Tuesday, December 1, 2015

Bhutanese Tourism Industry Under Attack: VII

I am truly disgusted that there are people in this country who can contemplate doing away with our very successful Minimum Daily Tariff tourism policy that has seen the industry grow into the most vital and successful. Rightfully, it should be the hydro-power sector that must take the coveted place of being the first and the brightest. Unfortunately, I suspect that it has undergone a complete shift it its long term objectives.

I am not a tour operator but I am drawn into the business once in a while since I am asked to host some friends of friends abroad who visit Bhutan. Thus I had the opportunity to understand the industry from close quarters.

In my earlier articles I have covered most of the topics related to tourism - in this one I talk of:

The Fuss/Misconception Surrounding “Undercutting”:
Some have painted a very grim picture about the prevalence of the practice of “undercutting” that is supposedly rampant in the Bhutanese tourism industry. They say that it is an evil that must be rooted out. They say the practice is bad for the business. However, ask them how it is bad, how it hampers the growth of the tourism business and they are clueless. They have nothing to offer by way of justification - except that they will contend that it is illegal to “undercut”!

It is quite possible that undercutting may be in practice - but not merely confined to the big operators as is being put out. Small time operators may practice undercutting too - each of them for two entirely different reasons.

The truth is that there is no need for “undercutting”. There are a few billion prospects out there. If you are creative enough, if you work hard enough, if you are able to put your imagination to work, there is more than enough for a hundred thousand more tour operators to play the field.

That said, among trade circles, there is a different nomenclature that is employed to define “undercutting” - as we know it. It is referred to as “discount”. Nowhere in the world - including Bhutan - offering discount over the published rate is a crime. My understanding is that the TCB rule simply requires that every tourist wishing to visit Bhutan must pay a sum of US$250.00 per person per night halt. The rule does not prohibit a tour operator from offering discount to his/her tourists - as long as the discount offered does not become deductible from the Minimum Daily Tariff which is, in any event, not permitted. The crux of the matter is: how can a case of “undercutting” be proven - when the full Minimum Daily Tariff is deposited?

Small time operators offer discount because they can afford it - they have no overhead costs to factor into their pricing. The big timers offer discount because for them it is a matter of increasing volume to attain a certain level of economies of scale. Offering discount to clients is an accepted business practice everywhere else in the world.

I look at “undercutting” as a none-issue. As long as a tour operator deposits the tour payment calculated at the rate of the mandatory US$250.00 per person per night halt, no charge of “undercutting” can be leveled against the tour operator. The country does not suffer loss of foreign exchange, which is the primary concern. As long as the tour operator files his tax returns based on the business turnover calculated at US$250.00 per person per night halt, the country does not suffer reduction in tax collection.

The TCB may not recognize “discount” as a necessary evil - but remember, they have not outlawed the practice. As long as they continue to get their US$250.00 per person per night halt, “undercutting” is none-existent. It is a baseless and unproven supposition - pure and simple conjecture!

As one American professor of journalism once told me - an unproven truth is not a truth.

As to the allegation that bulk of the tourism business is monopolized by the big boys - Kuzuzangpo la - Welcome to the real world! There is only one way to fight that - work hard instead of whining - so that you too become big. Only the incompetent complain that others are doing better.

You cannot expect some Robin Hood to come and slice away someone’s business and deliver to you. Or may be, in Bhutan's case, you can!

........... End of Series


  1. I fully support your views and the maintenance of the status quo in respect of the current tourism policies of the government.

  2. 200-250 USD per guest per night is neither high end nor low end, it is affordable for anyone who is genuinely interested in visiting Bhutan. In my opinion the tariff must not be liberalized and the motion for liberalization is devoid of any evidence for the presumed benefits (benefits for whom?). In fact regional tourists should be regulated as well. The whole liberalization discussion rather seems like an effort of certain lobbies to increase their profit, given that tourism everywhere in the world is known to be a domain where mostly the greedy gather. Undercutting is not necessary and does indeed often hamper the quality of the experience of tourists. More could be done to improve the quality of the commercial hospitality and service industry (hotels, guesthouses, etc.) AND to understand the tourist demands and expectations (no comprehensive quantitative or qualitative data exists). Also more could be done in terms of marketing Bhutan outside where the procedures for entering the country as tourists are often distorted in order for large international tour companies to lure guests. It should be made clear that bookings can be done individually with local agents directly. However, diversifying, and benefiting those who are not yet widely included is already possible within the existing system and does not require a change of the wise tariff system in place. Indeed the current tariff system guarantees that if no undercutting takes place the Bhutanese can remunerate their fellow Bhutanese at all levels including the grassroots fairly. It is entirely in Bhutanese hands whether the stakeholders "destroy" their precious culture and traditions by liberalizing where it is not necessary or support their fellow citizens and follow the wise middle path approach by taking social responsibility towards each other. For ruining the local culture and traditions as well as environmental exquisiteness "immoral" backpackers need not even enter the country. Unfortunately that can be achieved by the locals themselves.

  3. Share your views. Present Minimum Tariff, which has served us in more ways than one, should stay in place.