The Silent Crisis in Hospitality

Written by: Md Golam Mostafa Tuku

Editor-in-Chief & Chairman 

Reference: RAJUK Notice on Unauthorized Commercial Activities (Dated: 06/10/2025)

1. Executive Summary

On October 6, 2025, the Capital Development Authority (RAJUK) issued an urgent directive mandating the closure and removal of all "unauthorized commercial activities" in residential zones like Gulshan, Banani, Baridhara, and Uttara within 30 days. While the notice targets guest houses, restaurants, and hotels to restore residential sanctity, a deeper analysis reveals that this "scorched earth" policy threatens to cripple a vital artery of Bangladesh’s economy.

This report argues that indiscriminately shutting down compliant boutique hotels will destabilize a sector that contributes significantly to the national GDP, exacerbate the skilled labor crisis, and contradict global urban planning standards.

2. Economic Context: Kicking an Industry While It’s Down

The timing of this notice could not be worse. The hospitality sector is currently the backbone of our service economy, yet it remains fragile. According to recent data, the tourism and hospitality sector contributes approximately 3% to Bangladesh's GDP, a figure that significantly trails our neighbors like India and Nepal. While the potential is there, the sector is struggling to recover from the political instability and booking cancellations witnessed in mid-2024.
 
 A "Fragile" Recovery: In 2024, earnings from foreign tourists actually fell to $440 million from $453 million the previous year. A blanket ban on the very establishments that service foreign NGO workers, mid-level diplomats, and business travelers—who often prefer the intimacy of boutique hotels in Gulshan over large chains—will likely drive this figure down further.
 
The Multiplier Effect: The "Hotel and Restaurant Survey 2020" by the Bangladesh Bureau of Statistics showed that the gross value added by this sector skyrocketed from BDT 119 billion in 2009-10 to BDT 879 billion in 2019-20. Shutting down these businesses deletes a decade of economic progress overnight.

3. The "5-Star Fallacy" vs. Market Reality

There is a prevailing myth that closing smaller hotels will redirect revenue to the 5-star hotel industry however the data at hand suggests otherwise.
 
 The "Missing Middle": 5-star hotels in Dhaka operate at a price point (often $200+ per night) that is inaccessible to the vast majority of travelers. The boutique hotels in residential zones fill the critical "mid-market" gap ($50-$120), servicing the budget-conscious business traveler while giving them class service at the hearts of our capital.
 Investor Reality: Local investors favor these smaller establishments because they are economically viable. Mid-range hotels typically offer a ROI of 12-15%, compared to the slower, capital-intensive returns of luxury 5-star properties. By banning them, RAJUK is effectively punishing the most efficient segment of the hospitality market.

Displaced Revenue: If these 3-star and boutique options are removed, travelers will not "upgrade" to 5-star hotels; they will simply shorten their trips or they will opt for rental options which would contribute far less to our country’s economy . Even worse they might choose alternative destinations like Bangkok or Kathmandu, where accommodation options are diverse and plentiful.

4. Global Urban Planning: We Are Moving Backwards

RAJUK’s strict segregation of "residential" vs. "commercial" is an outdated mid-20th-century concept while modern global cities embrace Mixed-Use Zoning.
 
We can take a look at some of the global precedents that display this in action :
 
Paris & London: In cities like Paris, zoning is often "General Urban," allowing boutique hotels to coexist next to apartments, creating vibrant, walkable neighborhoods.
The Langsuan area in Bangkok is a prime example where high-end residential units and hospitality businesses (like the Kimpton Maa-Lai) are woven together, creating a "self-contained ecosystem" that boosts property values.

The Verdict: Segregation creates "dead zones" at night and traffic congestion during the day whereas Mixed-use neighborhoods are the global standard for safety and community vibrancy.

5. The Human Cost

The hospitality sector is a massive employer, and this ban puts millions of livelihoods at risk and will put a significant dent on our employment rate specifically the skilled worker percentage. The travel and tourism sector is estimated to support over 2.4 million jobs in Bangladesh. These are not just unskilled jobs; they include hotel managers, chefs, front-desk officers, and English-speaking concierge staff. If boutique hotels in Banani and Gulshan are shuttered then these skilled workers will face a saturated local market. The inevitable result is migration and we will lose our best-trained service professionals to hotels in the Middle East and Southeast Asia.
 
While they may send back remittance, we lose the value of their daily labor. We are effectively training workers to build other countries' tourism industries because we refuse to let them work in our own by introducing decades old regulations in place.

6. Recommendation: Regulation Not Erasure

The current RAJUK notice repeats the mistakes of the 2016 post-Holey Artisan eviction drives, which were criticized for being hasty and inconsistent.

We propose a "Smart Compliance" Framework:

Differentiate by Quality: Do not treat a high-safety boutique hotel the same as an illicit spa. Introduce a "Diplomatic Zone Hospitality License" for establishments that meet strict fire safety, hygiene, and security protocols.
Grandfathering Clause: Allow establishments that have been operating for more than 5 years with a clean tax and safety record to remain, provided they pay a special "commercial impact fee" to the city corporation.
Target the Real Problem: Focus enforcement resources on the establishments that are actual nuisances—those without fire exits, those selling illicit goods, or those causing noise pollution—rather than punishing the entire industry.

Aviation & Tourism Times stands with the compliant, safe and professional boutique hoteliers of Bangladesh. We urge the Ministry of Civil Aviation and Tourism to intervene and work with RAJUK to revise this damaging policy.