Oversupply Meets Soft Demand

Bhutan has seen a marked rise in hotel supply—especially certified star-rated properties—without matching tourist demand. While luxury and boutique properties still command attention, many three-star hotels, particularly in Thimphu, Paro and Punakha, are operating far below capacity. Occupancy rates for some mid-tier hotels have dropped sharply, forcing heavy discounts just to stay afloat.

Tourism Recovery is Sluggish and Uneven

Tourist arrivals are increasing year-on-year: for instance, Bhutan saw about +31.7% more arrivals in H1 2025 over H1 2024, which itself had surged over pre-pandemic levels.
However, total numbers are still lagging behind 2019 peaks. Some key markets (notably India) dominate the arrival mix, leaving many regions under-visited.
Revenue from the Sustainable Development Fee (SDF) has risen due to increased arrivals, particularly in Q4 2024. But hoteliers argue that higher fees and flexible visa or tour package policies are contributing to lower occupancy and price sensitivity among travelers.

Mid-Tier Hotels are Hit Hardest

Three-star hotels are squeezed from both ends:

Key Policy & Regulatory Tensions

Implications for B2B Travel Agents, Airlines & Corporate Travel Planners

What’s Changing: Bright Spots & Opportunities

Conclusion & Takeaways for B2B Travel Industry

Bhutan stands at a cross-roads. While tourist numbers are rising again, mid-tier hotels—especially three-star properties—are caught in a tough squeeze from oversupply, regulatory complexity, and shifting traveler expectations. For travel agents, airlines, and corporate planners operating in or with Bhutan, strategic agility will matter more than ever.

Key takeaways:

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