The Indonesian hospitality industry is reeling from the effects of a government-wide budget efficiency policy. Hotels and travel agencies that once depended on government events and civil servant travel are now scrambling to stay afloat, cutting staff and shifting strategies in the face of declining revenue.
The downturn began after the issuance of Presidential Instruction (Inpres) No. 1 of 2025, which mandates strict expenditure controls across both the national and regional budgets. Since then, meeting rooms and ballrooms once filled with official events have fallen silent.
“The result (of budget efficiency) is staff reductions because there’s simply not as much demand anymore. All businesses now have to adjust to market conditions,” said Maulana Yusran, Secretary General of the Indonesian Hotel and Restaurant Association (PHRI), on Saturday, May 10, 2025.
According to him, the labor cuts are only a short-term solution. If the current trend continues, hotels may face more significant losses down the line. To survive, Maulana suggests that businesses must pivot quickly. One key solution? Shifting from government clients to tourist markets.
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That shift is already being considered by many operators. Targeting domestic and foreign tourists through tourism promotion efforts could help fill empty rooms and replace lost event revenue. “If we don’t adapt by finding a new market, the damage will get worse,” Maulana warned.
The damage has already taken root across key cities. Hotels in Bandung, Semarang, Surabaya, and Makassar—areas that typically benefit from government-related travel—are reporting fewer bookings and shrinking income.
Data from Statistics Indonesia (BPS) show a national trend: occupancy rates at star-rated hotels dropped from 48.38% in January 2025 to 47.21% in February, a decline of 1.17 percentage points month-to-month.
In some cases, the financial toll is staggering. Bumi Wiyata Hotel in Depok, West Java, revealed that it suffered losses of over IDR 1 billion in just the first three months of 2025. The drop in income has been linked directly to the government’s budget trimming.
The hotel’s management says the main blow came from the sudden decline in school graduations, seminars, and training events—activities that once filled its calendar. Now, with clients pulling back under pressure to cut costs, the hotel’s financial health is rapidly deteriorating.
A mix of macro and microeconomic challenges, compounded by reduced spending from both government institutions and private partners, has left the industry vulnerable. For many, the only path forward is reinvention—and fast.
As the hospitality sector faces mounting pressure, the urgent call is for collaboration between businesses and government to explore new markets and revive demand. If the industry fails to pivot quickly, more closures and layoffs may be on the horizon.
