Confusion galore: who will benefit from the new tourism policy, tour operators or hoteliers?

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Many say they’ll wait and see

Dechen Dolkar

To reduce its expenses, fearing a drop in tourism revenue, a four-star hotel recently released more than a dozen employees on unpaid leave from August 1, for a period of one year.

Citing uncertainties in the hospitality industry due to the increase in sustainability fees to US$200, the head of the company which runs around four hotels decided to lay off about 100 employees, who would be hired on daily wages if the “situation” improves. .

Bhutan will officially open its borders to tourism from September 23. But uncertainties about what will happen fill the air of tourism. Many are unsure 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 of the Tourism Board of Bhutan (TCB) to allow hotels to operate as tour operators.

The uncertainty is whether hotels or tour operators would lose or benefit from the new policy. At present, only 629 out of more than 3,000 licensed tour operators have applied for validation and assessment of readiness for the opening of tourism. Only 126 hotels and 92 host families 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 being transformed into offices and private apartments while some lower the shutters.

Confusion among hoteliers

The hospitality industry is in a mix. They do not know if they would benefit from the new SDF policy or if they would be serious losers. Chairman of the Hotel and Restaurant Association of Bhutan (HRAB), Sonam Wangchuk, said the association was unsure whether it would win or lose.

Many, including the association, are waiting for the borders to open to see the repercussions. Sonam Wangchuk said they will only be able to find out after the tourists arrive. The president said he told hoteliers not to sell at a minimum rate and to maintain standard rates.

Under the old minimum daily rate (MDR) agreement, hoteliers are held to ransom by tour operators. Tour operators negotiated with hoteliers to get the cheapest rates. Having to depend on tour operators, hoteliers have reduced their rates to earn income and stay in business. There are also cases where the 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 book 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 the tour operators say

Tour operators, meanwhile, believe the hospitality industry will suffer when they have to compete to attract tourists willing to pay more than the $200 SDF. Tour operators would have to sell above 200 USD as the fee would be paid to the government. An operator selling for 400 USD should manage the cost of the guide, trip, food and accommodation within the additional 200 USD. “It will embarrass the hotels because the tour operators negotiate. The cheapest hotel would get the most customers as tour operators try to cut costs,” he said.

A board member of the Association of Bhutanese Tour Operators (ABTO) said that around 64% of tourists go through tour operators globally. “There is no clarity. If hotels are to operate as operators. It will be confusing,” he said.

Letting hoteliers and tour operators manage tourists, some say, will ensure a level playing field. For example, under the previous minimum daily package, a tourist received a hotel, guide, transportation, and meals while limiting choice. When a tourist is taken to a restaurant, the tour operators negotiate with the restaurants, because the room for maneuver is limited. Discounts led to compromises. A buffet dinner costing Nu 700 per person is negotiated at Nu 400 with reduced food items. “It has an impact on service,” said one hotelier.

The new SDF, said one operator, would offer tourists a choice. “If a tourist wants to have meals for 1000 Nu, the restaurant will deal accordingly and if the tourist opts for 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 radical, the price can be charged accordingly. “Tourists were reluctant to pay for extra services because they think everything is included in the package. Therefore, they don’t experience anything special,” said a tour operator.

For example, if a large group of tourists visits a farm, some farm owners are reluctant to provide the services because they do not make any profit from it. The operator said farms can charge tourists to visit their property.

A new concern

Some tour operators fear that tour operators from outside the country may also operate and send tourists to Bhutan. “They will pay taxes, apply for visa online and use local agents after giving commissions,” one said. “It will bring us back to square one if not make it worse.”

Tour operators are convinced of the policy of increasing the SDF to 200 USD, but fear that it is possible to present and label Bhutan as a budget destination, which goes against the policy of high tourism of range.

It has been learned that regional agents are already advertising holidays to Bhutan for 280 USD. A tour operator said that while underselling in the tourism sector was rampant in the past, it could get worse as there are no requirements for tour operators.

Meanwhile, big industry players who run 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.

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