Only 25 hotels have so far qualified for the government’s loan interest subsidy under the Economic Stimulus Programme, despite applications from 284 properties across the country.
The approved hotels have received more than Nu 7.2 million in interest assistance from the Nu 850 million allocated for the ESP loan interest subsidy scheme. The relatively low number of beneficiaries has prompted concerns within the hospitality industry that the programme’s requirements may exclude some of the businesses most affected by financial distress.
According to data from the Royal Monetary Authority, the approved applicants comprise five two-star hotels, 16 three-star hotels and four four-star hotels. Fifteen of them are located in Thimphu, while Paro and Chhukha have four each. Two hotels in Gelephu have also been selected.
Under the programme, the government will cover four percentage points of the loan interest, while financial institutions will contribute another one percentage point. The support will be provided for one year beginning next month.
Hotels seeking the subsidy must first obtain a verification letter from the Department of Tourism. To secure the letter, an establishment must hold a valid star-rating certificate, be registered with the Tourism Registration System and possess a valid business licence.
Applicants are also required to be operational and maintain an active loan repayment record.
Hotel owners, however, argue that the conditions do not adequately reflect the situation of businesses that have been struggling since the pandemic. The issue was raised during the special annual general meeting of the Hotel and Restaurant Association of Bhutan held yesterday.
Some members said hotels established before the introduction of the Tourism Registration System had received technical clearances from the former Tourism Council of Bhutan. They called on the government to recognise these documents when assessing applications.
“When we constructed our hotels, there was no Tourism Registration System or anything similar. We only had the technical clearance issued by the then Tourism Council of Bhutan,” association chairman Ugyen Tenzin said.
He said the inclusion of several additional requirements had prevented many businesses from accessing the support, despite their having operated with official clearance in the past.
“We have also informed the director of the Department of Tourism. Why can’t the technical clearance be used as a supporting document to avail of the subsidy?” he said.
Other hoteliers said the programme offers limited relief to establishments that have already fallen behind on repayments.
Lily Wangchuk, founder and president of the 33 Soksoom Centre for Well-Being & Happiness, said many hotel owners could not benefit from the support because they had been unable to regularly service their loans.
“As many of us couldn’t pay back the majority of our loans, the subsidy support does not benefit us much,” she said.
She added that hotels must undergo an assessment by the Department of Tourism, obtain certification and complete registration on the Tourism Registration System before they can even be considered for the subsidy.
The Department of Tourism has defended the requirements, saying technical clearance alone does not establish whether a hotel remains operational.
The department’s director said some properties holding old technical clearance certificates were no longer functioning, while a number of non-operational hotels had also applied for assistance.
With the subsidy fund limited, he said priority had to be given to operational hotels facing genuine and serious financial difficulties. Bhutan has close to 400 hotels.
The hospitality sector has received several forms of government assistance since the COVID-19 pandemic, including loan deferments and repayment moratoriums. Despite these measures, the sector continues to carry a substantial debt burden.
RMA figures show that hotels had outstanding borrowings of more than Nu 24.5 billion spread across 1,113 loan accounts as of March this year. Three-star hotels accounted for the largest portion, with loans totalling about Nu 17 billion.
More than Nu 400 million in hotel loans have become non-performing, while nearly Nu 9.2 billion across 178 loan accounts remains under deferment.
The debate over the subsidy has highlighted the challenge of directing limited public funds towards viable businesses without excluding hotels whose financial difficulties have made it harder for them to meet the programme’s conditions.
