Subsidy fails to bring in more tourists
The National Council’s (NC), Economic Affairs Committee (EAC), in its latest Review Report on the State of Tourism in Bhutan has recommended that the government do away with the airfare subsidy which was introduced towards the end of 2024, as one of the schemes to enhance tourist arrivals in the country.
The NC’s EAC has mentioned that while the Royal Government’s initiative to provide airfare subsidy for full-SDF paying passengers during the off-peak months was well-intentioned, the results indicate that there is an increase of just 657 passengers or a growth of 4.6%, compared to the same period in the previous year. “Since there is no clear evidence that this growth is linked to the subsidy initiative, the committee recommends the Royal Government to discontinue the airfare subsidy,” the report reads.
The subsidy, which was launched on November 11, 2024, had the Opposition Party writing to the government to do away with the subsidy. Apart from stating that the policy requires careful reconsideration, the Opposition Party had mentioned that the subsidy scheme deviates from the nation’s well-established ‘high value, low volume’ tourism policy. The party further said that reduction of international airfares to SAARC levels through subsidy directly contradicts the objective of Sustainable Development Fee (SDF) which was aimed at making Bhutan a high-end tourist destination.
The Opposition had also said that the airfare subsidy distorts the consistency of policy narrative which is critical in guiding the development strategies and in gaining the trust and confidence of the stakeholders including the tourists. It also noted that the airfare subsidy which roughly amounts to USD 125 per person may not motivate the international tourists to visit Bhutan but trigger market instability upon expiry of the subsidy.
In response, the Ministry of Finance had stated that the subsidy is a price subsidy to lower the cost of air tickets for the SDF-paying tourists only and not for all travelers. The Ministry said it was to encourage the SDF-paying tourists to visit Bhutan during the lean season. The Ministry called it an investment that is expected to increase the number of tourists from 7,213 (actual figure for 2023) to over 9,600 tourists from December 2024 resulting in improved domestic revenue generation. The projected subsidy was about Nu 96 million (M) estimated based on per ticket cost and target arrivals.
Meanwhile the EAC’s report states that tourists visit is mostly concentrated in western Bhutan primarily because of the region’s proximity to main entry points at Paro international airport and Phuentsholing international border gate. “Therefore, to encourage more equitable distribution of tourists across the regions, the committee recommends that the Royal Government consider introducing a duration-based discount on the SDF, whereby the SDF is waived-off after a certain number of days. Doing so will encourage longer stays and promote travels to other regions as well.”
In order to improve tourism products and services, it has recommended that the Government enhance support for branding and marketing. Other recommendations include the need for the government to strengthen stakeholder engagement for policy formulation in tourism, prioritize improving the overall reliability of domestic flights to Yonphula and Bumthang airports, initiate a targeted loan restructuring measures for the hotel industry to provide a critical financial relief and to support employment retention in the industry, to direct the Department of Immigration to develop and implement an integrated online system that records the name of the licensed travel agency responsible for bringing in tourists at the time of SDF payment and strengthen regulatory and enforcement mechanisms to safeguard the interest of the industry.
Ugyen Tenzin from Thimphu
