Shangri-La Lost and Found: Can Bhutan Find Its Way Back to Tourism Paradise Again?

The tiny kingdom of Bhutan, tucked between India and China, has soared in popularity among tourists from India. A proposed move by the Bhutanese government to remove free entry for regional visitors, however, could stem the tide of mass tourism that has found its way into the Buddhist nation in recent years.

The Lower House of Bhutan Parliament earlier this month passed a draft tourism bill to charge a sustainable tourism fee on regional tourists from July, meaning that visitors from India, Bangladesh, and the Maldives may soon have to pay 1,200 rupees ($16.70) per person, per day, to visit Bhutan.

This fee is seen as an attempt by the Bhutanese government to preserve the country’s ecology as well as its “high-value, low-impact” tourism strategy, after the exclusive, high-end destination image of the tiny Himalayan nation has become tainted by the brush of mass tourism in recent years.

As visas are not required for Indian citizens to enter Bhutan, the landlocked country has especially attracted many budget travelers from its 600-million-strong neighbor to the south, many of whom are drawn by the proximity and the abundance of cheap accommodation that has sprung up to cope with the visitor surge.

According to the Tourism Council of Bhutan, the country recorded over 274,097 tourists in 2018, a 7.6 percent increase from the year before. The regional arrival tally in 2018 came up to 202,290 visitors, of which India took up the lion’s share of 70 percent with 191,836 visitors.

Breaking the Indian tide

The levy, if implemented, is nothing new to Bhutan though. Already, the majority of international tourists to Bhutan must spend a minimum of $250 a day to visit the country that is identified by its gross national happiness. The cost includes accommodation, transport, and the sustainable development fee.

“This policy basically aspires to ensure the best experience for all tourists while ensuring that the service, infrastructure, and nature are not overexploited,” explained Dorji Dhradhul, director general of the Tourism Council of Bhutan.

“It is true that today India makes up more than half of the total tourists in Bhutan, and it is our hope that this status will continue into the future from strength to strength,” he added. “We are fully aware that we have huge outbound tourists waiting in India and Bangladesh to be tapped. And India will always be our closest and the biggest source of tourists.”

Tour operators in India, however, expressed concerns that the tourism fees could impede tourist flow to Bhutan.

“It would be too early to predict the exact decline in the number of Indian tourists to Bhutan,” said Suman Roy, founder and partner of Tourety, a tour operator based in Kolkata in the eastern state of West Bengal, which borders Bhutan. “But it would be prudent to assume that the number of Bhutan-bound Indian tourists will fall significantly,” he reckoned.

Daniel D’Souza, president and country head of leisure for SOTC Travel, agreed. “This new policy could place a restriction on many budget and cost-conscious travelers. With a 12–15 percent price increase (approximately 7,000 Indian rupees more) for a six-day tour package, they will now have to look for alternate destinations. With this surcharge, the cost of visiting Bhutan will compete with many nearby international places such as Dubai, Mauritius, Hong Kong, and Malaysia, etc.”

Neither has the proposed move been met with enthusiasm among Bhutan’s operators of low-cost rental accommodations and budget hotels, who fear the introduction of mandatory government fees for Indian tourists would greatly impact upon their business.

“I feel the imposed fee is too high and will definitely deter a lot of Indian visitors from coming to Bhutan,” said a hotelier and tour operator from Bhutan, who declined to be named.

He said this change has primarily been lobbied by tour operators who deal in dollar-paying tariff clients and have been affected by the flow of Indian tourists as they have to compete for rooms, ground transport, and airline tickets that used to be easily available prior to the mass arrival of Indian visitors.

The margins for dollar-paying tourists are very high and profitable, he added.

He believes the new regulation is likely to affect the local hospitality sector, as hotels had been experiencing low occupancy of 15–20 percent prior to the arrival of Indian tourists.

The number of budget hotels in Bhutan has doubled in the last few years while the number of beds more than doubled from over 5,000 to over 11,000, according to a Nikkei Asian Review report.

“Services and budget hotels have come up in recent years to meet the Indian influx, but now they would suffer a loss,” said Sonam Wangchuk, chairman of the Hotel and Restaurant Association of Bhutan.

Regaining exclusivity

On the other hand, luxury travel operators and hotels in Bhutan are eager for the fee to be implemented and give the country a chance to reclaim its high-end destination image.

“Earlier on we saw demand from well-traveled customers for Bhutan, but over the recent years Bhutan has turned into a mass destination,” D’Souza noted.

“[Bhutan] will no longer be treated as a cheap destination,” said Sonam Dorji, general manager of the Tashi Namgay Resort. “Now more tourists with high paying capacity would visit the country. It would be [more aligned with] our policy of high-value, low-volume tourism.

“Bhutan will definitely establish itself as a popular destination among the elite tourists. We are expecting to get premium clients even from neighboring countries,” he elaborated.

That is probably an outcome that the Bhutanese government is betting on. The country earned $85.4 million from global tourists in 2018, of which $26.3 million was direct revenue for the government collected through sustainable development and visa fees.

Even if the fee implementation crimps the flow of tourist traffic from India, it’s likely that Bhutan will now be able to attract the higher-spending segments to generate significant revenue and sustain the tourism industry.

Meanwhile, discussion for the proposed tourism fee for regional tourists is ongoing in the Upper House of the Bhutanese Parliament, as the government is still in debate over the number of regions that will be exempted from the levy.

Looks like Bhutan needs to quickly get a grip of its draft tourism bill — and destination image.