Strange! Despite Holiday Season and Tourist Influx, Hotel Occupancy Remains Low

The hospitality industry has yet to fully reap the benefits of the long holiday season. Industry players explained that hotels can generally only enjoy significant revenue increases when occupancy rates surpass higher thresholds. If occupancy remains around the 50% mark, hotels have limited options to raise room rates.

“If the average occupancy is still in the 50% range, the increase is not felt by hotels. Usually, it only has an impact once the average occupancy reaches above 70%,” said Maulana Yusran, Secretary General of PHRI, to CNBC Indonesia on Wednesday.

PHRI identifies one of the factors hindering the distribution of tourist benefits to the hotel industry as the prevalence of accommodations operating outside the official licensing system. This situation leads some tourists to choose non-formal lodgings that are not recorded as hotels.

“The challenge is the abundance of illegal accommodations. They choose not to stay in hotels, perhaps opting for boarding houses or other types of accommodation that are currently widespread,” he said.

As a result, the increase in the number of tourists is not automatically followed by an increase in hotel occupancy or regional revenue from the tourism sector. This is despite the fact that hotels are businesses that contribute directly to regional original income (PAD) through taxes and employment.

“An increase in visits should be accompanied by an increase in occupancy, because hotels certainly contribute to PAD,” said Maulana.

This condition is considered an anomaly amidst data showing a continuous growth trend in foreign tourist arrivals. According to PHRI, the increase in tourist spending has not been reflected evenly across the hotel business. Only certain hotels with specific market segments are able to feel a greater impact from the increase in tourist visits.

“Perhaps certain hotels are benefiting because they possess their own unique attractions. But if we speak about an entire province as a whole, the impact is certainly not felt,” said Maulana.

Therefore, PHRI believes the main challenge in tourism today is not just increasing the number of tourists, but ensuring that every growth in visits truly provides an economic impact that is felt by official businesses and local governments. Field conditions indicate that the impact on the hotel business remains limited.

“The situation on the ground does not show a very significant impact on hotels. It is true that international tourists are increasing, but the challenge we face is how to anticipate so that these tourists also contribute to PAD,” concluded Maulana.