Many say they will wait and see
To cut costs, fearing reduced tourism revenue, a four-star hotel recently put more than a dozen employees on unpaid leave starting Aug. 1 for a year.
Citing uncertainty in the hotel business due to increased sustainability fees of up to US$200, the head of the company, which operates about four hotels, decided to send around 100 employees to be employed on a daily wage system if the “situation” improve.
Bhutan will officially open its borders to tourism from September 23. But uncertainty about what will happen fills the tourist air. Many are confused as to whether the new policy will benefit them or hinder their business.
The big question is who would win or lose, the tour operators or the hotels. This stems from the decision of the Tourism Board of Bhutan (TCB) to allow hotels to function as tour operators.
The uncertainty is whether hotels or tour operators will lose or benefit from the new policy. To date, only 629 out of over 3,000 licensed tour operators have submitted an application for validation and assessment of readiness to open tourism. Only 126 hotels and 92 lodgings have applied for the validations as of July 3.
Meanwhile, 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 apartments, while some are downing the shutters.
Confusion among hoteliers
The hotel industry is mixed. They are not sure whether they will benefit from the SDF’s new policy or lose badly. Hotel and Restaurant Association of Bhutan (HRAB) chairperson Sonam Wangchuk said the association was not sure whether it would win or lose.
Many, including the association, are waiting for the borders to open to see the consequences. Sonam Wangchuk said they will be able to know only after the tourists start coming. The chairman said he had been telling hoteliers not to sell at minimum prices and to maintain standard prices.
Under the earlier Minimum Daily Rate (MDR) agreement, hoteliers were held to ransom by tour operators. Tour operators bargained with hoteliers for the cheapest prices. Because they had to depend on tour operators, hoteliers lowered their prices to earn some income and stay in business. There are also cases where tour operators have not paid the hotels.
A hotelier said things would turn around if they could sell their property. “If tourists book our hotels for 10 days to see Bhutan and ask us to provide them with a guide or vehicles, we can negotiate with the tour operators. If it is not cost effective, we will do it ourselves,” she said. “This will solve the problem of bad debts between hotels and tour operators,” said a hotelier.
What tour operators say
Tour operators on the other hand believe that the hotel business will suffer when they have to compete for tourists willing to pay more than USD 200 SDF. Tour operators will have to sell above 200 USD as the fee will be given to the government. An operator selling for USD 400 will need to manage the cost of tour guide, travel, food and accommodation within the additional USD 200. “It will hamper the hotels as the tour operators would be bargaining. The cheapest hotel would receive the most guests as travel agents try to save costs,” he said.
A board member of the Association of Bhutan Tour Operators (ABTO) said about 64 percent of tourists come through tour operators in the world. “There is no clarity. If the hotels are to work as operators. It will be confusing,” he said.
Some say that letting both hoteliers and tour operators cater to tourists will level the playing field. For example, the previous minimum day package scheme provided the tourist with hotel, guide, transport and food while limiting choice. When the tourist is taken to a restaurant, the tour operators bargain with the restaurants because the playing margin is limited. Discounts lead to compromises. Buffet dinner costing Nu 700 per person is negotiable to Nu 400 with discounted food items. “It affects service,” said a hotelier.
The new SDF, an operator said, will provide choice to tourists. “If a tourist wants to eat for Nu 1000, the restaurant will cater 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. If tourists want to experience something unique and drastic, the price can be charged accordingly. “Tourists are reluctant to pay for additional services because they think everything is included in the package. Therefore, they do not experience anything special,” said a tour operator.
For example, if a large group of tourists visits a farmhouse, some farmhouse owners are reluctant to provide the services because they do not earn anything from it. The operator said the country houses can charge for tourists who want to visit their property.
A new concern
Some tour operators are concerned that tour operators outside the country may also operate and send tourists to Bhutan. “They will pay taxes, apply for a visa online and use local agents after giving commissions,” said one. “This will bring us back to square one, if not make the situation worse.”
Tour operators are convinced of the policy to increase the SDF to USD 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 was understood that regional agents are now advertising Bhutan holidays for USD 280. A tour operator said that while price gouging in the tourism sector has been widespread in the past, it could get worse as there is no requirement for tour operators.
Meanwhile, major industry players running their own travel agents and hotels expect to benefit from the new policies. However, many in the hospitality and tourism industry say they will have to wait until December 2023 to see the impact of the new tourism policy.