TCB in final stages of a Tourism Policy that will also decide tourism tariff issue

The National Council’s (NC) review of the Tourism sector and particularly its observations on possibly reforming the current tariff structure has generated a lot of discussions both inside and outside the Tourism sector.

However, the NC’s review and recommendations, while generating debate and new ideas will not be legally binding on the government, which has to take the final call.

The real action of coming up with a comprehensive Tourism Policy, that would take the final call on the tariff structure is taking place in the Tourism Council of Bhutan (TCB) office.

Director of TCB, Chhimmy Pem said, “Earlier this year we requested the World Bank for help and they in turn appointed a reputed international tourism consultancy company called Solimar International.”

In the draft report by Solimar there are three options for the tariff of which one is keeping the status quo, another is making minor changes to it and the third is to completely do away with it by keeping only the USD 65 royalty for the government.

She emphasized that Solimar’s report will not be the policy per se but it will present various strategies to strengthen and improve various aspects of tourism and also various options on issues like the Tourism tariff.

A draft report is ready which will be subject to a few changes after which it will be presented to the TCB Council.

The TCB Council Chaired by Prime Minister, with the Minister of Economic Affairs as the Vice Chair and members like the Home Secretary, Agriculture Secretary, GNHC Secretary, Bhutan Chambers of Commerce and Industry (BCCI) President, Association of Bhutanese Tour Operators (ABTO) President, Hotel and Restaurants Association (HRAB) President, Guides Association of Bhutan (GAB) and the Director as the member secretary will finalize the policy document based on the Solimar report.

Given the importance of the issue it may even go to the cabinet from the Council for a final cabinet discussion.

While the NC’s recommendations, many of which go beyond the tariff issue into coordination, infrastructure, spread of tourists, local benefits etc, may not be legally binding, it will receive a hearing from the government.

Lyonchhen Tshering Tobgay said, “We will look at the NC’s report carefully and the civil servants will closely study it.” The PM said that NC’s review report would also be sent to the TCB.

Lyonchhen said that while various sectors had various view on the tariff issue the final decision by the government will be taken in the larger national interest.

The Director emphasized that Solimar has been working with the TCB and consulting all the stakeholders in coming up with the report. The final Document, according to the TCB Director will not only look at tariff which is just of the many issues but also strategies in various areas like capacity building, product development, regulations etc.

The government so far has not taken a stand on the tariff issues as there is strong constituency to play it safe and keep the status quo that ABTO is also arguing for.

However, on the other hand, there are those within the government who want to make changes in the current tariff system.

In addition to this the last two years has seen active and at times open lobbying by the BCCI, HRAB, GAB, Handicrafts Association, Taxi Drivers Association and the Airlines to make the tariff system more flexible.

The BCCI was in the process of drafting a report supporting the liberalization of the tariff but gave it up as the NC was doing a comprehensive review.

All of the above organizations want the tariff to be more flexible to not only get in more numbers of dollar paying tourists but also increase their numbers during the lean months.

The big argument used in favour of liberalization is how the special ‘Thai offer’ in 2014 worked in increasing tourists during the lean months where Thai tourists only had to pay some royalty.

The feeling among them, also reflected in the NC review, is that some politically influential and also vocal tour operators have been calling the shots in an industry that has many more stakeholders and investors.

On the other hand ABTO members feel that doing away with the minimum tariff system would hit at the very foundations of the current tourism system in Bhutan, make tour operators lose business and give priority to numbers over quality.

They also point out that Bhutan does not have the infrastructure capacity to deal with large numbers of tourists.

The comprehensive 26 page review by the NC, while not being legally binding, has played a major catalyst role in bringing up the issue of tariff reform on the center stage.

What could create problems for some tour operators is a recommendation by the NC to the Royal Audit Authority (RAA) to do an audit on the practice of undercutting where tourists are actually brought in for less than the actual minimum tariff.

Bhutan’s original tourism policy which is still followed in spirit today was ‘High Value and Low Volume’ which in 2009-2010 was changed to ‘High Value and Low Impact’ in line with McKinsey’s recommendations and the then government’s aim to get in more tourists.

The first idea to liberalize Bhutan’s tourism tariff came from McKinsey in 2010 when it suggested the idea to the former government to increase the number of dollar paying tourists. The former government instead increased the peak season tariff from USD 200 to USD 250 after a show of hands at a meeting of mainly tour operators.

The BCCI Secretary General Phub Tshering said that BCCI would welcome the NC report and any other measures that look at the interests of big and small tour operators, guides, hotels, airlines, shops, restaurants, taxi drivers, handicraft shops and the economy in general.

However, despite all of the above some government officials feel that more than the tariff issue the main emerging challenge for Bhutan’s tourism sector is the rapid rise of non-royalty paying regional tourists who are threatening to undermine Bhutan’s exclusive tourism brand.

Bhutan got 47,610 dollar paying tourists in 2011 which went up to 68,081 in 2014.

This year until October the figure is 47,628.

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