Hundred percent foreign investment will be allowed in the construction of five-star hotels in Bhutan on a selective basis to overcome the shortage of financial capital in the domestic market and up the quality of services provided to tourists visiting Bhutan.
However, in the four-star hotel category, as suggested by the hoteliers, the government agreed that foreign investments will be allowed up to 70%, in order to create opportunities for the local entrepreneurs.
The prime minister, Lyonchhen Jigmi Y. Thinley, said that the Bhutanese economy cannot mobilize the kind of money necessary to build five-star hotels. Besides, reputed luxury hotels brought in expertise, experience, and even their own clientele.
High-end tourist destinations need high end hotels, he said. The decision on foreign investment was made in the wake of apprehensions expressed by the Bhutanese hoteliers that they may not be able to upgrade their hotels within two years to meet the quality requirements mandated by the government to shore up tourism in Bhutan.
The Hotel Association of Bhutan (HAB) submitted that of the total of 121 hotels in the country, 28 per cent (34 hotels) were rated as three-star and above, and the rest (87 hotels) as two-star and below.
Tandin Dorji (Ph.D), representing HAB, said that structural augmentation of the hotels would be difficult as most hotels were already debt-ridden and would not be able to obtain loans. Roughly, the upgradation would require the local hoteliers to cough up Nu 437 million.
The bleak financial situation was exacerbated by the fact that the current occupancy rate was as low as 10 to 15 percent, not to mention 46 new hotels that were under various stages of construction.
“The financial institutions have stopped giving loans for hotel construction in Bumthang and Paro so how can we upgrade without loans?” He went on to argue that it was not the quality of hotels that mattered but the services provided to the tourists, and recommended soft face-lift, refurbishment and quality of services rather than physical infrastructure. He added that 71 per cent of tourists were satisfied with the hotels, as indicated in the Tourism Council of Bhutan’s annual report, 2008. “We should allow the market forces to take its course without being mandated by the government,” he said.
In response, the prime minister said that high end destination is non-negotiable. Those unwilling would not only be edged out of the market but it was also the moral and ethical responsibility to provide good services to clients. “Every individual must upgrade their skills and services,” he said. “The idea is not to exclude you out of the tourism industry but to push you into elevating the standards.” Without continual improvement, after a decade or so Bhutan would no more be an exclusive destination.
The government will provide incentives that would make the upgradation possible, including tax breaks for up to 10 years for new hotels.
By: Dawa T Wangchuk
Soruce: Bhutan Today