The practice undermines the high value-low impact policy
Although the Tourism Council of Bhutan (TCB) suspended a licence of a tour operator last month for allegedly undercutting the minimum daily tariff set for tourists, many tour operators in the country are surprised about TCB hushing the issue.
The license of travel agent, Amen Bhutan, was suspended from November 1 this year for 12 months. When media approached the TCB, they denied cancelling any licenses then. Even office bearers of the Association of Bhutanese Tour Operators (ABTO) denied the suspension.
A tour operator then took to social media and through an anonymous account questioned why the TCB was withholding the information.
“Amen Bhutan has not only done undercutting but also sent his lowest quotation to almost all the agents in India, Nepal and abroad in his official letterhead,” the post claimed.
A tour operator, on the condition of anonymity, alleged that Amen Bhutan is quoting USD 111 for three nights to tourists. “Most of us all sell at USD 240 to 225 per night.”
He explained that the actual charge is USD 250 during peak season and USD 200 in lean season. “From this, 10 percent is overseas agent commission.”
The money, according to the tour operator, is directly deposited to the TCB’s USD account and then only TCB endorses the visa. “If TCB is concerned, they can curb undercutting from here.”
Another tour operator also alleged that TCB is not doing enough to curb undercutting in the sector, as this is not the first time a tour operator was found doing illegal business. “If TCB was serious, it could have deterred other tour operators from committing the crime,” he said. “It is happening time and again because they know they will not be penalised.”
A seasoned tour guide said that undercutting means selling at a low cost, which undermines the high-value low impact policy and affects the foundation of the industry, which is to achieve maximum benefits from fewer tourists and uphold a high-value tourism principle. “It also affects taxation as it gives room for tour operators to produce fake bills.”
He said that those tour operators, who adopt the method, provide poor service to tourists, thereby affecting the market.
A tour operator, who is new in the industry, said that while companies that bring in 400 to 500 guests pay Nu 600,000 as tax, companies that bring in more than 1000 tourists pay much lesser. “A system called money parking facilitates tax evasion,” he said.
Money parking he said is also called excess payment, where companies keep their hard currency in the TCB account. “When the companies have USD in 100,000, it promotes undercutting, no one checks the actual rate but the hoarded money.”
He said that it helps in tax evasion, as companies provide fake bills during taxation and they do not have an amount in their actual account.
A female tour operator, who also requested anonymity, said that until TCB or the government is serious about undercutting, it will be rampant, as tour operators know how to manipulate.
She cited an example of how a tour operator, who was found guilty of undercutting and manipulating visa, now operates in his wife’s name. “I will not be surprised if Amen Bhutan is back in the market, operating in the name of a relative because that is the trend.”
She said it is not fair to blame one person, as TCB encourages the practice. “There are many tour operators who adopt undercutting and TCB and immigration are least bothered.”
Tour operators said that until TCB and the government impose huge penalty on defaulters, grade the crime as a criminal offence where the tour operator should be taken to court and penalised and TCB exposes the defaulters, undercutting would flourish.
TCB refused to provide information, saying that they suspended the license of Amen Bhutan as per the rules.
The secretary general for ABTO, Sonam Dorji, said that he heard about the license suspension but there was no formal communication from TCB. When asked if TCB and ABTO should be communicating on such issues, he said, “Ideally we should”.
He directed Kuensel to talk to ABTO board about the undercutting issue. ABTO’s chairman, Rinzin Ongdra Wangchuk, said he discussed the matter with board members and decided not to comment on it. “There is an understanding that we will not discuss undercutting as an issue, as all requirements are met.”
Meanwhile, Amen Bhutan’s tour operator said he doesn’t want to comment, as he is on his way home from China. “TCB sent me emails about the suspension of my license and since I don’t have guests, I didn’t bother.”
Impacts of undercutting
The National Council, in their 16th session, submitted a review report on tourism policy and strategies on December 21, 2016, where it states that although it is not officially acknowledged, there are sufficient sources of information to indicate rampant undercutting in the tourism sector.
It states that anecdotal evidence indicates that through undercutting, Bhutanese operators, in collusion with foreign partners, sell Bhutan for as low as US$136- US$ 146 per person per 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. Eventually, it leads to Bhutan being seen as a cheap destination and not a high-value destination.”
The NC’s report also states that there are concerns that some of the so-called tour operators in Bhutan merely act as ground handling agents for larger tour companies based abroad and actively engage in undercutting the others. “This leads to leakages of profit and foreign exchange and gradual loss of control of tourism development in the country.”