Hotel lessees wait for further deferral of loan repayment period

Choki Wangmo

As deferred loan repayment period comes to an end this month, lessees of the hotels and resorts are worried. They might have to surrender the property, leased at a high operational cost.

Last November, Anup has signed a ten-year lease to run Hotel Majestic in Thimphu. By the time the hotel was ready to be used, Covid-19 impact left him without options. He said that he incurred huge expenses in furnishing and maintenance works.

Except for one-off use as a quarantine facility, the hotel had no customers. More than 12 hotel staff were provided in-house food and lodge but were laid off without salaries. With the loan waiver in place, he did not have to pay Nu 350,000 as monthly rent. But he said he was now concerned about how the hotel would sustain if he has to pay rent to the owners beginning next month. “The owners have loans and they won’t be able to support us. I hope the government would continue to defer loan repayment for another few months.”

Before Covid-19, it was a lean season and the earnings were low, he said.

Another three-star hotel lessee in Thimphu said that the hotel was used as a quarantine facility once and then it remained closed except for occasional cleaning. From April till this month, the owner waived off 50 percent of Nu 2, 50,000 paid as rent.

Thirteen hotel staff were paid a monthly salary ranging from Nu 7,000 to 20,000. If the situation did not improve, desperate measures such as laying-off the workers could happen, said the manager. If the government doesn’t defer loan repayment further, the hotel has to pay Nu 300,000 bank loan by next month, excluding rent.

During tourist season, the hotel made Nu 700,000 a month. He said that there were no plans to move ahead but was waiting for the situation to improve. “We are waiting for directives from the Hotels and Restaurants Association of Bhutan,” he said.

Similarly, the hotels in Phuntsholing and Paro don’t have any future plans. Most of the owners said that it was hard to plan anything with the uncertain nature of the pandemic. Some hotels were closed since months ago.

For example, the lessee of a standard budget hotel, Hotel Shine in Phuntsholing, wants to surrender the property if he had to pay the rent by the next few months. He, however, said that he was hopeful that the business opening with extended closing time from next month would help him earn a nominal income.

Most of the customers are local people.  Twenty staff of the hotel, mostly Indians , were laid-off.

General Manager of Hotel Pundarika in Thimphu, Tashi Gyeltshen, said: “We are surrendering the hotel next month since we can’t afford to pay the rent as the earning is almost zero. We might lose the security deposit paid as rent for four months.”

The hotel pays a rent of Nu 2 80,000 besides the furnishing cost of Nu 300,000.

“If the owner waives off the rent, we can pay for another three months but if the situation worsens, we have to surrender the hotel. We don’t have a second plan,” he added.

The hotel is running at a loss since the hotel was operationalised at the same time as the first Covid-19 positive was reported in the country.

The lessee of Town View resort in Paro said that he doesn’t have a clear way forward but would wait for a year to cool off the Covid-19 impact.”

Excepting operational costs, most of the lessees have personal loans to repay, therefore, raising finance-related concerns.

The government introduced monetary measures in April to provide short-term relief to sectors facing financial distress and to assist businesses. To complement the monetary measures, the government has also announced fiscal measures deferring the tax payment.

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