Bali Hotel Occupancies Decline as Luxury Villas Flourish

Overview of the Current Situation

Recent reports indicate that despite a significant influx of foreign tourists to Bali, hotel occupancy rates are plummeting. Between January and February 2025, the Indonesian island welcomed over one million international visitors, reaching a total of 1,013,700 from 20 different countries. An emerging trend reveals that many of these tourists are opting for alternative accommodations, primarily luxury villas and homestays, rather than traditional hotels.

Understanding the Shift in Accommodation Preferences

The shift away from hotels to villas and homestays in Bali is becoming increasingly pronounced. Tjokorda Oka Artha Ardhana Sukawati, commonly known as Coke Ace, who serves as the chairman of the Indonesian Hotel and Restaurant Association (PHRI), has addressed this emerging preference. He noted that while villas and homestays began to gain popularity in the 1950s in Ubud Village, they have evolved into a highly sought-after accommodation choice today.

Coke Ace pointed out that the provincial government has instituted regulations surrounding the management and operations of these accommodations to promote lawful practices and community benefits. He emphasized that this form of tourism is essential for local economic development. Community-based tourism allows local residents to benefit directly from the influx of visitors.

Concerns Over Global Competition and Local Impact

However, the growth in villa and homestay popularity has also raised concerns within the hotel industry. Coke Ace expressed that many luxury villas and homestays are now owned and managed by non-local interests. As these properties predominantly capitalize on international brand recognition and larger capital investments, they often compete unfairly with local, licensed hotels which bear higher operational costs including taxes.

He articulated frustrations with the disparity in tax obligations, as many homestays and villas, particularly those that can be categorized as luxury properties, enjoy lower tax rates, putting them at an advantage over large hotels. This situation has become alarming for traditional hoteliers, who find it increasingly difficult to compete for guests when the alternative accommodations can undercut them both financially and in terms of guest offerings.

Regulatory Challenges

Coke Ace has implored that all sectors of the accommodation industry, including luxury villas and homestays, adhere to established rules and regulations. He advocates for equitable practices regarding licensing, spatial planning, market segmentation, and pricing. Such measures are crucial to maintaining a balanced tourism landscape that benefits all local stakeholders and ensures sustainable growth for Bali’s tourism sector.

Conclusion

As the tourism landscape in Bali continues to evolve, the disparities between the hotel industry and the burgeoning villa market will likely remain a point of discussion among stakeholders. The need for regulatory oversight and community-based development remains key to ensuring that Bali’s tourism infrastructure serves both travelers and its local economy effectively.