The Hotel Question

For a long time, Bhutan had the high value and low volume tourism policy, but things changed when Bhutan hired McKinsey during the time of the first government.

The McKinsey team which had a lot of young Indian graduates studying and prescribing solutions to accelerate Bhutan’s economic development recommended promoting Bhutan in India and the region targeting the high income crowd.

The then TCB went on a whirlwind tour of India promoting Bhutan and while we did get the high income Indians, we also ended up getting the mass tourism crowds of Darjeeling and Kalimpong which were at the time shut for months due to the Gorkhaland demand.

At the same time, the first government responding in part to concerns of room shortages and in part to grow the tourism industry came out with major fiscal incentives, including long income tax and import tax breaks.

The combination of mass tourism and fiscal incentives led to a dramatic surge in hotels being built. This was fine as long as Bhutan was getting the mass tourism crowd, but mass tourism was starting to extract a major cost on Bhutan’s peace, cleanliness, infrastructure and resources.

Bhutan was also being sold cheaper than many mass tourism sites in India like Goa, Darjeeling etc.

If mass tourism was allowed to continue it would have permanently altered the very face and character of Bhutan.

Then the pandemic hit which impacted tourism and later new policies came into place in reaction to the mass tourism of the past.

Before hotels ask for help it must be admitted that there is an over capacity of hotels, especially in Thimphu and Paro.

However, at the same time it must also be admitted that the over capacity in hotels happened due to the policies and incentives that started in the time of the first government, where a clear signal was given by the then government to build more hotels.

Given the lack of economic opportunities and diversification in Bhutan, too many people got into the hotel sector.

Today the hotel sector stands at an important crossroad. With more than Nu 13 bn in deferred loans it is no longer a hotel problem but now a national problem that threatens other sectors of the economy if it is not resolved.

 As a Buddhist country it is imperative that Bhutan find a ‘middle path’ where we do not go back to mass tourism, and at the same time come up with enough sustainable numbers and policies to support the existing numbers of hotels.

Compromise is the oil that makes governments go.
Gerald R. Ford