Why is Bhutan Expensive?

In this article we’ll tackle the “high cost” of visiting Bhutan and explain why tourism in Bhutan is expensive and remind you of what you are actually receiving for the payment.

What Is High?

If you have read that it will set you back several hundred dollars per day just to be there, you are likely shocked enough not to look even further. There is a huge misconception that the $250/day price is the cost of the visa to go to Bhutan. Instead the visa is just a mere $40 but the government only issues visas to people who have purchased an all-inclusive tour package.  So how much is one of these all-inclusive tour packages?  Well that is where the magic number $250/day comes in!  In fact, things can become even more expensive.  If you are travelling solo, you will end up paying and additional $40/day supplement bring the total price to $290.

Before you run away scratching Bhutan off your list, notice the phrase “all-inclusive”?  That means that everything is included in your visit to Bhutan including the hotels, the meals, the transportation, the guide, and entrance fees into the sites.  You will only have to pay extra for your own personal expenses and the drinks.

Day vs Night

Although you will see things mentioned here about so much money per day, it really means per night.  If you come to Bhutan on Monday and leave and Thursday, you will have to pay for 3 days which is $750 plus a visa fee of $40 meaning the total bill is $790.

Even for All-Inclusive, it is still expensive!!

If you are from North America and you see the phrase “all-inclusive”, you immediately think of a beach resort in Mexico or one of the Caribbean islands and the prices for these things is probably $200/day including the flight! 

All Inclusive Resort
An all inclusive resort in Mexico.

In Bhutan the rate is $250/day and that doesn’t include the flights or the alcohol so yes, this rate does appear to be rather steep.

It can’t really be that expensive is it?  In fact, many people that I know who travel a lot tell me that hotels in Asia are just $10 per day and you can eat for just $1 or $2 so somebody in Bhutan must be getting rich!  

As a tour operator, I can assure you that while hotels in Bhutan are certainly cheap compared to North America and Europe, they are more expensive than some Asian countries like Thailand, but we’ll leave that discussion for another article.

The biggest contributor to the cost of visiting Bhutan (which is included as part of the $250/day tour payment) is a government royalty of $65 per day for each person.  What is this royalty? 

Goal of High Value/Low Impact

Well, let’s take a few minutes to do some background about how tourism started in Bhutan.  There is an article that I wrote before [ insert link ] discussion in more details but we will repeat the important parts here.

When tourism opened in Bhutan in the early 1970s, the government wanted to ensure that tourism expanded at a rather slow and controlled rate.  Primarily, this was done simply because there were not sufficient services available for tourists such as hotels or flights into the country when they started.   The government was also being very cautious about allowing uncontrolled tourism to have a strongly negative impact on the local culture.

It turned out that what Bhutan was trying to prevent didn’t have a name at that time. In fact, it took more than 40 years for the name to appear.  In [get the reference] tourism in Barcelona hit a breaking point and the term “overtourism” was created to describe the situation where there are just too many tourists.

If you have never watched the video “Crowded Out” by Responsible Travel, I highly recommend it and pay attention to the comments from the Venice Residents.

You would think that everybody in Venice would be rejoicing with so much income being generated from tourism but instead the actual residents of Venice are the ones suffering.  Income from tourism goes only to the people involved in tourism and it doesn’t necessary get disbursed to everybody.

When we think of tourist locations, we often just consider the services provided for the tourists such as the number and quality of restaurants are available and the number and quality of hotels.  We fail to think about the services that are required for the people actually living there.  Can you imagine if the town you lived in suddenly converted all the supermarkets into souvenir shops and hotels?  Your life would be negatively affected because now you cannot longer go and pick up your vegetables locally but instead need to travel to some other place.

Souvenir Shops
Although souvenir shops are important, do you need more of these or supermarkets for the local residents?

We have been seeing the effect in parts of Europe with the introduction of AirBNB.  While AirBNB has worked out great for people with extra apartments and providing tourists with inexpensive accommodations, the success of the AirBNB wave is encouraging more flats to be converted from regular residents into short-term stay homes.  Why would a landlord rent a flat for 1000 Euros in a month if it could be sold on AirBNB for 100 Euros per night?   With money to be earned you will likely see flats being bought and converted which once again is good for the people selling but a high demand is likely to cause inflation in the housing market making it less affordable for people who live in tourist “hotspots”.

Consider this video.  The biggest complaint of the residents is not the fact that tourists were coming to their city but rather that they were crowding out the locals by staying in the apartments.

A number of places in Bhutan appears on AirBNB a couple of years ago.  It is sort of inappropriate to advertise on AirBNB because a tour operator still needs to be involved to arrange the visa.   However the regional tourists from India, Bangladesh and Maldives would have been able to make use of them. 

The government stepped in this year and declared that AirBNB was not permitted.

The tourism industry managers (governments and regulators) need to seriously consider the balance between the benefits that the tourism industry is brining and the cost to the residents of the communities being affected by large increases in tourism. 

Control of Overtourism

One of the known ways to help control overtourism is through price control.  Although the all-inclusive tour package requirement with a minimum price is certainly a deterrent for people looking for super cheap tourism, the real controlling mechanism is the $65 per day royalty that is being charged as part of the payment.

The royalty is a direct tax applied directly to each tourist because it is easier to capture this additional fee when the visa is issued compared to collecting tax through various hotels and restaurants. 

If you were to remove the $65 per day royalty fee, the cost of visiting Bhutan falls very close in line with any other countries in Asia (assuming that you are including all the meals, the 3-star hotels, the entrance fees, the local transportation, and a guide).

Is the Royalty Actually Necessary?

Why can’t the government just impose taxes on the hotels and restaurants rather than directly?

One of the things that I have noticed about Bhutan, and many developing countries is their ability to implement taxation. The taxation system in a lot of countries is less efficient than it is in North America or Europe.   For a taxation system to be efficient, it requires that most people cooperate in the system.  Tax payers need to be willing to report incomes correctly and remit taxes mostly voluntarily and tax enforcers need to make sure that things are being reported and remitted correctly.

Nobody enjoys paying taxes but most people that I know from Canada do report their income correctly and any taxes due.

In a lot of Asian countries, the taxation auditors do not seem to audit accounts with sufficiently deep enough detail and business operators can be quite crafty in their reporting.  The result is a significant loss in taxation revenue through this channel.  A direct taxation, by means of the royalty, is the best way to ensure collection since the government can account for the tax as the visa is issued.

Is the 250 a day too much?

The following table of data was collected from publications provided by the Tourism Council of Bhutan. The data was available for the top 10 arrival 1 countries.   Take a look at the numbers that I’ve highlighted in bold.

Country 2013 2014 2015 2016 2017 2018
Thailand 3527 12105 3778 4177 4047 3886
Japan 4035 2707 2437 4833 2744 2675
South Korea 6048 998
Australia 2062 2037 1833 1818 2249 2739

Notice that the highlighted numbers sort of stand out as anomalies for each country for one particular year.

In an attempt to help increase the number of visitors during the lean season summer months, they created some “Friendship” offers to citizens of various countries.   The countries involved were: Thailand in 2014, Japan in 2016, South Korea in 2017 and Australia in 2018.  The friendship offers required that visitors still use a local tour operator and they were still charged the $65/day royalty but were exempted from the minimum tour payment.

The biggest impact that this had was from Thailand where numbers quadrupled for the one year.  It was very noticeable around Thimphu during the summer of 2014 that the number of Thai guests had increased significantly.  During the other summers it was sort of noticeable that there were a few extra people from particular countries, but it was nothing compared to Thailand.

While these offers were going on, we saw prices in the range of $160 per day because of the deals that the hotels were offering.  Does $160 still seem expensive?  For some people inquiring about travel, the answer was yes, it was still expensive for them.  Now what we don’t know is the effect of removing the royalty and the minimum payment.

What you are getting for your daily tariff?

Some people hear about the minimum daily tariff and think that this is the visa fee and that they will need to then arrange for the hotel and food on top of this.  The minimum tariff however is simply what you need to spend in order to be given a visa.

Do keep in mind that the daily tariff does include your hotel, your food, the transportation and the guide.  The price, ignoring the royalty, isn’t really that expensive.

Conclusion

Why is Bhutan expensive?  It is expensive because it has to be in order to prevent overtourism. 

Looking at the effects of the friendship offer it looks like the removing the minimum payment could result in 2 to 4 times the number of regular visitors. Although Bhutan could certainly benefit from an increase in tourists during the low season months, there is no way that they could take more tourists during the high seasons where we already see flights and hotels booked to the max about 3 months in advance.

Masked Dance
Masked dance during one of the festivals in Bhutan.

Although the royalty is currently fixed, I could easily see this royalty becoming dynamic where different amounts are charged at different times.  The royalty and the minimum payment could also be shifted up and down as required in order to help spread tourist over more of the year.

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