Whether the debate on the “liberalization” of tourism business passes into law will depend on how many of the members of the two Houses agree or disagree with the motion. However, one thing is certain - the issue will not be decided in this winter session of the National Assembly but will require many more sessions of deliberations. After all, the issue at stake is that of the country’s biggest employer and the most important industry. In fact, at this stage it is not even certain if enough members of the Upper House will support the motion - enough that they can forward the issue to the Lower House, for further deliberation.
The lifting of the Minimum Daily Tariff in itself does not constitute “liberalization”. There are a host of issues that needs to be addressed before it can become law. Right now the only thing that is being discussed is the segregation of the Royalty and doing away with the Minimum Daily Tariff. If the Minimum Daily Tariff is to be freed, how is the industry to be regulated? Rather, will it remain to be regulated? Will the government and the regulator have the moral authority and the legal basis to regulate and impose rules on how the business is to be conducted, once "liberalized"? Will the new rules require the tourists to come through local tour companies or will they apply for VISA directly to the Immigration Department or Bhutanese Embassies abroad? Who will collect the Royalty and when and how? Will it entail setting up on-line payment systems? Once the government collects its Royalty and tells the tour operators to conduct their business in an atmosphere of free enterprise and be subjected to market forces, the government and the regulator forfeits their right and authority to define minimum service levels. How will they regulate and impose conditions? Or, is it going to be free for all kind of business? It is not as simple as just lifting the Minimum Daily Tariff. Has the proponents thought of all the complexities?
So, what exactly is this "enfant terrible" Minimum Daily Tariff?
The Minimum Daily Tariff is not a price tag for a service or product - it is a unique and well thought out business strategy at the core of which is fair play to both the contracting parties. Inherent in it is the Royal Government of Bhutan’s unconditional assurance that service will be delivered as pledged; a warranty and a promise of restitution against any defective or unfulfilled service by the service provider; including assurance of full payment for services rendered.
It is a stick that keeps the snake in the straight and the narrow, and the golden goose happily quacking away singing songs of praise and approval.
Deriving confidence from the principles on which the Minimum Daily Tariff system is founded, thousands of tourists have no qualms about sending millions of dollars to a country they know nothing about - to operators they had never seen before. The Minimum Daily Tariff is a trust builder among potential visitors and to it is due all the credit for Bhutan’s steady and sure-footed progress in sustainable tourism.
Given all that, one has to be a total idiot to want to rock a system that holds so much promise.
Taking a more simplistic view, the Minimum Daily Tariff is the sum of amount designated in US$ that is mandated by rule to be charged to every tourist who visit Bhutan. A tour operator can charge higher than the set amount but not lower which, in Bhutanese tourism parlance, is known as “undercutting”. In addition to the Minimum Daily Tariff, there is also additional tariff called Surcharge - for tour groups comprising of less than three persons.
The Minimum Daily Tariff includes government Royalty of US$65.00. The prevailing Minimum Daily Tariff is US$ 250.00 per person per night halt. This means a tour operator gets to keep the gross amount of US$ 185.00 per person per night halt. Within this amount, the tour operator must provide a level of service and accommodation defined by the Tourism Council of Bhutan (TCB), such as class and category of hotel accommodation, quality and variety of food items, licenced guide, ponies, yaks, cooks, tents and camping gear, transportation to any point etc.
Certainly this Minimum Daily Tariff fixed by the government is generous and the tour companies do make good profit. No complaints there. On the other hand, the tourists themselves think that the Minimum Daily Tariff of US$ 250.00 is more than reasonable - going by the level of services included in it.
However, the Minimum Daily Tariff is not just about numbers alone. As far as I have understood, it goes way beyond that. It is an ingenious business model designed by the government, on behalf the Bhutanese tour operators. It has worked flawlessly for the past many decades and all players are in a win-win situation.
So how does this Minimum Daily Tariff work?
The imposition of the Minimum Daily Tariff requires that the tourists or their agents make 100% payment in advance into the bank account of the TCB, once the tour is booked and confirmed. Because of this, the foreign tour agents or tourists have no reservations about making full payment in advance because they know that the Royal Government of Bhutan assures the safety of their money. On the other hand since full payment is received in advance, Bhutanese tour operators never face a situation where they are cheated out of their dues.
The tourists have another safety measure built in into this system. The TCB releases only 50% of the payment to the tour operator - the other 50% is held back by the TCB until the tour is completed and the tourists go back happy and satisfied. In the event the tour operator does not deliver to the tourists as promised and if they are unhappy with the level of service offered by the local tour operators, they can complain to the TCB and the TCB will compensate the tourists depending upon the genuineness of the complaint, from the 50% tour payment withheld by them. This boosts confidence in the tourists because they know that we have a fail-safe system where their interests are protected by the government, on their behalf.
Now tell me - who in their right minds would want to change all that?
It would be a terrible mistake to confuse Minimum Daily Tariff as a price tag for a service or a product - it is not. It is a concept for sustainable tourism that has helped Bhutan avoid the many pitfalls that other countries have suffered in their chase for the tourist dollar. Let us not make the same mistakes.
......................... to be continued