Faced with financial challenges and sustainability issues, three-star hotel owners in the country are planning to petition the government to  reconsider the current tourism fee structure and replace the daily Sustainable Development Fee (SDF) with a one-time visa fee for tourists.

This suggestion comes at a time when many hoteliers, particularly those relying on Indian tourists, face significant challenges due to decreased occupancy rates and financial pressures.

In a meeting held on Tuesday, the hoteliers discussed the struggles their businesses are facing and announced plans to submit a formal petition to the government.

A hotel owner in Thimphu, Tshering Wangdi, said that most three-star hotels rely heavily on Indian tourists, who typically prefer staying at more affordable hotels. “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,” he said.

Despite ramping up marketing efforts, occupancy rates in hotels have dropped dramatically compared to last year.

Tshering Wangdi said that international visitors, particularly those paying in dollars, tend to stay in more expensive four and five-star hotels, further impacting the business of mid-range establishments.

As of September this year, Bhutan received 95,633 tourists, including 31,073 international and 64,560 regional visitors. This marks a decline compared to the 103,066 visitors recorded last year, and a sharp drop from 2019, when 315,599 tourists visited, comprising 72,202 international tourists and 243,397 regional tourists.

The decrease in visitors is contributing to the financial strain faced by many hotels.

Financial institutions have extended loan deferments for hoteliers until June 2025, but many are worried that once the deferment period ends, they will struggle to meet their monthly Equated Monthly Instalments.

Hoteliers said that replacing the daily SDF with a one-time visa fee—similar to the visa systems in other countries— will help mitigate their financial challenges while also benefiting the tourism sector.

A key point raised by the hoteliers is that a one-time visa fee would encourage tourists to stay longer, which would benefit the tourism industry and lead to higher tax contributions, without the complications associated with daily fees.

This would also reduce the financial burden on tourists, especially those travelling in large groups, and make Bhutan more competitive as a destination.

The current SDF structure, where tourists are required to pay a daily fee, has been a source of frustration for both tourists and hoteliers. Many Indian tourists, who traditionally travel in large families or groups, find Bhutan to be a more expensive destination compared to other regional options due to the SDF.

Currently, many three-star hotels in Bhutan are struggling with occupancy rates of less than 10 percent, far below the levels needed to sustain their businesses.

There are 400 hotels in the country, each with an average of 20 rooms.

Hoteliers argue that achieving a 50 percent occupancy rate, about 2,000 tourists per day across the country is necessary. And this  would just cover operational costs and meet loan repayments.

However, with rooms priced between Nu 2,500 and Nu 3,000 per night, many hoteliers are barely breaking even, with monthly revenues between Nu 200,000 and Nu 300,000. With this revenue, hoteliers are facing difficulties in paying staff salaries and managing operational costs.

Hoteliers said that to sustain their business, hoteliers are forced to offer discounted rates dictated by overseas tour operators. “These agents call us and say another hotel is offering a lower rate, so we have to match it to secure bookings,” one hotelier said.

Payments from these agents, who book rooms on behalf of foreign tourists, are typically made in Bhutanese currency, which limits the impact on the country’s foreign currency reserves. Moreover, some hoteliers have faced delays in payments, with some cases even ending up in court due to unpaid dues.

Hoteliers suggested that the government should make it mandatory for all tourists to wire payments directly into Bhutanese accounts, particularly for those travelling through overseas agents. This would help bolster the country’s foreign currency reserves.

Hoteliers also suggested that the government impose a moratorium on new hotel construction in popular tourist destinations like Thimphu, Paro, and Punakha due to the high number of existing accommodations.