Hoteliers worried about a Hotel Bubble as occupancy rate drops to 36 per cent in 2018

With the drastic increase in the number of hotels- low occupancy, selling rooms at lower rates and difficulty in repaying the loans are some of the major concerns for the hoteliers today, according to the Hotel and Restaurant Association of Bhutan (HRAB).

Today there are about 397 hotels in Thimphu region with 286 hotels in Thimphu and 199 hotels in Paro in addition to 90 hotels expected to come up in next two to three years in Thimphu and Paro alone.

In 2018, a total of 274,097 tourists visited the country with an average stay of 6.6 days. There were 499,2105 bed nights in total of which only 180,9040 beds were occupied. The occupancy rate for the hotels was 36 percent compared to 40 per cent in 2017.

The fear is that occupancy rates will drop even more as more hotels come up.

A HRAB board member, on the condition of anonymity, said, “In the tourism sector, the demand for Bhutan is almost restrictive in nature due to certain challenges. The demand for Bhutan has not increased substantially in the last few years because of certain factors like limited seats, poor marketing strategies, travel package and immigration issues.”

“The drastic increase in the number of hotels in the country especially in Thimphu and Paro is another important factor that has resulted in the low occupancy rate for hotels,” said the HRAB board member.

Another board member of HRAB said, “The occupancy rate will go further down. Despite so many hotels coming up, there has been no restrictions on the number of hotels from the Tourism Council of Bhutan (TCB)”.

The board member said, “When there is less number of tourists and more hotels in contrast, it is obvious that occupancy rate of each hotel is going to fall down and the value of the hotels will also drop. When our occupancy starts dropping down we are trying to hold on as much as possible but that brings down the value of our hotels.”

“We were worried that every year, the number of hotels are increasing, but today we are more worried because even private houses like duplexes and apartments are converted into rooms to accommodate tourists. There are incidences where travel agents keep tourists at their homes or apartment,” she said.

“In the first place, TCB is not restricting the number of hotel and now such illegal business is also not monitored and hoteliers feel that this is not right because as a legal entity we pay tax, we have certain standards and millions of our money is invested in maintaining these standards”, another HRAB member added.

A hotelier said, “There is going to be a hotel bubble that is going to burst in the next one or two years and some hotels are going to turn bankrupt because even if tourism council brings in drastic change in the policies to address or solve the issue, some hotels will still be bankrupt and so there is a desperate need for a change”.

He said, “There is a misconception where many believe that hoteliers are promoting mass tourism but I want to clarify that this is wrong because right now we are at that stage where our occupancy rate is as low as 36 per cent and on the other hand there are so many policies and regulations coming in which is only intended to bring in the high value tourists. What we would suggest is that firstly we should increase or improve our occupancy and then think about bringing in high value tourists.”

He further said, “People in the country are constructing hotels because their neighbors are constructing and the government is providing fiscal incentives indicating that people should invest in it as it is booming.”

Another hotelier said, “When I constructed the hotel, the first motive was to make the profit but in the current market we are not able to fill up the rooms. It is only in our country where we have policies which demand tour operators to book the hotels for tourist. In other countries, tourists can book the hotel with the help of tour operators or on their own. We don’t mind tour operators filling up hotel’s room but they are not able to give us occupancy in order to sustain ourselves”.

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One comment

  1. This hotel owners should not complain as they have received both finanxial and nonfinancial suport, which is effectively my taxes and my reaources. Even this paper ran an article how much each hotel receivd financial support from gov.

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