As the tourism industry expands, the number of hotels continues to rise. According to the Annual Tourism Snapshot 2025, hotel numbers have increased by 43 per cent since 2019. However, this growth has not translated into stronger business performance. Many hoteliers, particularly those running three-star hotels, are struggling to keep rooms occupied and repay their loans.
Ugyen Dorji has been running a three-star hotel at Olakha in Thimphu for the past five years. Today, not a single tourist occupies his hotel; all the rooms sit empty. He says even during the peak season, occupancy remains low, a pattern that has persisted despite increased marketing and a steady rise in tourist arrivals.
Business began to slow down after the pandemic. As more hotels opened across the country, competition intensified and reservations became harder to secure. Ugyen says the market feels crowded, with too many rooms chasing too few guests.
“If we count the hotels, there are almost 400 3-star and below hotels. Guests in these hotels are mostly regional tourists. About 30 per cent of these guests go to 4-star and 5-star hotels. Only around 70 per cent of them stay in hotels below 3-star hotels. As the number of hotels below 3-star is high, it is even harder to get 2 to 3 guests in a day,” added Ugyen.
He entered the hotel business in 2018 after returning from Australia, hopeful about Bhutan’s growing tourism sector.
In the early days, the hotel performed well. Rooms filled quickly during peak seasons, and regional tourists kept occupancy steady even during lean months. That momentum has now faded.
Today, he owes banks about Nu 80 M. The father of six says that, at the current pace of business, he could take another 100 years to clear the debt.
His dreams, he says, are now overshadowed by the struggle to sustain the business.
Ugyen said, “After going abroad, working through difficult times, sweeping and cleaning other’s toilets, making money, coming back and buying a land to establish the hotel, I’m worried if it gets seized by the bank. I’m worried about my family; my wife, six children and the staff and their families. Hundreds and thousands would be affected.”
His situation reflects a wider strain across the industry. As of September last year, the hotel and tourism sector recorded the highest loan deferrals, amounting to nearly Nu 12bn.
To attract visitors, some have reduced room rates while including additional services in the existing price.
Sonam Dolma, the owner of Kuku Grand in Gelephu said, “I have been applying for a working capital through an overdraft loan since last year, but I didn’t get it. I researched thoroughly about that afterwards. Only then did I know that the interest on our loan deferred during the COVID-19 period was added to the principal amount. After it’s added as a principal, we really can’t have access to the OD loan.”
“While the government and banks granted loan waivers to revive the hotel industry during the COVID-19 period, loan interests were accumulated. Charging interest on that accumulated interest is not reasonable,” said Namgay Wangchuk, the owner of Lhaki Hotel in Phuentsholing, Chhukha.
Kesang Phuntshok, the owner of Hotel Vara in Punakha said, “After COVID-19, we are in a position where we don’t know what to do. Even the brain is not working. Initially, I thought of spending my life running this business, but now we are struggling.”
The government’s announcement of a four per cent loan interest subsidy under the Economic Stimulus Programme, with banks contributing one per cent for a year, has brought some relief.
Still, many say the support is not enough to reverse the downturn.
The impact extends beyond hotel owners. Employees who depend on the sector for their livelihoods also worry about job security as businesses struggle to stay afloat.
Ningma Lama, a receptionist at the Hotel Ugyen said, “It has been some time since we’ve seen guests here. As a result, employees are not fully engaged and often come to work with no tasks to do before leaving for home. With no guests, we do not get the opportunity to learn or gain new experiences. Consequently, staff turnover is higher.”
Many three-star hotels relied heavily on Indian tourists, who did not have to pay the Sustainable Development Fee until 2023. Hoteliers say policy changes, including the introduction of the SDF, affected visitor numbers.
Ugyen Dorji said, “Regardless of which government comes to power, there is a need to consult the private sector and develop relevant policies so that the sector is not adversely affected. Even after policies are implemented, governments have rarely monitored whether they are actually benefiting the people.”
According to the Hotel and Restaurant Association of Bhutan, tourist arrivals increased last year, but the growing number of hotels often goes unnoticed.
The country had about 309 hotels in 2019. The number rose to 442 last year. The association says Paro and Thimphu are already saturated, making it harder to maintain service quality. It calls for greater focus on developing destinations beyond Punakha.
The association also urges the government to support the sector through policy adjustments. They suggest targeted waivers for longer stays or larger groups, lower airfares, and reduced monument fees to attract more visitors.
The Department of Tourism stated that with the growing number of hotels, achieving full occupancy is unlikely. It also proposed a moratorium on new hotel construction in the past, but hoteliers did not accept the suggestion.
For now, each empty room reminds hoteliers like Ugyen of the uncertainty facing the hotel industry. Still, they say they will continue to hold on, hoping that stronger policies and a steady return of visitors will bring life back to hotels.
Kelzang Chhophyel
Edited by Sangay Chezom
