Bhutan Hotel Industry Faces Crisis Amidst Oversupply And Tourism Decline

Published on September 15, 2025

In Bhutan, a three-star edifice successful nan superior metropolis of Thimphu reveals nan challenging reality of nan tourism assemblage today. Once designed to pull high-end tourists, nan edifice now offers rooms for arsenic debased arsenic Nu 2,500 a nighttime for 2 people, including meal and dinner. This drastic value simplification is not astir profit but a matter of survival. The full edifice industry, peculiarly successful nan certified star-rated sector, is grappling pinch akin issues.

The Growing Gap Between Supply and Demand

The emergence successful nan number of hotels crossed nan state has led to a increasing mismatch betwixt proviso and demand. Between 2019 and now, nan number of certified hotels successful Bhutan has surged from 160 to 397, pinch nan bulk of them located successful nan cardinal regions of Thimphu, Paro, and Punakha. Among these, three-star hotels dominate, accounting for 202 establishments, followed by 92 one-star and 60 two-star hotels. Bhutan besides boasts 23 four-star and 20 five-star hotels, successful summation to 176 certified homestays.

While nan number of disposable rooms has importantly increased, nan number of visitors visiting Bhutan has not grown astatine nan aforesaid pace. In fact, nan state is facing an oversupply of edifice rooms compared to nan number of visitors it receives. Occupancy rates successful immoderate three-star hotels person plummeted to azygous digits, starring operators to little their prices drastically.

Tourist Arrivals Fall Short of Expectations

The country’s tourism manufacture has not afloat recovered from nan effect of nan COVID-19 pandemic. Between January and August of this year, Bhutan received 115,536 tourists. However, this number is still acold beneath nan pre-pandemic figures. For instance, successful 2019, nan state welcomed 315,599 visitors, but this dropped to 145,065 successful 2022 and further declined to 103,066 successful 2023.

The number of visitors visiting Bhutan is besides heavy skewed towards Indian nationals, who relationship for nan mostly of arrivals. While Indian visitors typically enactment for an mean of 4 days, world visitors thin to enactment for astir 5 days. Despite nan seasonal uptick successful tourism, galore three-star hotels catering to Indian visitors are among nan hardest hit.

Impact of Oversupply connected Three-Star Hotels

Three-star hotels successful Bhutan, which chiefly target Indian tourists, are uncovering it difficult to compete pinch high-end options specified arsenic luxury hotels, homestays, and moreover forbidden Airbnb rentals. These alternatives, contempt being technically banned, still pull a information of nan tourer market, leaving mid-tier hotels struggling to capable their rooms. In immoderate cases, hotels person reported zero occupancy for respective months successful a row. Even pinch nan highest tourer play underway, galore hotels person not received immoderate bookings.

To support operations, edifice owners person pointed retired that astatine slightest 50% occupancy is needed to break even, covering indebtedness repayments and worker wages. Given that location are 8,625 edifice rooms disposable nationwide, nan presence of 10,010 visitors successful August intends that, connected average, location is little than 1 impermanent per edifice each month. To break even, nan state would request a staggering 6,000 visitors a time aliases 180,000 visitors per month—far much than nan existent influx.

The Government’s Response to Oversupply

The business is not only a consequence of reduced tourer arrivals but besides nan oversupply of hotels. Even successful 2019, erstwhile Bhutan reached its highest tourer numbers of complete 315,000 visitors, nan disposable edifice rooms were not capable to accommodate each visitors. Today, pinch less visitors and much hotels, nan disparity betwixt proviso and request has widened significantly.

In an effort to reside this imbalance, nan authorities intends to pull 250,000 visitors this year, but this target is still a important challenge. The government’s push for edifice development, which included taxation exemptions connected imported furnishings and generous taxation holidays, is simply a superior logic for nan oversupply. Between 2010 and 2015, these fiscal incentives encouraged a ample summation successful edifice construction.

The Royal Monetary Authority, recognizing nan strain connected nan industry, imposed a impermanent moratorium connected caller edifice and lodging loans successful June 2023. Despite this, nan manufacture continues to struggle pinch overcapacity. A Department of Tourism (DoT) charismatic acknowledged that oversupply successful nan occidental regions, particularly Thimphu, is contributing to nan problem. While nan DoT is moving to raise consciousness astir nan rumor and beforehand sustainable edifice development, nan request for accommodations remains mostly concentrated successful nan occidental regions, leaving different parts of nan state underserved.

Measures for Promoting Sustainable Tourism

Despite nan struggles, location person been immoderate affirmative trends. The DoT reported a 51.8% summation successful tourer arrivals successful 2024, pinch an 18.6% emergence successful nan first half of 2025 compared to nan aforesaid play past year. To support nan industry, nan DoT has introduced fiscal incentives and a mandatory Tourist Registration System (TRS), designed to supply much meticulous information connected edifice occupancy.

However, edifice operators are skeptical astir nan effectiveness of nan TRS. They reason that to get genuinely meticulous data, visitors should beryllium required to show confirmed edifice bookings upon entering nan country. Some besides propose extending nan TRS to see carrier providers and circuit guides, which would thief streamline nan tourism acquisition and heighten accountability.

Furthermore, nan DoT is moving to certify transporters who wish to cater to tourists, frankincense improving nan value of work crossed nan full tourism sector. Yet, edifice owners still constituent retired argumentation gaps, particularly pinch visa regulations becoming much flexible. Many circuit operators now promote visitors to use for visas connected their own, and to salary for hotels and services successful cash. This, according to hoteliers, has led to taxation evasion and reduced overseas reserves inflow, limiting gross to nan Sustainable Development Fee.

Challenges pinch Pricing and Fronting

Another ongoing interest successful nan edifice assemblage is nan rumor of “fronting,” wherever overseas recreation agents and circuit operators dictate edifice prices. As a result, galore three-star hotels are forced to waste their services astatine little rates, which affects some their gross and nan wide value of service. To reside this, nan DoT conducts extended monitoring of edifice standards to guarantee compliance pinch required criteria.

Looking Forward: Policy Adjustments and Hotel Sustainability

In consequence to these challenges, nan authorities continues to research ways to support nan industry. The DoT’s efforts to stabilize nan edifice marketplace and guarantee sustainable maturation are important successful addressing some nan oversupply rumor and nan debased occupancy rates. However, nan early of Bhutan’s edifice manufacture will dangle connected addressing some nan supply-demand imbalance and nan broader challenges facing nan tourism sector.