Budget cuts by the Indonesian government leading to widespread cancellation of official meetings and travel have left hotels across the country – particularly those outside of Java Island – grappling with significant revenue loss.

Data from the Indonesia Hotel and Restaurant Association (IHRA) showed that budget cuts could result in losses of nearly 25 trillion rupiah (US$1.5 billion) for the national accommodation and hotel industry. This includes 16.5 trillion rupiah from room occupancy and 8.2 trillion rupiah from meetings and events.

Hariyadi Sukamdani, chairman of IHRA, stated that hotels outside Java have been significantly impacted, as many rely on government contracts for up to 70 per cent of their revenue.

Anggiat Sinaga, chairman of the IHRA South Sulawesi chapter, shared that since January 2025, average occupancy had dropped to between 15 and 20 per cent – the lowest seen since the Covic travel disruption.

Anggiat noted that hotels in Makassar were hit hard by reduced spending power since 3Q2024.

“We were still holding on with about 60 per cent occupancy, thanks to government business. But once the new policy took effect in January, occupancy immediately dropped to 30 per cent and is continuing to fall, reaching just 15 per cent now,” he said.

IHRA chapters in Lampung and West Sumatra are suffering similar effects, with bookings slipping away since November 2024. Some hotels have lost up to 60 per cent of their occupancy by January 2025.

Hoteliers in Yogyakarta are reporting a 40 per cent decline in projected income for 2025.

Deddy Pranowo Eryono, chairman of IHRA Yogyakarta, said: “The (leisure) business has yet to recover from Covid-19, and (hotels are) only full during the peak season from May to June. The rest of the year, we’re relying on government business. Without that, the average occupancy is a maximum of 50 per cent.”

While acknowledging that national finances are not in the best shape, Dodi Ahmad Sofiandi, chairman of IHRA West Java, urged the government to revise its efficiency policy as soon as possible.

“If cuts are unavoidable, please don’t take everything at once. We need some breathing room – focus the cuts on certain events and, if possible, apply them only until the end of the year,” he beseeched.

“Right now, we don’t have the budget to promote inbound tourism, and with government (events) being cut off, we’re left without any support,” Dodi added.

He warned that if occupancy continued to fall below 50 per cent, hoteliers in West Java would only be able to survive until April 2025.

“There will definitely be adjustments to operational costs, including reducing daily workers and cutting working hours for permanent staff,” Dodi noted.

The situation in South Sulawesi, a destination that depends heavily on government activities, is dire.

“We’ve been bleeding for over three months now, with nearly 20 per cent of staff across South Sulawesi already let go. Those still working will inevitably face salary cuts. Right now, we’re just fighting to keep the hotels open and avoid a second ‘pandemic’ for the industry,” shared Anggiat.