Plug undercutting or reform daily tourism tariff: Council

Endorsing all 10 recommendations, the House asked the RAA to ascertain the prevalence of tourism malpractice or undercutting

Tourism: The National Council concluding its deliberations on the tourism policy review pulled the last string to expose the illegal practice in the industry: undercutting.

National Council yesterday asked the Royal Audit Authority to ascertain the prevalence of tourism malpractice or undercutting when it endorsed the 10 recommendations of its economic affairs committee.

Undercutting means a tour operator bringing in a tourist on a much lesser rate than the fixed daily tariff of USD 200 in lean season (winter) and USD 250 in peak season.

The committee observed that through undercutting, Bhutanese operators in collusion with foreign partners sell Bhutan for as low as USD 126 to USD 146 a person a day.

“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,” the report stated. “Eventually it leads to Bhutan being seen as a cheap destination and not a high value destination.”

Based on this, the House also recommended a reform in pricing system to address the issue.

It recommended the government to move from ‘fixed minimum daily tariff system to a more transparent pricing system that provides tourists greater value for money and discourages the malpractice of undercutting and improves higher value tourism.’

Committee chairperson and Chukha Councillor Pema Tenzin said this issue has stirred the committee, Council and the industry.

“When we asked them if the present tariff is adequate they say it isn’t but at the same time they don’t want it changed,” he said.

Without a policy, the Bhutan Tourism Rules, schedules of tariff for international tourists 1995 and the Trekking in Bhutan Rules and Regulations 1996 regulate the sector today. Tariffs were revised in January 2012 from USD 200 to 250 for peak season and from USD 165 to 200 for lean seasons and a royalty of USD 65 to the government.

“The Tourism Council in the absence of legal support could not bring about the changes until now,” Councillor Pema Tenzin said.

One of the urgent recommendations was that the government frame a comprehensive sustainable tourism policy for development, management and promotion of the industry in line with the national plans and priorities and draft a Tourism Bill.

The significance of the sector and an exponential rise in tourist arrivals triggered a review, which found that it has become imperative to have a comprehensive policy to guide the sector including unregulated regional tourists.

Since its inception in 1974, the country has followed a policy of ‘high value, low volume’ tourism, which kept it well regulated.

In 2009, it changed to ‘high value, low impact’ as part of the government’s Accelerating Bhutan’s Socio-Economic Development initiative and set a target of 100,000 tourists a year by 2012 opening the country to regional tourists as well.

Until 2008, only 27,000 dollar paying tourists and 12,000 regional tourists visited the country. The number rose in 2014 to 133,480 tourists, the majority of which were regional tourists, 68,000. The government has pledged to increase tourist arrival to more than 200,000 by the end of this Plan.

Of the 1,700 tour operators, members said about 90 percent get only 30 percent of the tourist arrivals, while the rest goes to the top 10 operators.

The UN World Tourism Organisation, which had helped make the policy for the country earlier, recently pointed out the eminent tariff revision the country needed.

Some members also argued that the fixed tariff caused wrong marketing and awareness with the misunderstanding of all-inclusive nature of tariff.

Wangdue Councillor Tashi Dorji abstained from voting on the recommendation as he disagreed with it. He said it could lead to mass tourism.

“If certain things are good, even if they are old, should be continued,” he said, supporting the existing fixed daily tourist tariff of USD 250.

Few members voiced their concerns on mass tourism, undercutting and opening up venues of corruption in the industry.

The resolutions came through with a resounding majority of 19 votes from 20 members present, after its deliberations in two successive sessions.

The Council’s recommendations are not final. The tourism debate that took a decade to come to the fore is now in the government’s court.

The recommendations also call for improving infrastructure, human resource, and study the carrying capacity of the economy, environment and society among others.

Tshering Palden

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