Undercutting on the rise, “clean” tour operators losing out

Undercutting is being practiced widely in the tourism industry with tour operators offering their clients cheaper rates than the fixed tourist tariff of USD 250 per head during peak season and USD 200 per head during off season.
Tour operators are supposed to offer only 10% discount which means that the tariff is USD 180 during off season and USD 225 during season but The Bhutanese learnt that tour operators are slashing prices as much as by 30%.This fails to maintain the government dictum of, ‘high value tourism and low impact footprints’.
“Unfortunately, while many tour operators abide by the regulations, some are there who have been abusing this system by offering lower rates than normally allowed; this has posed a great challenge to our national policy and it’s difficult for law-abiding tour operators to attract tourists,” said the chief executive officer (CEO) of Snow Lion Adventure, Nim Dorji.
Undercutting, insiders say, has been there for more than five years now and this business is on the rise.
The issue has now been put up to the association of Bhutanese tour operators (ABTO) by concerned tour operators and the vice chairman of ABTO, Kinley Gyeltshen, said that the association had a “thorough discussion” with TCB.
“But since there is no documented proof of undercutting, we couldn’t blacklist the illegal tour operators,” he added.
Proprietor of Smile Bhutan Dorji Gyeltshen pointed out that undercutting “is a form of curtail”. “It will have a serious impact on the economy as a whole and those who are in this business because in the long run it will lead to out flow of hard currency from the country.”
With their large control over the market, the tour operators can also persuade restaurants and hotels to offer special discounts thus enabling them to cut costs and expenditure of their clients.
General secretary of hotel association of Bhutan (HAB) Tashi Rabgyel said that a mechanism should be there to counter-check this practice as it also led to hotel quality being compromised.
Most tour operators feel that undercutting is literally cutting off their lifeline.
“I have been to Nepal a number of times and even to India but I couldn’t get a single client from Nepal or India based on the rates laid down by the government because some other tour operators from Bhutan were offering much lower rates than the government tariff,” said Deepak Tamang of Raven Tours and Treks.
President of guide association of Bhutan (GAB), Garab Dorji, said that “undercutting leads to compromise on quality of services and facilities including inferior tour guides”.
Several tour operators cited problems in their business dealings outside Bhutan as 30% of tourists visit Bhutan through Nepal and 20% through India, making it a sizeable 50%.
A majority of tourists coming from Nepal and India are visiting Bhutan through the tour operators who practice undercutting and a large share of the market is being exploited by a few through illegal means.
The CEO of Snow Lion Adventure also said that the tour agencies who spend on their websites hardly receive responses, and travelling abroad to market in international trade fairs is expensive.
Tour operators complained that under-cutters are able to deposit the exact amount (daily tariff juxtaposed with the number of days spent in the country) to TCB even when undercutting is involved. Therefore, there was no reason the practice would not prevail. TCB, meanwhile, is revising the Tour Operators’ regulation to tackle this issue by incorporating certain provisions/mechanisms. Further, TCB has prepared a legal framework to tackle this issue.
However, the officiating media focal person of tourism council of Bhutan, Phuntsho Gyeltshen, said that “the mandatory requirement of the tour operators is to deposit total tour payment to the council to ensure that such practices are prevented.”
“Technically, there is no undercutting since the total cost is deposited in advance with TCB to process visa and complete other formalities,” he said, adding that “ there is no proof on such practices being undertaken.”