The Bhutanese Leading the way.
The hotel industry is very worried these days as the deferral for Hotel and Tourism loans worth Nu 13.508 billion (bn) comes to an end on 30th June 2025.
These loans are for 503 loan accounts which are mainly hotel loans.
In the last round of loan deferrals, Hotel and Tourism loans worth Nu 20.981 bn for 1,240 loan accounts had been deferred till 30th June 2024 under Monetary Measures 4. After this came to an end, the Royal Monetary Authority (RMA) left it on a case by case basis between the Financial Institutions (FIs) and hotels.
The FIs went by a common Standard Operating Procedure agreed to by all the FIs and so the deferral was extended for 503 loan accounts worth Nu 13.508 bn for another year till June 2025 based on their payment capacity.
The Hotel and Restaurant Association of Bhutan (HRAB) just finished its Annual General Meeting a few days ago, and it was decided at the meeting that HRAB will request for one more year of deferral, given the low occupancy rates.
HRAB will also be asking to be allowed to get the Economic Stimulus Plan loans at 4% interest rate so that they can use the money to do repairs and other activities.
The FIs are also expected to discuss the matter soon in one of its upcoming meetings.
HRAB is in touch with the Ministry of Industry Commerce and Employment (MoICE) and it is likely the ministry will coordinate the meetings between HRAB, the FIs and RMA.
A banker that the paper talked to said, on one hand, the hotels have a valid stance on the issue of low occupancy rates, but on the other hand, if deferrals continue to be given then it is just postponing a problem that will only get bigger.
A HRAB member said that the best solution would be if there are policy changes to help increase tourism numbers. The member said that under the current scenario, the hotels that are suffering the most are three star and budget hotels, as the ones who pay SDF USD 100 will stay only in higher end hotels.
He said there are some tour operators currently using three star and budget hotels, but a tourist paying USD 100 SDF will demand and expect better quality, and so even this limited reprieve will die out.
Hoteliers’ views
A Hotelier said that the total number of tourists who visited Bhutan in 2024 was 145,065, out of which 94,280 were from India.
“Now, compare this to the number of tourists who visited just before the pandemic in 2018 which is 274,097 visitors and many of whom stayed for a much longer duration.”
The hotelier said the current number of tourists visiting Bhutan is still significantly lower than in 2018, and those who do visit tend to stay for much shorter durations due to policy changes.
“Unless these issues are addressed, Dzongkhags other than Thimphu, Paro, and Punakha will struggle to attract tourists, no matter how much we try to promote them. Most visitors, given their short stays, only manage to explore these three Dzongkhags.”
“We had high hopes from this government, and we acknowledge their efforts, but more needs to be done instead of waiting until 2027, as set by the previous government. If action isn’t taken soon, it may be too late for those in the tourism industry who are struggling with financial debts and trying to sustain their businesses,” the hotelier added.
Another hotelier said despite the fact that the hotel industry provides the country with the much needed foreign currency and dignified employment for people, the industry has not been understood well enough by the policy makers in-terms of its potential to provide greater employment opportunity and improve the overall economy of the country.
“While the government’s revenue may go up by increasing the SDF, but simply focusing on it could smother the potential of this industry to resolve pertinent issues such as economic growth and meaningful employment.”
The hotelier said that the government should control (not ban) the new construction of hotels as the chances of defaulting on loans is high with declining guest turnover for the number of hotels already struggling to run.
“So, the government should do a market capacity assessment to determine if more hotels would be productive in-terms of loan repayment, and risk of defaulting leading to blowing up of the financial bubble. This could be easily understood from the existing crisis that hotels are facing.”
A third hotelier said, “We do not even have money sometimes to pay our staff and I think that is part of the reason for the hotel industry having major issues with staff retention. The banks will be seizing the hotels since we do not have anything to pay them back with. 2023 was slightly better so we all had high hopes but the numbers kept getting worse after that.”
A budget hotel owner in Thimphu said, “We get around 2 to 3 customers a week, and we also have to pay our staff. I think that the issue with staff retention is because of the income of the hotel decreasing. If we have many guests visiting, we will not have the issue of staff leaving their jobs after only working for two or three months.”
The National Assembly (NA) sought feedback from the Hotel Industry on what can be done. Here the three-star hotels sent a submission to the NA. They said the biggest challenge is the Sustainable Development Fee (SDF).
“While we understand its long-term significance, the high SDF has drastically reduced tourist arrivals, severely impacting hotel revenues. If the government could consider temporarily waiving or revising the SDF—similar to how Thailand supports its tourism sector—it would help us recover and contribute more effectively to the economy.”
The three-star hotels said the Prime Minister has emphasized the importance of marketing, and they have actively promoted Bhutan alongside tour operators. However they said that without addressing the SDF issue, their efforts will not yield the desired results.
The three star hotels also said they are deeply concerned about the ongoing price undercutting within the industry. Last year (2024), the minimum hotel rate was Nu. 2,800, but in 2025 it has dropped to Nu. 1,800–2,000. “This trend is unsustainable and damages all of us,” said the hotels.
