Rajesh Rai | Phuentsholing

More than three months after the border gate opened, and the Sustainable Development Fee (SDF) started for regional tourists, the hotel business in Phuentsholing is still struggling to make a comeback.

Both star-rated and budget hotel owners say occupancy remains low and the future seems uncertain.

Even before the new SDF of Nu 1,200 per night was introduced, hoteliers had raised the concern to the government and requested Phuentsholing to be SDF-free until Rinchending checkpost. Although the long-term interest of the SDF was well-intended and planned, hoteliers had pointed out that they would lose business.

They wait for better days. A few have closed their business.

A manager with a star hotel said the business is “bad.”

“There are no tourists at all. Some Indian businessmen had taken four rooms in my hotel. But due to the SDF, he is keeping his colleagues across the border,” he said, explaining that they enter Phuentsholing only during the daytime.

The proprietor of Alem Hotel, Kuldeep said all bookings are getting canceled due to the SDF.

“I have zero percent room occupancy for the year 2023,” he said.

Although the government has deferred the loans for hoteliers, Kuldeep said they are still worried about the repayment later because there is no revenue from the hotels at present.

“Moreover, we have to pay our staff for which we have to depend on local guests.”

Meanwhile, hoteliers also say that they are finding it difficult when it comes to the staff from across the border as they have to return home every night. In case there are emergency cases, the government must allow them to stay overnight.

Although the government has a long-term vision in implementing SDF, hoteliers say border towns such as Phuentsholing, Samtse, Gelephu and Samdrupjongkhar must be an exception. Hotels in these places will not sustain otherwise, they say.

Today, tourists are staying across the border and traveling to Thimphu and places beyond.

The Hotel and Restaurant Association of Bhutan’s (HRAB) representative in Phuentsholing, Karma said he has quit the industry.

“The business is dead. That is the reason I had to quit,” he said.

Karma said that SDF has both pros and cons. It is good in the long-run, he said, explaining the SDF was to make Bhutan an exclusive tourist destination. However, the current impact due to the change, especially, on budget hotels is unfavourable.

As budget hotels are not allowed to entertain tourists, the government has been very clear since the beginning that budget hotels, if they wish, can convert their properties into three-star hotels.

“Not all budget hotels can be converted into star hotels,” Karma said.  Many share the same thoughts.

The owner of Hotel Khamzang, a budget hotel said this is because even the star hotels are struggling. 

“Although we are asked to convert our hotels into three-star hotels, there is a risk factor to it,” he said.  “If the three stars were doing exceptionally well, we can think about converting.”

The proprietor of Galing Hotel (budget) said making Phuentsholing SDF free will bring back other businesses to life.

“People from Sikkim, Nagaland, and Assam come here to shop. But the SDF has become a problem and they end up staying across the border or staying only for a short duration,” she said.

“If we have good occupancy, the business will be distributed. They will shop from our shops and use our taxis and eat and drink in our restaurants.”

There are at least 50 hotels in Phuentsholing, including more than 10 three-star hotels. Prior to the Covid-19 pandemic, many rental buildings in the town were converted into hotels.

Still today, some have already invested in new hotel constructions.

One of them, Ugyen Samdrup said despite an uncertain situation in the sector, he is going on with the construction.

“This is the risk I am taking,” he said.

“Every second or third building you come across in Phuentsholing is a hotel. And it is evident now that they are not doing well.”

Ugyen Samdrup said that the hotel industry is the only one that provides employment to school dropouts. At the macro-level, if this sector is doing well, the trickle effect is on many areas such as employment, real estate, and the overall economy.

Despite the drop in arrivals, 16,520 tourists have visited the country since the opening of the border in September last year.

Records with the Department of Immigration show that of the total arrivals, 8,273 were Indian tourists paying the Sustainable Development Fee (SDF) Nu 1,200.