Bali’s tourism scene is facing an unexpected challenge. While international visitor numbers are booming, hotel and villa occupancy rates aren’t reflecting the same growth.
This disconnect has raised concerns within Bali’s established hospitality industry, with many pointing to the rise of unregistered villas operating outside official regulations.
Bypass Ownership Regulation
According to recent data from the Indonesian Hotel and Restaurant Association in Bali, hotel occupancy has dropped by 10-20% since early 2025, despite the surge in tourists. Compared to previous years’ typical occupancy rates of 60-70%, this shift is sparking serious discussions in the industry.
“In Bali, how is it that there appear to be many foreign tourists, but hotel occupancy is low because many of them are staying in unlicensed villas. Well, that’s the fact, which means the government is actually negligent. Why are there commercial villas in residential areas? They certainly don’t have permits,” said the Secretary General of the Indonesian Hotel and Restaurant Association, Maulana Yusran as quoted from CNBC Indonesia.
Meanwhile, Perry Marcus as Secretary General of the Indonesian Hotel and Restaurant Association in Bali suspected that these illegal accommodations originate from local residential properties that are rented out to foreigners. However, some foreign visitors then bring in other travelers to stay and charge them higher rates.
Additionally, there are cases where illegal accommodations are actually owned by foreigners but registered under the names of Indonesian citizens to bypass ownership regulations, a practice known as nominee practice, which is illegal.
Read More : Bali Crackdown on Nominee Agreements, New Regulation Coming Soon
Unfair Competition
The Bali Villa Rental Management Association (BVRMA) echoes these concerns, stating that licensed villas are particularly feeling the pinch. Occupancy rates for BVRMA members have reportedly plummeted to below 30%, a significant drop from the usual 80% expected leading up to the high season.
Kadek Adnyana, Chairman of BVRMA, highlights that these illegal operators often skirt crucial licensing and tax obligations, allowing them to offer lower rates, thereby creating unfair competition. Payments for these illegal bookings are frequently processed offshore, further impacting Indonesia’s tax revenue.
“Legal villas can cost IDR 8-9 million per night because there are fees for the Certificate of Functional Worthiness (SLF), Building Approval (PBG) and other taxes. Meanwhile, illegal villas can cost only IDR 5 million per night. Of course, tourists choose the cheap ones, especially since they don’t know which ones are legal and which ones are not,” Adnyana explained.
That’s why Adnyana also emphasized the importance of regulation and enforcement of regulations for villa rental businesses and tourism accommodation in Bali. Encouraging massive socialization to investors and property owners regarding licensing obligations such as business licenses, building permits, and taxes.
“Of course we hope more people will invest in Bali, but of course they must know and follow the existing regulations,” Adnyana added.
Read More: Illegal Villas Face Environmental Law Enforcement in Indonesia
Impact on Bali’s Economy and Reputation
While more visitors are coming, the rise of unregulated accommodations is putting real pressure on the island’s legitimate hotels and villas. These illegal stays sidestep taxes, drain revenue, and operate without proper safety standards, creating risks not just for businesses but also for tourists who unknowingly book them. There are even concerns that some of these places are being used for shady activities.
It’s not just about accommodation, reports suggest some foreign operators are running unauthorized businesses, like airport transfers, impacting local workers who depend on those jobs. Balinese local government and the Ministry of Tourism are stepping up efforts to tackle the issue. A task force is now monitoring accommodations, while authorities work on stricter rules and penalties for illegal operators. They’re also pushing booking platforms to tighten their verification process and prevent unlicensed listings.
Invest in Compliant Way
Bali’s tourism scene is definitely at a crossroads. While everyone still loves coming to the island, all these unregistered places popping up are really putting a dent in our vital tourism industry. Sorting this out means we all need to pitch in – the government, businesses, and even tourists – to make sure Bali keeps thriving and genuinely benefits everyone here.
So, if you’re a foreign business thinking about starting a rental villa in Bali, listen up! It’s super important to get things right from the start. That’s where Seven Stones Indonesia can really help. We can help you set up your villa rental business on a solid, legal footing, which means you will be contributing positively to Bali’s economy.
Ready to invest in Bali the smart, compliant way? Get in touch with Seven Stones Indonesia’s legal team today! Plus, for ongoing updates on Indonesia’s business regulations, you can simply join our Whatsapp group via this link.