if mass tourism is promoted, the gap between rich and poor will further widen which is not a good sign for a GNH country.

  2. A duty-bound citizen of Bhutan
    A duty-bound citizen of Bhutan says:

    My say on lifting the existing tariff system of the Royal Government of Bhutan

    I am working as tour guide in Bhutan and I have been working in the tourism industry for

    the past 10 years. My job is to take the dollar-paying tourists of the Royal Government

    of Bhutan to all the designated tourist destinations in the country. This is the

    opportunity I coveted for many years until the day I have my opportunity to explore my

    own country together with my visiting clients and it is not possible to do it without this

    regulation in place. I have always asked my clients why they chose Bhutan for a holiday

    destination despite the highly regulated tariff of the Royal Government of Bhutan. The

    answer I always get back is the resounding unique tourism policy of responsible tourism

    of the Royal Government of Bhutan. It is the same answer I keep getting from my clients

    over and over again. I want to thank my beloved young monarch of Bhutan from the

    bottom of my heart for his work of divinity and I have high regard for him. He’s just 16

    years old when he has this amazing vision for his Kingdom. I cannot help but laud him

    for his farsighted visionary leadership. It is the willing contributions of the visitors in the

    building of this otherwise developing nation have made the whale of difference in the

    lives of many Bhutanese people from the otherwise abysmal living conditions. I am very

    grateful to my visitors who have visited this country despite the high tariff of the Royal

    Government of Bhutan. And the Royal Government of Bhutan’s been very supportive of

    the tourism industry of Bhutan to the contrary and the governments of the past and the

    present have always engaged themselves in developing better infrastructures like roads

    and diversifying tourism products in the country by introducing many new products in

    the market.

    Third King has opened the country to the outside world but the young monarch has

    seen the danger of mass tourism and therefore he has decided to regulate the flow of

    visitors into the country by promoting responsible tourism and the existing high value

    low impact tourism policy of the Royal Government of Bhutan is pronounced. The first

    group of paying tourists of 30 people from the west has been received in the country at

    the start of it. This policy has guided the operations of tours and treks in the country

    and this has kept the numbers at the manageable level. The existing tariff system of the

    Royal Government of Bhutan has brought enough dollars to the Royal Government of

    Bhutan’s exchequer and this is not only helping Bhutan to maintain the country’s

    foreign currency reserves with the Royal Monetary Authority of Bhutan but also fuels the

    many ongoing developmental activities in the country. I want to thank each one of them

    for visiting us.

    I am very happy to become the ambassador of my country. When I have first decided

    to take the full-time guiding job after my high school, it has never occurred to my mind of

    what my job is all about and I have been completely raw, unpolished like a nugget gold,

    not well-read or informed. Looking back in time to my learning now how much wiser I

    have become meeting people of different nationalities from different countries around

    the world. Thanks to the existing fixed tariff system of the Royal Government of Bhutan.

    It has allowed only the well-read and well-thought people who have always accorded

    the highest regard for His Majesty’s sound tourism policy; therefore, the daily tariff

    system of the Royal Government of Bhutan has not failed the country in anyways until

    the members of the Economic Affairs Committee of the National Council of Bhutan have

    formally proposed the government to lift the existing tariff system of the Royal

    Government of Bhutan.

    The danger of lifting the existing tariff system is that it will not only promote mass

    tourism in the country beyond the managing capacity of the existing tourism

    infrastructure of the tourism industry but also attract mostly only the low-profile people

    with no proper education with little or no respect of our otherwise intact living culture of

    Bhutan which we’re very much proud of. People working for those tour operators who

    are undercutting the cost are already experiencing the wrath of it. More and more such

    people will come to visit us and less and less of today’s high-end tourists who support

    His Majesty’s vision of responsible tourism will recede to the contrary.

    I laud NC’s noble intention but it’s not how we resolve the host of existing problems in

    the tourism industry. Our chosen few could do better than this. Yes–I understand there

    are seasonality issue and issue of bad debts of the hotels, besides problem of cost

    cutting by few miser tour operators and the regional disparity in deriving the benefit out

    of the tourism returns among others and it is about time we redress these longstanding

    issues but intelligently.

    Who knows my job better than I do? Seasonality’s always been an issue and it’ll remain

    so. Not everything is in our hand or in the hands of divine. It’s the visitors’ exclusive

    choice to decide what time of the year they come and what they see and do for the

    duration of their stay in Bhutan; therefore, I think we must leave the decision to their

    discretion. For example, summer and winter are the two extreme seasons of Bhutan:

    summer it rains and condition of the road gets worsen and it’s the tour operator’s duty to

    inform them accordingly and they don’t visit in winter because it is the coldest season of

    the year to the contrary. Even if we manage to invite them to visit us in these two

    seasons they will have no choice but to stay homebound for most of the otherwise

    lucrative time of the day while they should be going out visiting places and doing things

    of their choice because of the chill to the bone. The visitors are expected to be well-

    informed before they make their decision to come. This is critical in the making of

    informed decision; otherwise, the entire team who runs the tour will run into troubled

    water later. Whether this fixed tariff stays or go, it will not address the issue of

    seasonality problem. Even the introduction of low-season tariff of the Royal

    Government of Bhutan to the contrary has failed to address this longstanding issue of

    seasonality problem. The issue here is not about seasonality but the two seasons itself:

    wet summer and winter cold. I don’t think they’ll be willing to pay to do nothing. The

    logic is simple. We must understand this fully before we proposed a change contrary to

    this matter of fact. I understand the guides are going without work in these two

    seasons, but we should take this as opportunity of this freedom to be more responsible.

    There’re thousand and one possibilities outside the tourism industry when we’re not

    working. It’s just that we need to stay proactive. Maybe we reflect on our shortcomings,

    make improvement on it or help aging parents in the village or do something else.

    I know tour operators could also do more than what they’re already doing now if they

    want to. I have no say on the small group, but they could pay us more from the big

    group if the number is good. For now it’s always the operators who are taking lions’

    share out of the pie and what they pay us for the service is just the tip of it; besides,

    their fists on tourists spending while in Bhutan are tightened. We take their money, so

    why cannot we feed them enough to send them back healthy. After all we make all the

    promises to do enough before they come but we fail to deliver it most of the time. The

    margin they get out of daily minimum tariff from the tourist is more than what they

    should be getting; their expensive fleet of SUV cars parked in front of their offices

    speaks it.

    Few big tour operators are selfish to the contrary. They’re killing not just all the service

    providers but also tarnishing the image of high-end tourist destination by undercutting

    the cost. After keeping their margin, they have little left to pay for the tourists comfort

    like hotels and the guides and ultimately we suffer for their selfishness.

    I also know that there are dedicated group of tour operators in the country. They’re not

    only good to their subordinates but also pays them enough and look after them well

    besides bringing good innovation in the products they’re selling to their customers and

    more and more customers visit them; therefore, EAC chairperson of the National

    Council of Bhutan cannot mix both good and bad apples together. It’s the case of few

    bad rotten apples spoiling the other good apples in the same basket. If he lands up

    generalizing all the tour operators, it isn’t fair on the part of him to blame the entire team

    of the industry for the fault of the few selfish operators; then, he’s disparaging the

    laudable achievements of those dedicated operators. It’s the individual tour operator

    who has put its heart and soul together to build its own business empire for many years

    out of the scrap and I laud them for their industry and enterprise and for serving the

    Kingdom’s guests well thereby serving the TSA-WA- SUM well.

    Another limitation of the tourism industry is the tourism rule itself. Guides and other

    service providers to the industry are left in the mercy of the tour operators, besides the

    government’s rule of organized and guided tour there’s no written law anywhere in the

    tourism book to say that injustice against guides and other service providers by the

    guest or the operator is protected. The exploitation is rampant in the form of nepotism.

    It promotes blame game; therefore, we take blame most of the time because we’re at

    the mercy of them and they can fire us anytime if they find the reason to get rid of us.

    Guides Association of Bhutan is supposed to stand for all the guides but it has never

    taken the leadership to convince most of us why we should not become its members;

    instead, they’re taking the back seat and its function is limited to renewing license and

    conducting few refresher courses, besides attending calls from few tour operators on

    inquiry and attending meetings in the foreign land; therefore, guides could not find a

    united front for a united stand against such injustice. If they are taking a strong stand

    for us, they can fight to fix the minimum daily sustainable allowance uniformly for all or

    keep all the guides in its lawful hands by making the membership mandatory. The issue

    of professionalism can be solved. Example, new comers could be attached with the

    working group for internship before they take up a leadership tour; this will not only save

    the face of the company he works for but also avoid himself cutting his own sorry

    figures. Nothing is happening anything like this. For now our association stands for its

    registered members only and its voice cannot represent the voice of all guides in the

    country to the contrary.

    Lets all bury our differences and reflect on this issue of lifting of the tariff by the

    Government and its subsequent ramifications. We all must look at the bigger picture

    for the benefit of all and what we all do should be in the best interest of the nation.

    However, going by the stand of the individual players of the tourism industry to me at

    least I feel they all speak for themselves. We all must understand this. Hotel runners

    are speaking for themselves for they know that by lifting the existing tariff system will

    allow them to exercise their own freedom of choice for they could run their own tour

    companies to bring their own guests like Aman, Uma, Zhiwaling, Naksel, & Taj do for

    instance, and contrary to the GAB’s chairman’s stand, the predicament of the guides will

    only get worse if the tour is run with the tight budget. This example is best drawn from

    the unregulated regional tourists from India, Maldives, and Bangladesh. How much this

    change will benefit who is yet to be seen, but I feel this change will bring more rain to

    where there’s already enough water and the desert will go with little water or no rain.

    If the proposed change is to pull down some of the high-performing tour operators in the

    name of level-playing field, NC must not forget this matter of fact that they’re well-

    established companies and they’ll have nothing to lose but only to gain out of this game.

    They’ve been long playing this game and this change is only going to make their job

    easier. Why undercutting is possible by the top-performing operators? It is possible

    because they have chain of hotels across Bhutan and fleet of cars at their disposal and

    therefore they can still dictate the market. The government should punish those

    companies who are found guilty of this crime, instead.

    The proposed change by the NC will only kill the new comers who’re trying to enter the

    market and the struggling companies, who are already in the market, but under this

    existing tariff system of the Royal Government of Bhutan, at least both big and small

    players have their own customers to look after and therefore are benefited. The

    working guides on the other hand are the future tour operators of the country; this is

    what the past history of the existing tour operators say.

    And my question to the members of the EAC of the NC: Is the fourth King’s vision of

    responsible tourism limited by $65 royalty of the Royal Government of Bhutan?

  3. irfan
    irfan says:

    This post has surely enriched my limited knowledge about tourism in Bhutan. The problem is that it hasn’t helped me to get out of that very crossroads. Moreover, it’s not just two roads crossing at a point.

    Bhutanese tourism industry has a new sector to consider in the recent years…’hydro power and construction tourism’. And even this sector brings in considerable revenue to the economy. I was reading it somewhere about tourism industry in Australia and it was written that higher education sector has been a major revenue earning sector for them.

    I definitely understand the visionary policy of ‘High Value and Low Impact’ in Bhutanese tourism and this policy has also remained the major marketing strategy for so many decades. This is also true that the same strategy may not work to attract the regional tourism which includes India, Bangladesh and Maldives. I am not even sure when some Bhutanese football team will be hosting some matches against any teams from these countries.

    Coming back to the that fixed charges that a foreign tourist needs to pay per day; even this rate has been on that very crossroads for years now. In the mean time, dollar as a currency has strengthen against currencies of India, Bangladesh and Maldives in the recent times. I hope that I am wrong there.

    Even Bhutanese economy has seen tremendous growth in recent time mostly due to the hydro power sector and that has resulted in positive growth of the banking and financing sector of the country. One result of that has its key effects in driving growth in the very important tourism infrastructure creation. Here another debatable argument points out that recent growth in tourism infrastructure has remained restricted within a zone.

    But on every such created infrastructure, there will be the obvious pressure of repayment of the debts. So it’s obvious that certain agents or their Bhutanese clients will be forced to undercut the packages on offer. Bhutan still has its well defined tourist seasons, tourism festivals and a very short and restricted tourism calendar. So there is even a chance here that the quality of tour packages may suffer.

    Conventional theory suggests that the high end tourists should always be happy. But Bhutan also has an ever increasing population of trained tourist guides. There can aways be the right policy in place to link these guides and local clients in form of the hosts to the regional tourists provided there is a totally separate marketable strategy in place. The expectation of high end tourists in the region will differ from that of Europe or America.

    Considering high end tourists of the region; irony is that they are both your customers and also your main competition. This need to be addressed at the industrial strategy and master policy level. The ‘High Value Low Impact’ policy will not continue to sustain in isolation only. Moreover, Bhutanese people have started to explore and travel beyond its boundaries.

    Yes that it’s at a crossroads, but definitely it’s not a simple case of just two roads crossing. I don’t know what the data looks like for treating to eyes; but this is the most challenging time for the tourism industry in Bhutan. The way it has developed is the challenge to deal with and it’s well grown up now.

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