Wants service loan repayment term extended
Yangchen C Rinzin
Representing hoteliers, the Hotel and Restaurant Association of Bhutan (HRAB), wants the service sector to be included with sectors that would benefit from the increased loan repayment term.
Reasoning that the hotel industry would take time to recover from the impact of the pandemic even if tourism opens, HRAB’s Chairman Sonam Wangchuk said that there was a need for economic relief packages for the hotel industry.
Recently, the Royal Monetary Authority increased loan repayment terms from 20 years to 30 years, excluding the maximum gestation period of three years. The benefit of the additional 10-year loan repayment term, however, is only for commercial and housing loans.
“Hoteliers whose business have been severely affected by the pandemic must be included in any economic relief packages because it’s a widely known fact that the tourism sector has been affected,” he said. “It is still unclear when tourism will restart, and when it does, it won’t bounce back to normal that quickly.”
The chairman also said that after fiscal and monetary interventions, namely loan payment deferment and kidu, come to an end, hoteliers still won’t be able to repay the loans at the interest rates charged.
He said the association expects a reduction of 50 percent in interest rates.
Currently, those who have availed service loans pay an interest rate ranging from a floating rate of 7.9 to 12 percent, based on the interest options.
While acknowledging the kidu received during the pandemic, including allowing hotels to operate as quarantine centres, HRAB members said that it is time to ready a mechanism to solve the issue of loan repayment post-Covid-19, as hotels will not see business picking up immediately, even if normalcy returns in tourism.
“Interest on loans were originally calculated based on the market, and when the market for the hotel industry is affected, there is no way hoteliers can repay loans at the same interest,” he said.
HRAB Executive Director Sangeeta Rana said that there is a misconception that hoteliers are earning a good amount as quarantine facilities and conference sites, and that there is no need for economic relief plans. “Only about 100 of the 650 hotels today are operating as quarantine facilities, and most of them are in Thimphu, Paro, and Punakha.”
The executive director said that the tourism and hotel industry cannot be excluded in relief discussions. “There are no discussions on how to help the sector after the pandemic.”
HRAB currently has about 230 members that employ almost 18,000 employees.