SDF discounted by 50 % to 100 USD!
In the surprise announcement, Bhutanese authorities discounted Sustainable Development Fee from 200 USD per person per day to 100 USD per person per day. New policy is supposed to be valid till the end of August 2027.
Is this the final correction of the contested tourism reform, or can we expect some more tinkering?
Read our blog to see the answers!
What is SDF and how it developed?
Sustainable Development Fee (SDF) is the direct tax Bhutan is levying from tourists. Tourism Levy Act 2022 did set it to 200 USD per person per day for adults and 100 USD per day for kids from 6 to 11 years. Children below 6 don't need to pay SDF. This is valid for all nationalities except for Indians, who have their own tariff (see here).
Prior to pandemic, SDF was only 65 USD per person per day. Also, it was subject to progressive duration discount (50 % after 8th night and 0 SDF after 14th night). Back then, SDF was part of so-called Minimum Daily Package Rate (MDPR) which included hotel cost, guide, vehicle, and meals. MDPR could range from 180 to 290 USD per person per day depending on season, number of people in group or whether you book directly or through overseas agency. After the pandemic as part of controversial tourism reform, MDPR was abolished and only SDF remained.
In June 2023, due to dwindling tourism arrivals, Bhutanese authorities announced short-lived duration discount schemes on SDF to attract visitors back. On 25 August 2023, this scheme, criticized as complicated and insufficient, was scrapped and flat 50 % discount on 200 USD was introduced.
Will 100 USD SDF bring tourism back?
Yes, but it will take time.
Autumn 2023 is basically lost, only small numbers of individual tourists might be attracted with the new incentive. But for the spring and autumn 2024, we can expect the tourist numbers to start increasing steadily.
Getting back to pre-pandemic numbers would still be a struggle. Many foreign travel agencies did stop promoting Bhutan after the unreasonable price hike, and it might take time to regain their trust. Also, right before pandemic, Bhutan was finally managing to liberate itself from the image of country, where only the rich people can go. Tourism reform got us back by more than 10 years and spreading the message, that Bhutan actually can be visited, if you really want to, will take a time.
Comparing to pre-pandemic SDF of 65 USD, increase to 100 USD means more than 50% price hike. However, since the SDF was not being raised since 1990s and given the rampant inflation of the last few years, we believe that this level is reasonable.
I already got visa, can I get refund?
According to Bhutan Tourism website FAQ, you can cancel your issued visa and reapply. The difference in the SDF would be refunded back to account from which you sent the payment or your tour operator will reimburse you.
After few days of faltering, the Department of Immigration also announced that they won't be charging 40 USD per person visa fee again, which is reasonable decision and welcome news. See DoI Visa FAQ, especially question 13 to 16, for details.
Can we expect some more changes to SDF?
Yes, and we should not only expect. Everyone who has Bhutan tourism and Bhutanese economy in mind should demand it!
Pre-pandemic SDF was subject to progressive duration discount. This was to incentivize longer stay. The longer you stain in Bhutan, the farther you get. 80% of all tourists will stay maximum 7 nights in Bhutan, visiting just Paro, Thimphu, Punakha and Wangdue districts. Bhutan needs to attract people for longer stays in order to get visitors to Trongsa, Bumthang and eastern and southern Bhutan. However, with flat 100 USD, longer stays are severely punished compared to pre-pandemic state. See the graph below:
As you can see, due to duration discount, old SDF could reach to maximum of 715 USD on 14th night and would not increase further by even a dollar. While the current flat 100 USD is reaching 3000 USD on the 30th night and will keep increasing by 100 USD per night until the maximum permitted duration on tourist visa of 90 days is reached.
This is obviously great discouragement for the longer stays in Bhutan. It needs to be stressed that Bhutan Tourism Levy act requires Bhutan's Department of Tourism to strengthen and implement strategies to ensure that the benefits of High Value Low Volume tourism is shared across all regions of the country.
Thus, Department of Tourism not only should, but it has to come with policies which will enable visitors to stay longer and visit the far-flung places.
We would like to propose following scheme, which will allow government to get benefit of increased SDF from the short visit, but will keep the cost of longer visit on almost same levels as before covid. It would be 50 % discount after the 5th night and 0 SDF after the 10th night. See the graph below:
Since the great majority of the visiting tourist will be charged increased SDF, Bhutan's government cashier will get its revenue. At the same time, the fringe number of the people staying longer and reaching to more far away places, won't be punished for their desirable choice.
We hope DoT will consider similar discount scheme and maybe, in coming 3 months or even earlier, such definitive fine-tuning of contested SDF policy, might be delivered.
Keep fingers crossed for that with us!