Many say they will wait and see
To cut costs, fearing a decline in tourism revenue, a four-star hotel recently raised more than a dozen employees on unpaid leave since August 1, for a year.
Citing uncertainties in the hotel industry due to the sustainable development tax hike to US $ 200, the head of the company that manages about four hotels has decided to send away about 100 employees, to be hired on a daily wage system if the “situation” had improved.
Bhutan will officially open its borders to tourism from 23 September. But uncertainties about what will happen fill the air of tourism. Many are confused as to whether the new policy will benefit them or hinder their business.
The big question is who: Tour operators or hotels would benefit or lose. This stems from the Tourism Council of Bhutan (TCB) decision to allow hotels to function as tour operators.
The uncertainty is whether hotels or tour operators would lose or benefit from the new policy. To date, only 629 of the more than 3,000 authorized tour operators have submitted an application for validation and evaluation for availability to open tourism. Only 126 hotels and 92 homestays have requested 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 converting into private offices and apartments while some are rolling down their shutters.
Confusion among the hoteliers
The hotel industry is in a mixed bag. They are unsure whether they would benefit from the new SDF policy or lose severely. Hotel and Restaurant Association of Bhutan (HRAB) president Sonam Wangchuk said the association is unsure whether it would gain or lose.
Many, including the association, are waiting for the opening of borders to see the repercussions. Sonam Wangchuk said they will only know after tourists start arriving. The president said he told hoteliers not to sell at a minimum rate and to keep the standard rates.
In the previous agreement with the minimum daily rate (MDR), hoteliers are held hostage by tour operators. Tour operators have negotiated with hoteliers for the cheapest rates. Having to depend on tour operators, hoteliers have cut their rates to earn some money and stay in business. There are also cases where tour operators have not paid for hotels.
One hotelier said things would change if they could sell their property. “If tourists book our hotels for 10 days to see Bhutan and ask us to arrange a guide or vehicles, we could negotiate with the tour operators. If it’s not profitable, we’ll do it ourselves, “he said.” This will solve the bad debt problem between hotels and tour operators, “said one hotelier.
What the tour operators say
Tour operators, on the other hand, believe the hotel industry will suffer when it has to compete for tourists willing to pay more than USD 200 SDF. Tour operators would have to sell above USD 200 as the commission would be awarded to the government. An operator selling for USD 400 would have to manage the costs of driving, travel, room and board within the extra USD 200. “This will hinder hotels as tour operators would bargain. The cheapest hotel would receive the most guests as tour agents try to save costs, “she said.
A board member of the Association of Bhutanese Tour Operators (ABTO) said that around 64% of tourists arrive via tour operators around the world. “There is no clarity. If hotels are to operate as operators. It will be confusing, “he said.
Letting both hoteliers and tour operators take care of tourists will, according to some, ensure a level playing field. For example, in the previous minimum day package, a tourist was provided with a hotel, a guide, transport and meals, also limiting the choice. When a tourist is brought to the restaurant, tour operators contract with restaurants, because the margin of play is limited. Discounts have led to compromises. A buffet dinner that costs Nu 700 per capita is negotiated at Nu 400 with reduced food items. “This has an impact on the service,” said one hotelier.
The new SDFs, an operator said, would give tourists a choice. “If a tourist wants to have meals for Nu 1,000, the restaurant will cater accordingly and if the tourist opts for instant noodles it is also possible.”
Another tour operator said that with the new SDFs, tour operators will have rooms to play. If tourists want to experience something unique and drastic, the price can be charged accordingly. “Tourists were reluctant to pay for additional services as they think everything is included in the package. So, they don’t experience anything special, “said one tour operator.
For example, if a large group of tourists visit a farm, some farm owners are reluctant to provide the services because they don’t make any money. The operator said that farmhouses can charge fees for tourists who wish to visit their property.
A new concern
Some tour operators fear 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 it doesn’t make things worse.”
Tour operators are convinced of the policy of raising the SDF to USD 200, but are concerned that it is possible to tackle and label Bhutan as an economic destination, defeating the policy of high-end tourism.
It has been learned that regional agents are already advertising holidays in Bhutan for 280 USD. One tour operator said that although undercutting in the tourism sector was rampant in the past, it could get worse as no tour operators are required.
Meanwhile, big industry players running their own travel agencies and hotels expect them to benefit from the new policies. However, many in the hotel and tourism sector say they will have to wait until December 2023 to see the impact of the new tourism policy.