Illegal lodging in Indonesia is posing a serious threat to the long-term sustainability of the country’s tourism industry. Government officials and tourism stakeholders have raised concerns over the increasing number of unlicensed accommodations operated by foreign nationals, particularly in Bali and other major tourist destinations. These unauthorized operations often bypass taxes, safety standards, and local regulations, creating unfair competition for licensed businesses.
Rising Concern Over Unlicensed Rentals
The number of villas, homestays, and private residences being illegally rented to tourists has grown rapidly in recent years. These properties, often listed on foreign digital platforms, operate without proper licensing or legal oversight. As a result, legitimate businesses that comply with Indonesian tax and safety standards are struggling to remain competitive.
“Lodgings such as homestays, villas, and other accommodations that pay taxes and follow regulations are negatively impacted when illegal practices are left unchecked. This is clearly unfair. All lodging businesses should be subject to the applicable licensing and supervision systems,” said Deputy Chair of Commission VII of the House of Representatives, Chusnunia Chalim.
Government Responds to Illegal Lodging in Indonesia
In response to these issues, Indonesian authorities are stepping up efforts to curb illegal lodging in Indonesia. Commission VII has called for firm but proportional enforcement against foreign nationals operating without permits.
The Ministry of Tourism is also coordinating with the Ministry of Investment and other government bodies to review business licensing procedures, especially in the property sector.
Chusnunia emphasized the importance of ensuring fair contributions to the economy. “This issue is not just about rule violations but also about maintaining balance and trust among business players. We want to ensure that all business players, whether local or foreign, contribute fairly to regional development,” she said, as reported by Antaranews.com.
The government also encourages collaboration between local governments, tourism associations, and immigration offices to strengthen oversight and data collection of lodging providers, particularly those using online platforms.
Role of Foreign Platforms and Regulatory Gaps
The rise of unlicensed accommodations has been fueled in part by online travel agents (OTAs), particularly foreign platforms that market these illegal listings. These platforms often use aggressive pricing tactics, including steep discounts and parity rate enforcement, which prevent local hotels from offering lower prices outside their systems.
“Foreign platforms must comply with Indonesian regulations. They are required to establish a Permanent Business Entity, register with a Business Identification Number, and adhere to national tax and legal systems,” said Rizki Handayani Mustafa, Deputy Minister for Industry and Investment at the Ministry of Tourism.
Authorities are working with the Ministry of Communications and Digital to block unregistered foreign platforms under Regulation No. 10/2021. Officials have also expressed willingness to engage in constructive dialogue with OTAs to protect local tourism businesses.
Impact on the Legal Tourism Ecosystem
The unchecked spread of unlicensed rentals is weakening Indonesia’s regulated tourism ecosystem. Many legal hotels report falling occupancy rates due to unfair competition. Industry players worry that aggressive discount strategies by foreign OTAs, sometimes referred to as “money-burning” tactics, are damaging the long-term viability of the sector.
Rizki explained, “Their existence not only fosters unfair competition but also threatens the survival of the local tourism ecosystem that complies with regulations.”
Ensuring Fair Growth in Tourism
To protect the integrity of the tourism industry, government officials urge stronger regulation, better digital oversight, and fairer business practices. The Ministry of Tourism supports initiatives such as Bali’s tourism lodging task force and encourages other regions to adopt similar measures.
To support legal businesses, the ministry also encourages hoteliers to diversify their markets, target high-spending guests, and adopt smarter promotional strategies. “We continue to promote innovation and marketing that targets the right audience. Cross-sector intervention is also being carried out to maintain the sustainability of tourism businesses in Indonesia,” Rizki concluded.
Source: antaranews.com, industri.kontan.co.id
Image: Scott Biales / Alamy
