Bhutan’s three-star hotel sector is rallying together to address mounting financial and sustainability challenges by urging the government to revise the current tourism fee structure. In a strategic move, hotel owners are advocating for the replacement of the daily Sustainable Development Fee (SDF) with a one-time visa fee for tourists, a change they believe could revitalize their struggling businesses.
The proposal emerged during a pivotal meeting held on Tuesday, where hotel owners collectively voiced their concerns over plummeting occupancy rates and escalating financial pressures. With a significant reliance on Indian tourists—a demographic that favors more affordable accommodations—the sector is facing a steep decline in visitor numbers.
Tshering Wangdi, owner of a prominent three-star hotel in Thimphu, highlighted the critical role Indian tourists play in their business. “Indian tourists make up a large portion of our clientele, and we are seeing a sharp decline in numbers. The current SDF is discouraging them from visiting Bhutan,” Wangdi explained. Despite intensified marketing efforts, hotels have witnessed a dramatic drop in occupancy compared to the previous year.
The financial strain is palpable. As of September this year, Bhutan welcomed 95,633 tourists, a stark decrease from 103,066 last year and a significant drop from the 315,599 visitors recorded in 2019. This downturn has severely impacted hotel revenues, with many establishments struggling to cover operational costs and meet loan repayments despite loan deferments extended by financial institutions until June 2025.
Wangdi pointed out that international visitors, particularly those paying in stronger currencies like the US dollar, tend to prefer higher-end four and five-star hotels, further squeezing the mid-range market. “Achieving a 50 percent occupancy rate, about 2,000 tourists per day across the country, is necessary to sustain our operations and meet financial obligations,” he stated.
Bhutan currently hosts around 400 hotels, each averaging 20 rooms, but many are operating with occupancy rates below 10 percent. With nightly room rates between Nu 2,500 and Nu 3,000, monthly revenues hover between Nu 200,000 and Nu 300,000, barely covering staff salaries and basic expenses. The competitive pressure from overseas tour operators forces hotels to offer discounted rates, often dictated by agents who demand lower prices to secure bookings. This practice not only reduces profit margins but also leads to delayed payments, sometimes resulting in legal disputes over unpaid dues.
To mitigate these issues, hoteliers are proposing a shift to a one-time visa fee system, akin to those implemented in other tourist destinations. They argue that such a change would encourage longer stays, enhance the overall tourist experience, and increase tax contributions without the complexities associated with daily fees. Additionally, a one-time fee would alleviate the financial burden on tourists, particularly those traveling in large groups, making Bhutan a more attractive and competitive destination.
Moreover, hoteliers are advocating for the government to mandate direct wire transfers of payments from overseas agents into Bhutanese bank accounts. This measure aims to strengthen the country’s foreign currency reserves and reduce the dependency on Bhutanese currency payments, which limit the economic impact of tourist expenditures.
Another significant recommendation is the imposition of a moratorium on new hotel constructions in key tourist hubs such as Thimphu, Paro, and Punakha. With an already saturated market, additional accommodations could exacerbate the competition and further depress occupancy rates.
As Bhutan navigates these challenging times, the hotel industry’s call for a revamped tourism fee structure underscores the critical need for supportive policies to sustain its vital role in the nation’s economy. The upcoming government deliberations on this petition will be crucial in determining the future trajectory of Bhutan’s hospitality sector and its ability to welcome tourists in a post-pandemic world.
