Govt. to address undercutting in tourism sector

The cancerous issue of undercutting, understood to be spreading rapidly among tour operators, would be treated once the government unleashes its plan to boost the industry, Lyonpo Dr Tandi Dorji said.

The foreign minister, who is also the new chairperson of the Tourism Council of Bhutan, said solutions to the problem were already at hand.

“We know what we need to do,” said the foreign minister.

Lyonpo Dr Tandi Dorji said the issue of undercutting was there since tourism began in 1970s.

He said the Association of Bhutanese Tour Operators (ABTO) and Bhutan Chamber of Commerce and Industry (BCCI) had recommended measures to stem out practice of undercutting from the industry.

“As reflected in our manifesto, we’ll take up all the recommendations from ABTO, as well as the recommendations made by BCCI on the special emphasis on the services in tourism,” he said.

He said that the TCB had an effective plan with a new director general at the helm.

The TCB will also work on the recommendations from the stakeholders who attended the two-day national conference on tourism.

“The government will provide all the support necessary to ensure that these are fulfilled,” Dr Tandi Dorji said.

The issue was one of the first agenda discussed in the first TCB meeting on February 23.

He said one of the measures would be to have an online payment system to make payments transparent.

Information and communications, foreign, home and cultural affairs, and finance ministries would collaborate with stakeholders to implement the recommendations to address the undercutting problem, he added.

National Council’s review two years ago showed that although undercutting was not officially acknowledged it was a rampant practice in the sector.

Undercutting involves selling tour packages below the government-set minimum price of US$ 200 during lean season and US$ 250 per person per day during peak season.

“While this may lead to higher numbers, the yield is lower and the tourist experience is also compromised as undercutting to meet the sale price leads to cheaper hotels and food. Eventually, it leads to Bhutan being seen as a cheap destination and not a high value destination,” NC economic affairs committee report stated.

Concerns were raised that some tour operators merely act as ground-handling agents for larger tour companies based abroad and actively engage in undercutting. Such practices lead to leakages of profit, foreign exchange and loss of control of tourism development in the country.

The committee recommended to retain the royalty component of USD 65 and to drop the tariff to ensure that the tourism system maximizes tourism benefits and opportunities and minimizes tourism leakages.

Similarly, the ABTO in its Bhutan tourism review and recommendations 2016 floated numerous tariff rate options for the government to address the issue.

TCB secretariat’s director general, Dorji Dhradhul, said that the industry had immense potential to become the highest contributor to the country’s economy.

He said that the recent national conference on tourism triggered interaction among the various stakeholders in the industry and representatives of sectors outside it.

About 300,000 tourists visit the country annually.

Tshering Palden

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