Many say they will wait and see
To cut costs, fearing decreased revenue from tourism, a four-star hotel recently relieved more than a dozen employees on leave without pay from August 1, for a year.
Citing uncertainties in the hotel business because of the increased sustainable development fees to US$ 200, the head of the company which runs about four hotels decided to send away about 100 employees, to be hired on a daily wage system if the “situation” improved.
Bhutan will officially open its borders to tourism from September 23. But uncertainties about what will happen are filling the tourism air. Many are confused if the new policy would benefit them or hamper their business.
The big question is who – tour operators or hotels would benefit or lose. This arises from the Tourism Council of Bhutan’s (TCB) decision to allow hotels to function as tour operators.
The uncertainty is if hotels or tour operators would lose or benefit from the new policy. As of now, only 629 out of more than 3,000 licensed tour operators have applied for validation and assessment for the readiness for opening the tourism. Only 126 hotels and 92 homestays have applied for the validations as of July 3.
Meanwhile, while some hotels are still under renovation to gear up for the change, others including some three-star hotels are converting into offices, and private apartments while some are pulling down the shutters.
Confusion among hoteliers
The hotel industry is in a mix. They are not sure if they would benefit from the new SDF policy or lose out badly. The chairman of the Hotel and Restaurant Association of Bhutan (HRAB), Sonam Wangchuk said the association is not sure if they would gain or lose.
Many, including the association, are waiting for the borders to open to see the repercussions. Sonam Wangchuk said that they will be able to know only after tourists start coming. The chairman said that he has been telling hoteliers to not sell at a minimum rate and maintain the standard rates.
In the earlier minimum daily rate (MDR) arrangement, hoteliers are held at ransom by tour operators. Tour operators bargained with hoteliers for the cheapest rates. Having to depend on the tour operators, hoteliers slashed their rates to earn some income and stay in business. There are also cases where tour operators have not paid the hotels.
A hotelier said that tables would turn if they could sell their property. “If tourists book our hotels for 10 days to see Bhutan and ask us to arrange a guide or vehicles, we could negotiate with the tour operators. If it is not profitable, we will do it ourselves,” she said. “This will address the bad debt issue between the hotels and tour operators,” a hotelier said.
What tour operators say
Tour operators on the other hand feel that the hotel business will suffer when they have to compete for tourists willing to pay more than the USD 200 SDF. Tour operators would have to sell above USD 200 as the fee would be given to the government. An operator selling for USD 400 would have to manage the cost of guide, travel, food and lodge within the extra USD 200. “This will hamper hotels as tour operators would bargain. The cheapest hotel would receive the most guests as tour agents try to save cost,” he said.
A board member of the Association of Bhutanese Tour Operators (ABTO) said that around 64 percent of tourists come through tour operators in the world. “There is no clarity. If hotels are to operate as operators. It will be confusing,” he said.
Letting both hoteliers and tour operators handle tourists, some say, will ensure a level playing field. For instance, in the earlier minimum daily package scheme, a tourist was provided with a hotel, guide, transport and meals while also limiting the choice. When a tourist is taken to restaurants, the tour operators bargain with restaurants, because the margin to play around is limited. Discounts led to compromises. A buffet dinner costing Nu 700 per head is negotiated to Nu 400 with reduced food items. “This impacts service,” said a hotelier.
The new SDF, an operator said, would provide choice to tourists. “If a tourist wants to have meals for Nu 1,000, the restaurant will cater accordingly and if the tourist opts for instant noodles it is also possible.”
Another tour operator said that with the new SDF, tour operators will have rooms to play around. If tourists want to experience something unique and drastic, the price can be charged accordingly. “Tourists were reluctant to pay for additional services since they think that everything is included in the package. Hence, they don’t experience anything special,” a tour operator said.
For instance, if a large group of tourists visits a farmhouse, some farmhouse owners are reluctant to provide the services because they gain nothing from it. The operator said that farmhouses can charge for tourists wanting to visit their property.
A new concern
Some tour operators are concerned that tour operators outside the country could also operate and send tourists to Bhutan. “They will pay taxes, apply for a visa online and use the local agents after giving commissions,” one said. “This will bring us back to square one if not make it worse.”
Tour operators are convinced about the policy of increasing the SDF to USD 200, but are concerned that fronting and labelling Bhutan as a budget destination is possible, defeating the policy of high-end tourism.
It was learned that regional agents are already advertising holidays in Bhutan for USD 280. A tour operator said that while undercutting in the tourism sector was rampant in the past, it could become worse since there is no requirement for tour operators.
Meanwhile, big players in the industry running their own travel agents and hotels are expecting that they would benefit from the new policies. However, many in both the hotel and tourism industry say that they will have to wait until December 2023 to see the impact of the new tourism policy.