Hotel Entrepreneurs Point to Local Governments as Responsible for Eradicating Illegal Lodgings
The Indonesian Hotel and Restaurant Association (PHRI) believes that the rise of illegal accommodations in various regions cannot continue to be the sole burden of the central government. Business owners argue that district and city governments are the parties with the direct authority to supervise business activities within their respective territories.
PHRI Secretary General Maulana Yusran stated that while the business licensing system is now integrated nationally through the Online Single Submission (OSS) system, operational oversight remains the full responsibility of local governments once permits are issued. “The issue of supervision actually falls within the domain of local governments. When we talk about the nationally integrated OSS for business licensing, those responsible for supervising businesses within their territory are the district and city governments,” Maulana told CNBC Indonesia on Wednesday.
Local regions have a direct interest in ensuring all operating businesses comply with applicable regulations, as the accommodation and restaurant sectors are vital sources of Regional Original Income (PAD). He noted that an increase in tourists should ideally lead to higher hotel occupancy rates and local tax revenue, but this is difficult to achieve if many accommodations operate without official permits. “If you ask why this is happening, the responsibility lies at the second-tier level. Because it is the second-tier local government that enjoys the PAD. So, do not keep blaming the central government,” he added.
Maulana emphasised that the central government has provided the regulations and licensing systems that serve as the legal basis for businesses. Therefore, the effectiveness of field enforcement depends heavily on the seriousness of local governments in conducting supervision. PHRI also warned that unlicensed businesses not only create unfair competition but also reduce the economic benefits intended for local communities through taxes and job creation.
These concerns from PHRI arise amidst government efforts to tighten supervision of tourist accommodations lacking official permits. The Ministry of Tourism has noted that approximately 1,600 tourism accommodation businesses still lack complete licensing, despite being marketed through Online Travel Agent (OTA) platforms. The government has granted businesses a two-month window to complete their legal documentation; accommodations that fail to meet requirements will be removed from OTA platforms starting 1 August 2026.
Minister of Tourism Widiyanti Putri Wardhana stated that this policy aims to create a more orderly, fair, and sustainable tourism industry, while also enhancing tourist protection and strengthening digital-based tourism governance. As part of this restructuring, the Ministry of Tourism is developing a verification system based on an Application Programming Interface (API) that will connect with the OSS and OTA platforms. This system will automatically verify business legality using Business Identification Numbers (NIB), Indonesian Standard Industrial Classification (KBLI), and Business Activity Numbers (NKU).
If all data is validated, accommodations can continue to be marketed via digital platforms; otherwise, they will be rejected or removed. The government aims to launch the API system by June 2027, after which all OTA platforms will be required to ensure only officially licensed accommodations are visible to consumers. Since March 2025, the Ministry of Tourism, local governments, and nine OTA partners have been conducting socialisation and assistance for business owners. As a result, the number of accommodations with official NIB has increased by 46.5% as of May 2026, with the villa category recording the highest growth at 76.4%.