Tourist accommodation shortage looms large

Especially in the east and south

With nearly 40,000 tourists estimated to visit the country in 2011 and fewer than 35 standard hotels (three star and above) to accommodate them, a shortfall in tourist accommodation is expected in the country.

Out of 119 tourist accom­modations registered with Tourism Council of Bhutan (TCB), 65 hotels fall short of the requirement for three star and 20 fall under one star, leaving only 34 hotels fit for tourists.

TCB foresees accommoda­tion shortage, especially in the east and south.

However, it is working towards upgrading all regis­tered hotels to cater to more tourists. TCB has signed MOUs with 22 sub-standard hotels in Thimphu, Paro and Haa according to which they will be upgraded to standard level by the end of 2012. Several hotels have already started the upgrading process.

Some 45 hotels are under construction in the country out of which 20 will be ready by 2012 end.

Further, TCB has started inviting proposals for establishment of high-end ho­tels and resorts in the country. Interested local investors can either develop and operate properties themselves or enter into joint ventures with foreign investors. Some 11 foreign investors have shown interest in the hospitality sec­tor, and proposals from local investors are pouring in.

The proposal for the prop­erty should be three star or above in the east and south and four star or above in the west and central Bhutan. In­vestors interested in the west should be willing to develop another property in the east or south two years after opera­tion in the west.

Investors can choose to either develop or develop as well as operate the property in the east or south, or upgrade an existing property to a four or five star hotel or resort. All the properties will have to be operational by the end of 2012.

But many hoteliers do not find the condition feasible, both financially and economi­cally.

Kunzang Norbu, the joint director of TCB’s services divi­sion, said that if an investor is not willing to develop two properties, one in the west and the other in either east or south, the project will be given to other interested investors. “But we will look at how this fares,” he said.

Most of the investors seek­ing FDI in the country are interested in development of properties in the west. There are not many interested to develop properties in the east.

To encourage development of properties, a 10-year in­come tax holiday and exemp­tion of customs duty and sales tax on import of furniture, fixtures, select equipment and fittings, land on lease, and repatriation of dividends in the currency earnings will be permitted.

TCB will also help facilitate liaisoning the local investors with international operators. Further, extra incentives are also being considered for the eastern circuit.

These initiatives are being carried out in order to ensure a balanced development in the country. The western region is more developed than the other regions, and it contains over 80 percent of the total tourism infrastructure.

Farm houses and luxury tented accommodations are also being considered for de­velopment in the dzongkhags that lack sufficient accommo­dation. As a pilot project, TCB is conducting a survey on farm houses in Haa and Trashiyang­tse.

TCB has already identified 250 acres of land in Trashi­gang and Trashiyangtse, Ma­nas, Bumthang and Trongsa for investors to consider. Land in the western region is also being identified.

Land identification in other dzongkhags will be carried out subsequently. Private land owners are also being regis­tered with TCB and their land will be considered for lease for development of properties.

Considering the hotel sup­ply gap in the coming years, additional land will be identified, accord­ing to TCB.

TCB has received expres­sion of interest from multiple international hotel operators like Six Senses, Taj, Starwood, Dusit Thani, Best Western International and Hyatt Hotels for partnering with local de­velopers. It has also received expression of interest from individual foreign investors for developing properties in the south.

Currently there is no limit set for the number of investors that would be permitted. How­ever, once TCB receives the full list of investors for various locations, a review would be carried out, and accordingly, selected companies would be allowed to invest.

Meanwhile, the high-end destination marketing is far­ing well. This year, TCB has coordinated and participated along with Drukair and 71 lo­cal tour operators and hote­liers in nine travel fairs and conferences.

TCB also participated in a road show in India in 34 cities. It has created different products, services and has taken up several promotional initiatives.

International arrivals have been increasing steadily over the years except for 2009 with only 23,840 arrivals down from 27,636 the year before. The arrival of tourists by the end of 2010 is expected to exceed the target of 35,000 which include high end tour­ists from both the region and beyond. The government targets 100,000 tourists by the end of 2012.

By Sonam Pelden