The tourism industry in Indonesia is facing mounting pressure as the hotel sector struggles. Budget cuts, mainly from reduced government event spending, have contributed to falling occupancy rates. Industry leaders are calling for stronger support to prevent further decline and revive momentum.
Tourism Industry Recovery Faces Ongoing Challenges
West Java’s hotel occupancy rates have dropped significantly since January 2025. According to Statistics Indonesia (BPS) West Java, the combined occupancy rate (TPK) in March stood at 37.88%, a decrease of 2.20 percentage points from January. Starred hotels recorded a TPK of 45.51%, while non-starred hotels were much lower at 21.33%. The prolonged Eid al Fitr holiday helped soften the decline, but concerns remain about future performance.
“As expected from the start, with budget efficiency in tourism, particularly affecting the Room Occupancy Rate [TPK], especially five-star hotels which are closely tied to government event organization,” said Acting Head of BPS West Java, Darwis Sitorus, as reported by Bisnis.com. “We’ll see what happens next month, because from January to February alone, the TPK has already dropped by 4.61%.” He added.
Tourism Industry Recovery Faces Ongoing Challenges
The sharp decline in occupancy is partly due to fewer public holidays and a steep reduction in government spending on meetings, incentives, conferences, and exhibitions (MICE). These activities traditionally support high room occupancy, especially in premium hotels. In addition to lower occupancy, businesses are concerned about weakening consumer purchasing power.
Darwis noted that the limited number of holidays in February and restrictions on government spending had a clear impact. “The lack of public holidays in February 2025 and the possible influence of government budget restrictions on MICE activities have had a significant impact on the drop in TPK figures,” he said.
Hotel Businesses Urge Government Spending Execution
Hotel industry leaders are urging the government to promptly execute its planned spending to support the struggling hospitality sector. The Indonesian Hotel and Restaurant Association (PHRI) emphasized the importance of government events in driving hotel revenue.
“It’s simple—we’re just asking the government to execute its spending. If they want to cut by 50%, that’s fine, but just execute the spending,” said PHRI Chairman Hariyadi BS Sukamdani as cited by Tempo.co. He stressed the urgency of implementing budgets for meetings, outreach programs, and other hotel-based activities.
Hotels have lost a substantial portion of their revenue base as government reservations have dried up. “Everyone is scrambling, the government market has vanished. We ask that spending be executed in the second quarter,” he added.
Data Highlights the Sector’s Decline
BPS data underscores the growing pressure on the hospitality industry. The significant drop in occupancy rates reflects the broader impact of government budget policies. Starred hotels, which typically host official events, are bearing the brunt of these changes. Without intervention, more hotels may struggle to stay afloat.
Reservations from government agencies are notably absent this year. PHRI Secretary General Maulana Yusran explained, “Usually by early Q1, they’ve already made reservations, just waiting to implement once the budget is disbursed. But now, it looks like reservations are almost non-existent.”
Strategic Aid Can Boost Tourism Industry Recovery
Tourism industry recovery can still be achieved with targeted action. Industry leaders suggest that strategic government aid, including timely budget execution and collaborative programs, can reinvigorate the sector. Early planning and public-private partnerships could stabilize hotel performance.
“Hopefully, the government will reconsider whether this policy should be reviewed. Even if there’s efficiency, is there a solution, especially for the hotel sector?” Darwis stated. He emphasized the potential of tourism to contribute to the national growth target of 8%.
A Call for Collaborative Action
The recovery of Indonesia’s hospitality industry cannot rest solely on business players. As Apindo Chairwoman Shinta Widjaja Kamdani pointed out, “We believe that recovery in the hotel and tourism sector cannot be left entirely to business players.”
To ensure a strong tourism industry recovery, coordinated efforts between the public and private sectors are essential. With effective support and timely execution, the hospitality sector can return to its role as a key driver of national economic growth.
Source: tempo.co, bisnis.com
Image: Getty Images