Dechen Dolkar 

In a worrying trend for Bhutan’s tourism industry, overseas agents are increasingly dominating the market, resulting in the decline in foreign currency reserves apart from economic repercussions for tour operators. 

Bhutanese tour agents say that the Tourism Policy 2022 has altered the country’s financial landscape. The policy mandates that tourists deposit only the sustainable development fee (SDF)into the government account while encouraging the rest to be brought in cash.

They say this shift benefits overseas agents but undermines Bhutanese operators who previously relied on a more structured financial system under the Minimum Daily Package Rate (MDPR). “The MDPR ensured equitable distribution of funds among service providers, with transactions documented and reported for tax purposes,” said a tour operator.

“The government wants only USD 100 and INR 1,200 SDF from tourists, not considering how tour operators benefit,” said the tour operator. Tour operators argue that the government should benefit through tax, but it focused only on the SDF. With overseas agents dominating, Bhutanese tour operators are losing out.

In the earlier MDPR system, tourists could visit Bhutan only through Bhutanese tour operators. All payments had to be deposited into their agents’ accounts in hard currency. Everything came in hard currency. 

Today, tourists pay only the SDF to the government, while the rest of their payments are carried in cash in the Ngultrum. Overseas agents also pay local guides, drivers, and vehicles in Ngultrum.

Meanwhile, Kuensel has learnt that the Royal Monetary Authority and the Department of Revenue and Customs are planning to form a committee to investigate the decline in foreign reserves from the tourism sector despite increasing tourist arrivals.

A tourism commentator said that the answer is not far to seek. The hard currency from tourism is lost when foreign agents dictate the tourism market.

Hard currency is only what the government receives in the form of SDF. Tour operators receive in the Ngultrum. 

Tour operators compete to bring in tourists, playing on the margins after paying the SDF. This has forced them to undercut to remain in business. The current system’s minimal profit margins force agents to cut corners, even limiting basic amenities like water for tourists.

Indian tourists typically book tours through overseas agents, who handle visa applications, itineraries, and hotel reservations. They directly contact local guides, drivers, and vehicle providers without involving local agents.

According to the Department of Tourism (DoT), from January 1 to May 31, 2024, Bhutan received 64,941 guests, a significant increase from 43,074 visitors during the same period in 2023. 

The 2024 visitor arrivals breakdown shows that 66 percent originated from India, while the remaining 34 percent came from the USA, China, the UK, Germany, Singapore, France, Italy, Malaysia, Vietnam, Thailand, Australia, and Canada. Indian tourist arrivals totalled 43,434 in 2024, up from 31,815 last year.

The department reported that over the past three months, there had been a noticeable increase in guests arriving from Singapore, Malaysia, Thailand, China, Australia, Canada, Italy, Taiwan, Indonesia, Russia, Spain, Japan, Israel, and the Philippines. 

The estimated SDF revenue collected between January and May 2024 is approximately USD 16.25 million.

However, despite the increase in tourist arrivals, particularly from India, there are serious questions about the benefits to the government in terms of foreign reserves, including the INR reserve.

Where is INR going?

Bhutanese tour agents say that overseas agents act as primary exchangers of INR to Ngultrum and operate in border towns, charging between 2.5 percent and 10 percent on every Ngultrum exchanged into INR. This practice has led to the depreciation of the Ngultrum against the INR, fostering informal currency exchange and placing the Ngultrum at a disadvantage in bordering Indian towns. 

To counter this, local agents suggest establishing government-regulated exchange counters at all entry points to stabilise exchange rates and ensure parity between the Ngultrum and INR.

The proprietor of BK Tours and Travels in Jaigaon said the agent directly contacts hotel owners who offer discounts since they send tourists continuously. “We also directly contact the guides and drivers,” he said. 

Tour guides are paid from Nu 1,500 to Nu 2,000 a day. For light vehicles, they pay around Nu 3,000 a day, and for medium vehicles and buses, they pay around Nu 4,500 to 5,000 a day. 

With the reopening of the border gates for tourists, BK Tours has sent around 1,500 to 2,000 Indian tourists to Bhutan.

The proprietor of Binay Travel and Tourism, Binay Tikhatri, said that his agent mostly sends Indian tourists, with only one to two Western tourists a year. Since the gate reopened, the agent has sent around 30 to 35 groups, each consisting of one to 12 people.

The Indian tourists mainly come from South India, Nagpur, Maharashtra, Gujarat, and Assam. They stay at least five nights and six days and a maximum of nine nights and 10 days.

Meanwhile, Bhutanese tour operators say most tourists enter Bhutan through Phuentsholing due to high domestic airfare for foreigners. They say, in a bid to earn doubly from tourists, the Bhutanese airlines have effectively diverted their potential passengers to entry points by road. 

The DRC has recently set up two additional SDF counters in Phuentsholing.

Tour operators call for the reinstatement of the MDPR system alongside the SDF to protect local interests and ensure sustainable economic benefits.