Many say they will wait and see
To cut costs and fear tourism revenue would fall, a four-star hotel recently laid off more than a dozen employees who were on a year’s unpaid leave from August 1.
Citing the uncertainties in the hotel business due to the $200 increase in sustainable development fees, the head of the company, which operates around four hotels, decided to lay off about 100 employees to be hired on the daily wage system if the “situation” improves .
Bhutan will officially open its borders to tourism from September 23. But uncertainties about what will happen fill the tourism air. Many are confused as to whether the new policy would benefit them or hinder their business.
The big question is who – tour operators or hotels – would benefit or lose. This stems from the decision by the Tourism Council of Bhutan (TCB) to allow hotels to act as tour operators.
The uncertainty is whether hotels or tour operators would benefit or lose from the new directive. To date, only 629 out of more than 3,000 licensed tour operators have applied for validation and evaluation for tourism’s opening maturity. As of July 3, only 126 hotels and 92 host families have applied for the validations.
While some hotels are still undergoing renovations to prepare for the change, others, including some three-star hotels, are being converted into offices and private residences while some are pulling down the shutters.
The hotel industry is mixed. They are unsure whether they would benefit or lose heavily from the new SDF policy. The Bhutan Hotel and Restaurant Association (HRAB) chairman Sonam Wangchuk said the association was not sure if it was going to win or lose.
Many, including the association, are waiting for the borders to open to see the effects. Sonam Wangchuk said they won’t know until the tourists come. The chairman said he had told hoteliers not to sell at a reserve price and keep standard prices.
In the previous minimum daily rate regulation (MDR), hoteliers are held for ransom by tour operators. Tour operators negotiated with hoteliers to get the best rates. Hoteliers had to rely on tour operators and reduced their prices to earn some income and stay in business. There are also cases where tour operators have not paid the hotels.
One hotelier said the tide would turn if they were able to sell their property. “If tourists book our hotels for 10 days to see Bhutan and ask us to organize a guide or vehicles, we could negotiate with the tour operators. If it’s not profitable, we’ll do it ourselves,” she said. “This will solve the problem of bad debts between hotels and tour operators,” said one hotelier.
What tour operators say
Tour operators, on the other hand, believe the hotel business will suffer if they have to compete for tourists willing to pay more than the $200 SDF. Tour operators would have to sell over $200 as the fee would be paid to the government. An operator selling for $400 would have to cover the cost of guiding, travel, food and lodging within the additional $200. “This will hamper hotels as tour operators would negotiate. The cheapest hotel would receive the most guests as travel agencies try to cut costs,” he said.
A board member of the Association of Bhutanese Tour Operators (ABTO) said around 64 percent of the world’s tourists come through tour operators. “There is no clarity. If hotels are to act as operators. It’s going to be confusing,” he said.
Some say that having hoteliers and tour operators churn tourists ensures a level playing field. For example, in the previous minimum per diem, a tourist was provided with a hotel, guide, transportation, and meals while at the same time limiting choices. When a tourist is brought to restaurants, the tour operators negotiate with restaurants because the scope is limited. Discounts led to compromises. A dinner buffet costs 700 nu per head and is negotiated with reduced meals to 400 nu. “It affects the service,” said one hotelier.
The new SDF, an operator said, would offer tourists choice. “If a tourist wants meals for 1,000 Nu, the restaurant will provide accordingly, and if the tourist chooses instant noodles, that is also possible.”
Another tour operator said that with the new SDF, tour operators will have rooms to play with. If tourists want to experience something unique and drastic, the price can be calculated accordingly. “Tourists were reluctant to pay for additional services, thinking that everything is included in the package. So they don’t experience anything special,” said one tour operator.
For example, when a large group of tourists visit a farmhouse, some farmhouse owners hesitate to provide the services because they get nothing. The operator said farms might charge fees for tourists wanting to visit their property.
A new concern
Some tour operators fear that tour operators could also operate outside the country and send tourists to Bhutan. “They pay taxes, apply for visas online, and use the local agents after giving commissions,” one said. “This will put us back where we started, if not worse.”
Tour operators are confident in the policy of raising the SDF to $200 but are concerned that it is possible to present and label Bhutan as a budget destination, defeating the policy of high-end tourism.
It became known that regional agents are already offering vacations in Bhutan for 280 USD. One tour operator said price undercutting in the tourism sector has been rife in the past but could get worse as there is no obligation on tour operators.
Meanwhile, major industry players who run their own travel agencies and hotels expect to benefit from the new guidelines. However, many in the hotel and tourism industry say they will have to wait until December 2023 to see the impact of the new tourism policy.