Covid-19 impact on Tourism in Bhutan
Background:
The Covid-19
pandemic has led to a global economic crisis with tourism being one of the
worst affected of all. Tourism has been one of the fastest growing and
most resilient socio-economic sectors of this era. In Bhutan, it is one of the
most important growth sectors as it earns the highest amount of hard currency
reserves and provides employment opportunity to a growing number of Bhutanese
youths. The contribution of the tourism sector to Bhutan’s GDP is estimated to be
around 9% and the sector is estimated to employ about 6% of the population. Like
elsewhere, tourism was the first sector of Bhutan’s economy impacted by the
pandemic.
The tourism industry
in Bhutan has continued to grow over the years. The country’s `High Value, Low
Volume` tourism policy anchored in promoting sustainable tourism makes Bhutan a
unique and an exclusive travel destination. The
revenue generation from the tourism sector has increased from over USD 2
million in the late 1980’s to over USD 88.63 million in 2019.
Facts and Figures:
Bhutan recorded a total of 315,599 visitor arrivals in 2019 which was an increase of 15.14% from 2018. There were 72,199 international visitors (increase of 0.55% from 2018) and 243,400 arrivals from the regional markets (increase of 20.32% from 2018). The major arrivals recorded are those who are visiting for leisure. The industry generated a total gross receipt of USD 88.63 million from dollar-paying tourists, 3.77% change as compared to 2018. There are no data on actual revenue earnings from regional tourists in 2019.
In 2018, out of the total
revenue of USD 85.4 million, USD 26.3 million was direct revenue for the
government through the Sustainable Development Fees, visa fees and taxes. While
published data on actual revenue earnings from regional tourists does not
exist, rough estimates show that Bhutan earned around USD 105 million from
regional tourists in 2018.
Apart from the direct
revenue to the government, the service providers such as travel agents, hotels,
restaurants, porter services, rafting, trekking companies, etc. and
establishments such handicraft shops and other small businesses derived revenue
from the tourists.
As per reports, there
are more than 3000 travel agencies, 160 certified hotels (3-5 stars), 665
budget (or non-certified) hotels and over 4200 restaurants and cafes in Bhutan.
Current Status:
After Bhutan reported its first Covid-19 case on
6 March 2020, the country imposed a travel ban on all incoming tourists. Bhutan is following zero death policy as
ordered by His Majesty the King and as a result the travel restrictions
are likely to continue for an extended period.
As per the Rapid Socio-Economic Impact Assessment conducted in May 2020 by the United Nations Development Programme and National Statistics Bureau, the impact of Covid-19 pandemic on Bhutan’s tourism sector is already deep, widespread and cross-cutting and has impacted the lives and livelihoods of many Bhutanese. The socio-economic impact of Covid-19 on tourism is significant and this is likely leave many unemployed and vulnerable as well as increase the fiscal pressure on the government.
The Tourism Council of Bhutan estimates that more than 50,000 Bhutanese or 6% of the population and 16 % of the working population are engaged in the tourism sector. This estimate certainly underestimates the importance of tourism on Bhutan’s economy as it does not include those engaged in informal businesses related to tourism (such as porter and pony, trinket sellers, entertainment centers, clothing stores and street vendors amongst others).
Further, the impact
of Covid-19 on tourism has a direct impact on Bhutanese financial institutions
as numerous hotels constructed amidst the recent tourism boom are unable to repay
their loans. In 2019, the ‘Services and Tourism’ segment recorded the highest
percentage (31%) of non-performing loans (NPL) in the country at approximately
USD 95.3 million. Hotels and restaurants constituted 13% of the NPL in the
segment at approximately USD 11.9 million. A prolonged period of halt in
tourist arrivals can lead to further credit defaults and strain financial
institutions all the more.
Way Forward:
While the tourism
sector and government reserves will lose substantial foreign exchange earnings,
the government’s key concern is addressing the needs of citizens who have lost
their jobs and livelihoods, especially if the present situation gets prolonged.
On 10 April 2020, His
Majesty the King announced the establishment of ‘Druk Gyalpo’s Relief Kidu fund’ i to provide income support to
people who have been laid off or placed on reduced salaries. The Relief Kidu has
provided immediate relief to over 23,000 individuals who had lost their
livelihoods either partially or completely because of the pandemic. Further, payment
of bank loans has been deferred by six months (with possibility of
further extension) with waiver on interest
payment.
Other measures
announced by the government include the rolling out of forward-looking
stimuli/contingency/acceleration plans in the agriculture, tourism and
construction sectors.
Currently, the Tourism
Council of Bhutan with the support from the Government is working on
strengthening the tourism infrastructure, developing new tourism products and
services and increasing entry points for tourists. This investment will go a
long way in transforming Bhutan’s tourism industry and its economy at large,
and will also promote sustainable job creation in the sector.
Note: As of October
1, 2020 Bhutan has reported 283 cases of Covid-19,
out of which 225 have recovered, and no fatalities recorded till date.
[i] His Majesty’s Welfare Relief Fund
Sources:
1. Review Report on
Tourism Policy and Strategies, National Council of Bhutan for the 16th Session
for National Council, 2016.
2. RAPID SOCIO-ECONOMIC
IMPACT ASSESSMENT OF COVID-19 ON BHUTAN’S TOURISM SECTOR: an analysis of the
vulnerability of individuals, households and businesses engaged in the tourism
sector MAY 2020 - United Nations Development Programme and National Statistics Bureau
3. Bhutan:
A Coronavirus Success Story SURYA VALLIAPPAN KRISHNA Published May 21, 2020
4. Bhutan Tourism
Monitor 2019 – Tourism Council of Bhutan.
5. Statistical Year Book 2019 – National Statistical Bureau, Bhutan
