The Foreign Minister Lyonpo Tandi Dorji meets India’s MEA Minister Dr S. Jaishankar

Govt achieves balancing act on Regional Tourism Policy with Hotels and GoI

The government in a story reported by The Bhutanese in 26th October 2019 announced the Draft Regional Tourism Policy and Draft Regional Tourism Management Guidelines to better regulate and manage the growing number and impact of mass regional tourism.

Since then, the government has had to do a delicate internal and external balancing act on the issue.

Internal balancing act

The internal balancing act was primarily with the Hotel Industry which has seen an explosion in the number of hotels in the last few years combined with already low occupancy rates even in the peak tourist season.

The initial regional tourism draft policy and guideline looked at a Sustainable Development Fee (SDF) of around half of that of tariff paying tourists (USD 65) which would be around Nu 2500 to Nu 2,000 a day.

However, according to sources, after concerns expressed by the Hotel Industry the latest draft proposal looks at a one time SDF fee which is 35 percent of the USD 65 coming to around Nu 1500 – Nu 1600 per person. The figure is, however, not finalized.

The idea for the government is that it is important to introduce the SDF in the first place and it can accordingly be revised depending on the ground situation.

The government also does not want to drastically bring down the numbers and hurt the Hotel Industry which has sunk in billions in investments in the last few years.

The Hotel and Restaurant Association Chairman (HRAB) Sonam Wangchuk, with 186 Hotels as its members, said that while the HRAB understood the need for a Sustainable Development Fee (SDF) for regional tourists the main concern is on the amount to be levied.

The HRAB Chairman who is also on the Tourism Council of Bhutan said that the HRAB had recommended a one time SDF fee of Nu 300 to Nu 500 per tourist.

He said that there are already reports of hotels in the east and south defaulting on hotel loans and if the fee is too high and there is a drastic drop in numbers then increasing hotel loan defaults could happen in areas like Thimphu, Paro, Phuentsholing, Punakha and Bumthang where most of the hotels are concentrated.

He said that even now during the peak season time occupancy rates in the hotels are already at around 35 percent which is very low. He said this would get more challenging as around 100 Hotels are under construction mainly between Paro and Thimphu and so Bhutan would have around 400 hotels, homestays and tourist accommodations by the end of the year.

A tourism insider said that the Hotel Industry itself is split as the higher end hotels want regulations while some three star hotels and most budget hotels are not in favour of too many regulations.

Apart from the SDF the government is thinking of an online permit processing fee of Nu 500 per permit. As per the draft policy it will be compulsory for regional tourists to process for an online permit.

The TCB will also consult with and ask the RSTA to come up with an appropriate amount that foreign vehicles entering Bhutan will have to pay.

Originally some proposed to completely stop foreign vehicles but a more balanced stance of allowing foreign vehicles but with regulations and fees was adopted.

The RSTA will come up with the specifications of what type of vehicles will be allowed and with what fees.

Regional Tourists will also have to come via a Bhutanese tour operator and have a Bhutanese tour guide.

Here, the HRAB Chairman said that the hotels should also be allowed to handle tourists like tour operators but they have no objections on the need to have guides. He said the other prime concern for hotels apart form the quantum of SDF is that their money can get held up by tour operators like in the case of tariff paying tourists.

He said whatever the arrangement the government should ensure that tourists can pay the hotels directly instead of having the tour operators in between.

“Hotels who invest Nu 30 to 40 mn should not be dictated to by tour operators who invest Nu 500,000 to Nu 1 mn,” said Sonam.

Unlike the more cautious HRAB, the Association of Bhutanese Tour Operators (ABTO) and Guides Association of Bhutan (GAB) are much more supportive of the government’s various proposals to regulate regional tourism.

However, even their support comes with qualifiers. ABTO Executive Director Sonam Dorji said, “Overall, we welcome the regulations but we need to go into the details and we need to hear from Lyonpo Tandin Dorji (Chairman of TCB) on the meeting in Delhi.”

The ABTO ED said that for the tour operators apart from the regional tourism regulations the other issue was on the entry and exit of tariff tourists not being allowed anymore from Gelephu and Samdrupjongkhar on the Indian side.

He said the GoI had given an extension till December but the tour operators need to hear what concrete steps will be taken next year.

In an earlier interview the Foreign Minister had clarified that Bhutan had identified only one entry and exit point for tourists to the Indian side which is Phuentsholing and so the issue only cropped up once the Indian side in Assam started securing its entry and exit points due to developments within Assam.

The ABTO ED said that the regional tourism policy and guidelines need to be seen from the perspective of better management of the tourists.

One aspect of the draft policy and guidelines is that regional tourists would have to stay in TCB certified hotels as currently while tariff paying tourists have to stay in three star hotels and above there is no such rules for regional tourists.

Here the TCB is looking at coming up with two star hotels which would require the many current budget hotels to upgrade to certain standards and this category of hotels would be allowed to keep both regional and even tariff paying tourists. Hotels below this would not be allowed to keep tourists.

The HRAB Chairman said that here the HRAB is supportive and he has even told his members that the hotel industry must be willing to put forward certain investments to get returns. The only concern and request being that the upgrades should not be external structures but internal ones like linen, beds etc.

He said that the HRAB is also supportive of the need to regulate regional tourist vehicles coming into Bhutan.

External sensitization

On the external front the main partner to be sensitized to Bhutan’s upcoming regional tourism regulations is the Government of India.

According to a reliable source Lyonpo Tandi Dorji informed the Indian side officially on the upcoming regulations in his high level meetings in Delhi with Indian ministers like the Minister for External Affairs Dr S. Jaishankar and the Home Minister Amit Shah.

The source said that the meetings went well and the Indian side showed a positive response.

The External Affairs Minister in a Twitter post on his Twitter account said, “Warmly welcomed as always FM Bhutan, Dr Tandi Dorji. A very good conversation on our unique bilateral ties.”

However, even before the formal intimation there was already a lot of back channel communication going on between the two governments through both formal channels and also less formal channels like the India-Bhutan dialogue.

One advice from former Indian officials and diplomats in the India-Bhutan dialogue was to not a spring a surprise on New Delhi but to keep them informed on what was coming.

A Bhutanese official in the know said that the foreign minister taking up the issue in Delhi was not to seek permission but to inform the other side well in advance as it would also involve and impact tourists coming in from India.

However, whatever, anyone says it is crucial for Bhutan to get India along on this policy to ensure that there is no misunderstanding and that Indian officials are sensitized adequately on the pressing issues and impact of mass regional tourism in Bhutan.

This is because Bhutan’s free trade agreement or Agreement on Trade, Commerce and Transit with India allows the movement of people and vehicles between the two countries.

From earlier communications between the two sides it is clear for now that the Indian government at the highest levels understands Bhutan’s concerns and are not against the draft regional tourism policy and guidelines.

There is a sympathetic ear in New Delhi on Bhutan’s concerns of its limited carrying capacity, ensuring better experience for regional tourists, protecting its high value and low volume tourism policy and avoiding other kinds of issues.

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