Bhutan has led the way in imposing hefty taxes on inbound visitors but are they the solution to overcrowding in popular destinations? Sam Bradley reports from the Land of the Thunder Dragon.
Overtourism is undoubtedly a problem, with images abounding of Barcelona’s Las Ramblas or Thailand’s pristine beaches resembling life in a sardine tin. The Austrian village of Hallstatt, home to 800 residents and said to be the inspiration for “Frozen,” was on track for one million visitors per year – until residents built a wall blocking a popular lookout point. Portofino in Italy is even introducing a €275 fine for visitors loitering to take photos, as there are simply too many tourists. The Japanese city of Kyoto is banning photos of geisha.
To curb this problem, many destinations are in the process of implementing a “tourism tax”. While this nuanced topic has generally been enacted slowly, tentatively and with much consultation, Bhutan boldly blazed a trail in 2022 with its eye-wateringly high US$200 per person per night levy.
The fact that changing the price of a product will also affect its demand has been understood by economists for almost as long as money has been in existence. As quoted in the bestseller book “Freakonomics”, ‘incentives are the cornerstone of modern life… ferreting them out is the key to solving just about any riddle…’. Policy makers and government advisers largely subscribe to this doctrine, using incentives (or disincentives, such as taxes) as a lever to change people’s behaviour.
Tourism bodies are no different, with many popular destinations such as France, Greece and Bali already charging a tourist tax, and others such as Iceland, Edinburgh and Thailand planning something similar soon. In theory this serves the dual purpose of keeping tourist numbers down while also raising funds for development and infrastructure.
Venice and its crowded canals often serve as the case study for overtourism: for every resident it receives a staggering 370 visitors per year, making its bridges and main squares claustrophobically crowded. Not only that, but large cruise ships have been blamed for flooding and damage to the city foundations. Under increasing pressure, lawmakers have responded by banning cruise ships from the historic centre and are currently trialling a €5 fee for day visitors to reduce numbers. It’s also cracking down on bad behaviour by fining tourists for sitting on bridges or steps, swimming in the canals, eating or drinking while sitting on the ground, or walking around in swimwear.
Whether these measures are enough remains to be seen. Most policymakers introducing tourism taxes have done so in a similar manner to Venice: timidly, and after much consultation and many delays. Not so Bhutan, which leads the way both in the amount charged as well as the speed of implementation. Referred to as a Sustainable Development Fee (SDF), tourists currently pay a fee to the government of Bhutan (recently reduced to US$100 per day) which is used for a range of development initiatives.
Measuring the success of this policy is hard, both because of the devastating effect covid had on tourist numbers as well as numerous changes to the fee (the slow recovery for Chinese tourism, as well as the Russian Ukrainian war haven’t helped either). However, based on discussions with people working in tourism in Bhutan, it’s clear the SDF has had a wide range of consequences.
There are many critics who have pointed out that the speed and enormity of the changes have left local suppliers with little time to adapt. Having stayed constant since 1991, and mere months before reopening after the pandemic and with little warning, in June 2022 the SDF was more than tripled to US$200 per person per night.
While Bhutan has never had a backpacking or budget tourism industry, the increased fee severely dented even the more expensive mainstream tourism industry. Many businesses were forced to close, and it’s rumoured as many as 20,000 Bhutanese (out of a total population of only 800,000) have permanently moved abroad, mainly to Australia. Most of those departures have been for better salaries or study opportunities abroad, but a sizeable proportion have left due to a diminished tourism sector and worse career prospects in Bhutan.
USD-paying tourist numbers are expected to hit 50,000 this year, and while that’s on track to meet government forecasts, it’s only 70 per cent of pre-pandemic levels. Subsequent discounts to the SDF suggest backtracking from the government, possibly because the levy has reduced tourist numbers too drastically.
The format of the US$200 fee was adapted in June 2023 so that four-night visas included another four free nights, and likewise seven for seven, and 12 for 18 free nights. The change didn’t last long though, as recently (from 1 September 2023) the fee has been reduced again, this time down to US$100 per person per night.
Another criticism is that the fee should be equally applied, as Indian residents currently only have to pay circa US$15 per day. This is for geopolitical reasons (Bhutan borders both India and China, and for security has very close diplomatic ties with India) but it has resulted in many tourists visiting from India. This has left some of the attractions occasionally feeling rather crowded; not quite the extensively luxurious atmosphere Bhutan was aiming for with its high value, low volume model. However, it’s still a vast improvement as Indian visitor numbers are only 25 per cent of what they were in 2019 (when they had no visa fee to pay).
However, despite the criticisms, the increased SDF has definitely also yielded positive results. Luxury hotels abound in Bhutan, from Six Senses and Amankora (with five hotels each, for now) to numerous boutique offerings such as Como Uma, Gangtey Lodge and Bhutan Spirit Sanctuary. All seem to be showing strong occupancy levels, especially during the festival season which runs from March to May and then September to December.
DrukAir (the flag carrier of Bhutan) is also reportedly doing well, having increased its fares in response to the increased wealth of its clientele – although the government is now reportedly talking to the airlines about decreasing prices to attract more tourists. It’s also reported that there have been more private jet landings in Bhutan than ever before, and the luxury tour operators are also busy and profitable.
Speaking of the benefits on the levy, Carissa Nimah, the chief marketing officer of the Department of Tourism Bhuta, says: “The Sustainable Development Fee funds a range of initiatives such as free healthcare and education for all citizens of Bhutan, supporting various environmental and conservation projects, infrastructure upgrades, upskilling the tourism sector, and much more. It’s about making sure that the benefits from tourism positively impact the whole community.
“Visitors who are drawn to the Kingdom are attracted to meaningful, authentic experiences and carefully managing tourism ensures the preservation of these unique qualities that draw visitors in the first place. While we would still like to responsibly grow our tourism numbers, we are on the right track. We welcomed 9,559 guests last month (in September 2023), which was a 34 per cent increase over our forecast for the month and most of those bookings were made before the SDF 100 revision took effect. When guests understand where their SDF money is going and why it’s so important to Bhutan, they support it.”
Personally speaking, the reason for my visit was to host a luxury trip for the tour operator of my employment, Cookson Adventures, and I was blown away by the experiences we were able to offer our guests. Our action-packed week included glamping in the verdant forests of Haa Valley, fishing and rafting in pristine rivers and hiking to the spectacular Tiger’s Nest Monastery.
In terms of cultural experiences, we watched traditional dance performances from the remote Layap tribe, participated in hotly contested archery contests, joined traditional cooking and craft classes, and toured many of the dzongs (monasteries). Bhutan felt safe, friendly and well organised, complemented by charming people and an amazing culture. My main takeaway was that it has an inherently strong product: it’s natural beauty, remarkable architecture and unique way of life mean there will still be tourist demand, no matter how high the tourist levy.
From these anecdotal viewpoints, results therefore appear mixed, and the SDF fee has undoubtedly had at least a few positive consequences. However, other countries looking to imitate Bhutan would do well to heed some of the factors that make the kingdom unique, and resist the temptation to blindly copy and paste their policies.
Nicknamed the hermit kingdom, Bhutan only properly opened to tourism in 1974, allowing a measly 30 visitors per day. Television and internet only made an appearance around the turn of the century, and the country has done well to maintain its unique culture and traditions. In many ways Bhutan is still different: it measures Gross National Happiness as well as GDP, and its abundant forests make it one of only three carbon negative countries in the world.
It has an incentive to keep visitor numbers low, both to protect its natural assets and to continue to safeguard its culture and traditions from outside influences. In 2019 it welcomed roughly 380,000 visitors (including non-fee-paying Indian tourists) which was felt by many to be the limit the country could manage. As it rebuilds after the pandemic, it is therefore trying to selectively control numbers before it reaches this upper ceiling once again.
So, what should other countries learn from Bhutan, if anything? Bhutan’s policy undoubtedly proves that a large tourist tax will indeed decrease the number of visitors (economic policy still works, even in a country as remote as Bhutan). And looking at the current global shift towards tourist taxes and levies, its clear many countries are going to continue to implement them in the coming years. The biggest challenge countries will face is how to make the tourist tax as effective as possible.
A flat tourist fee is a blunt instrument, as a standard “per person per day” fee will have a disproportionate effect on visitors who are younger or from previously disadvantaged backgrounds. Countries simply looking to reduce their tourist numbers will achieve their aims, but it’s not a fair system. After all, why should only wealthier travellers be allowed to view historic landmarks? I know I’m not the only student who backpacked parts of Europe on a shoestring budget, complete with homemade picnic lunches and some questionable youth hostel choices. Concessions may need to be made for travellers depending on their age, their country of origin and possibly even their social background, which won’t be easy to administer.
Government departments of tourist hotspots will also be aware a tourism tax won’t solve all their challenges. There are plenty of well-behaved tourists on a budget, and just as many wealthy but badly behaved visitors. A tourism tax won’t price out drunken stag-dos in Prague, or put an end to licentious full moon parties in Thailand. Policy planners looking to change the type of tourist visiting their shores will need to work a lot harder than simply implementing a fee, as they’ll need to change their image and reputation (a lot easier said than done). And as social media and television continue to highlight certain attractions and lead to mass tourism, expect to see more tourism boards try to disperse crowds to more rural areas, with Indonesia’s “5 new Balis” campaign serving as a prime example.
With Covid (hopefully) in the rearview mirror and tourism bouncing back in spectacular fashion, it’s clear governments need to act to control their tourist numbers and protect their landmarks. A good proportion of visitors (up to 40 per cent by some reports) have no problem paying a fee to help maintain and protect the areas they are visiting, provided it’s a reasonable amount and used properly. The devil will be in the detail – expect the “who, what, where and why” of these fees (and the many changes they’ll undoubtedly undergo) to be a hot topic over the next few years.