Passengers of KA Menoreh, which serves the Jakarta-Semarang route, queue on Dec 23, 2023, to enter the boarding area of Pasar Senen Station in Jakarta. - Photo: Antara file
JAKARTA: A local hospitality business group is anticipating multiple blows to the already struggling industry as the government is set to introduce policies that could hurt the tourism sector, saying that current developments have put them in “survival mode”.
The Indonesian Hotels and Restaurants Association (PHRI) said on Nov 19 that it had written a letter to the Finance Ministry and President Prabowo Subianto asking them to reconsider a stipulation that orders ministries to cut spending for official trips by a minimum of 50 percent.
The association also urged the government to refrain from hiking value added tax (VAT) from 11 to 12 percent starting January next year, as is stipulated in the 2021 Tax Harmonisation Law.
PHRI secretary-general Maulana Yusran told The Jakarta Post on Nov 19 that businesses have prepared massive efficiency measures to stay afloat.
This includes cutting costs and temporarily reducing employees’ working hours.
Separately, Yusran said that as of Wednesday (Nov 27), the government had yet to respond to the business group’s petition.
PHRI chairman Hariyadi Sukamdani said on Nov 19 that the industry now could only employ 70 to 80 per cent of its pre-pandemic workforce, stressing that the rate was decreasing amid a decline in occupancy rates, especially in Eastern Indonesia.
He attributed the drop to the government halting official trips and ceremonies to save money, as these typically account for 40 to 60 per cent of a hotels’ revenue.
Hariyadi also conveyed that the average occupancy rate was projected to decline to 45 per cent from around 50 per cent recorded during the Christmas and New Year season last year.
“The number of workers in the hotel and restaurant industry will decrease if occupancy remains low,” Hariyadi said.
The association also believes that a VAT hike would further hurt household spending, particularly for travel, given that the country is already grappling with weakening spending power, which is reflected in below 5 per cent gross domestic product growth in third quarter this year.
Economists and businesses have expressed concerns over what they consider signs pointing to weakening spending power over the past years, which can also be seen in a shrinking middle class and a shift in spending behavior toward prioritising essential items like food, as well as seeking lower-price goods.
Haris Eko Faruddin, an analyst with state-owned lender Mandiri, told the Post on Friday that the policy could lead to a decline in industry performance, but stressed that the outlook is not bleak.
The number of domestic tourist trips recovered to pre-pandemic levels in 2022, especially in destinations like Bali and Yogyakarta, Haris said, adding that a full recovery of foreign tourist trips to local destinations is expected to take place next year.
Deputy Tourism Minister Ni Luh Puspa said in a statement on Nov 23 that the government has prepared means to boost tourism activity during the upcoming end-of-year holiday season, including more than a dozen international and national events as well as a partnership with the industry to provide promotional offers.
However, she expects the ongoing eruption of mount Lewotobi Laki-laki in East Nusa Tenggara to impact destinations in its surroundings.
The government has recently promised to lower airfares by 10 per cent during the year-end holidays, aiming to “help our people and stimulate the economy, including tourism,” Coordinating Infrastructure and Regional Development Minister Agus Harimurti Yudhoyono said in a statement on Nov 26.
The PHRI’s Yusran told the Post on Thursday that reducing airfares is expected to distribute public mobility more evenly across the archipelago, noting that affordable air travel will favor people seeking faster cross-island trips.
Having more affordable ticket prices is expected to help increase occupancy in several areas during the Christmas and New Year holidays.
Mandiri’s Haris added that a drop in airfares is expected to significantly boost tourism during the holiday season, but he warned that increased tourism will still depend on how quickly airlines can recover their fleets to pre-pandemic levels, as a limited number of available planes is a major reason that tickets are expensive.
Manpower Minister Yassierli said on Nov 22 that he was confident that a spending cut on official travel would not lead to layoffs, stressing that it would only affect planned trips for the rest of this year, as quoted from state news agency Antara.
The government justified the move in early November, stressing that the cuts would save funds and allow spending on more productive public services and programmes.
That includes President Prabowo’s flagship free nutritious meal programme, the programme to build 3 million houses per year as well as other priority programmes both in food and energy security.
Meanwhile, the Finance Ministry has defended the planned VAT hike, stating on Nov 20 that the “VAT tariff adjustment has been discussed in depth between the government and the House of Representatives, which, of course, involves taking several aspects into consideration, such as economic, social and fiscal [ones]”.
However, Luhut Pandjaitan, head of the National Economic Council, said on Wednesday that the postponement of the VAT hike was “almost certain”, but the decision would be still up to President Prabowo in upcoming government meetings. - The Jakarta Post/ANN
