Illegal Accommodation on Foreign Digital Platforms Threatens Indonesia's Hotel Industry
Illegal accommodation listed on foreign digital platforms is considered a threat to the sustainability of Indonesia's hotel industry. The Ministry of Tourism has stated that the proliferation of unlicensed lodgings is one of the factors behind declining hotel occupancy rates at popular tourist destinations.
Deputy for Industry and Investment at the Ministry of Tourism, Rizki Handayani Mustafa, said the illegal practice is occurring on a massive scale, from Bali to other major cities. Numerous villas and private residences have been converted into accommodation without proper legal standing.
Rizki explained that the situation has made tourism industry operators at premier destinations and major cities across Indonesia anxious about further occupancy declines. Foreign online travel agents (OTAs) offer large discounts or cut-rate prices as a strategy to attract customers.
She gave the example of platforms applying discounted rates based on agreements with hotel operators, particularly during the low season or when many hotel rooms go unsold, whilst charging normal market rates during high season.
"Their presence not only creates unfair competition but also threatens the sustainability of the local tourism ecosystem that has complied with regulations," Rizki said in an official statement in Jakarta on Thursday, 22 May 2025.
The Ministry of Tourism has coordinated with the Ministry of Investment and Downstream Industries/BKPM to review business permits, particularly property businesses that in practice function as unlicensed accommodation. She expressed hope that a solution would be found promptly.
In addition, the Ministry of Tourism has established cooperation with the Ministry of Communications and Digital Affairs to block digital platforms that have not obtained permits as Electronic System Operators (PSE) as stipulated in Ministerial Regulation No. 10/2021. This effort forms part of broader measures to create fair business competition. Both parties will also open constructive dialogue with foreign platforms to find solutions to the complaints of Indonesian tourism operators.
"Foreign platforms must comply with Indonesian regulations. They are required to have a Permanent Establishment (BUT), be registered with a Business Identification Number (NIB), and comply with national taxation and legal systems," she said.
The Indonesian Hotel and Restaurant Association in Bali announced last April that average occupancy had declined by 10 to 20 per cent since the beginning of 2025, despite high foreign tourist arrivals on the island. Investigations revealed that many tourists opted to stay at illegal villas that do not pay taxes, enabling them to offer cut-rate prices.
The Bali Provincial Government has established a Tourism Accommodation Oversight Task Force to tackle the proliferation of illegal hotels and villas, whilst encouraging other regional governments to prevent similar situations in their territories.
The Ministry of Tourism has also urged hotel operators to diversify their markets by targeting communities with high purchasing power, enriching the guest experience, and leveraging technology for smarter promotional strategies.
Deputy for Industry and Investment at the Ministry of Tourism, Rizki Handayani Mustafa, said the illegal practice is occurring on a massive scale, from Bali to other major cities. Numerous villas and private residences have been converted into accommodation without proper legal standing.
Rizki explained that the situation has made tourism industry operators at premier destinations and major cities across Indonesia anxious about further occupancy declines. Foreign online travel agents (OTAs) offer large discounts or cut-rate prices as a strategy to attract customers.
She gave the example of platforms applying discounted rates based on agreements with hotel operators, particularly during the low season or when many hotel rooms go unsold, whilst charging normal market rates during high season.
"Their presence not only creates unfair competition but also threatens the sustainability of the local tourism ecosystem that has complied with regulations," Rizki said in an official statement in Jakarta on Thursday, 22 May 2025.
The Ministry of Tourism has coordinated with the Ministry of Investment and Downstream Industries/BKPM to review business permits, particularly property businesses that in practice function as unlicensed accommodation. She expressed hope that a solution would be found promptly.
In addition, the Ministry of Tourism has established cooperation with the Ministry of Communications and Digital Affairs to block digital platforms that have not obtained permits as Electronic System Operators (PSE) as stipulated in Ministerial Regulation No. 10/2021. This effort forms part of broader measures to create fair business competition. Both parties will also open constructive dialogue with foreign platforms to find solutions to the complaints of Indonesian tourism operators.
"Foreign platforms must comply with Indonesian regulations. They are required to have a Permanent Establishment (BUT), be registered with a Business Identification Number (NIB), and comply with national taxation and legal systems," she said.
The Indonesian Hotel and Restaurant Association in Bali announced last April that average occupancy had declined by 10 to 20 per cent since the beginning of 2025, despite high foreign tourist arrivals on the island. Investigations revealed that many tourists opted to stay at illegal villas that do not pay taxes, enabling them to offer cut-rate prices.
The Bali Provincial Government has established a Tourism Accommodation Oversight Task Force to tackle the proliferation of illegal hotels and villas, whilst encouraging other regional governments to prevent similar situations in their territories.
The Ministry of Tourism has also urged hotel operators to diversify their markets by targeting communities with high purchasing power, enriching the guest experience, and leveraging technology for smarter promotional strategies.