Indonesia’s Minister of Home Affairs, Tito Karnavian, has officially allowed regional governments (Pemda) to organize meetings and official events in hotels and restaurants.
This decision comes amid government-wide efforts to implement budget efficiency, which previously raised concerns about restrictions on public sector spending in the hospitality industry.
Speaking at the 2025–2029 Regional Medium-Term Development Plan (RPJMD) and 2026 Regional Government Work Plan (RKPD) forum in Lombok, Tito emphasized that spending efficiency does not equate to banning activities at hotels and restaurants.
“We must also think about hotels and restaurants—they employ many people and support supply chains for food and other services,” said Tito on June 4, 2025, as quoted by detik.com.
According to Tito, government events can still be held in hotels and restaurants as long as they are purposeful and not excessive. This approach is seen as a way to support the hospitality sector, which has suffered from reduced demand due to budget tightening.
Tito revealed that President Prabowo Subianto directly advised him to continue supporting hotels and restaurants during the efficiency period.
He further recommended that regional governments prioritize hosting activities in struggling hotels and restaurants to help keep their operations afloat.
“Target those that are nearly collapsing. Keep holding events there so they can survive,” he said.
Government Events Vital for Economic Circulation
Tito highlighted the importance of local government spending in circulating money within the economy and encouraging private sector growth.
“If the private sector doesn’t thrive, don’t expect economic acceleration,” Tito remarked, as cited by mediaindonesia.com.
He underscored the significance of the MICE (Meeting, Incentive, Convention, and Exhibition) industry for hotels and restaurants, noting their extensive employment and reliance on food and beverage supply chains.
“Reducing [the budget] is acceptable, but don’t cut it completely.” he reiterated.
Tito also mentioned that the central government has only reduced spending by USD 3.1 billion. across 552 regions, which he considers not significant enough to disrupt other budget allocations.
“Let regions use hotels and restaurants for meetings. It’s fine. Business trips are fine too. Just be reasonable—if three or four meetings are enough, don’t make it ten,” he advised.
Hotel Sector Faces Pressure, Investors Urged to Be Selective
Recent research from Colliers Indonesia noted that the government’s budget efficiency policies have impacted the performance of the hotel industry. In April, a survey by the Indonesian Hotel and Restaurant Association (PHRI) showed that 96.7% of Jakarta hotels experienced declining occupancy rates.
Indy Naila, an Investment Analyst at Edvisor Profina Visindo, confirmed the trend.
“This budget efficiency will reduce hotel demand, especially from the government and corporate segments,” Indy explained on June 4, 2025, as reported by kontan.co.id.
She noted that revenue and profit from government bookings form a significant portion of hotel income, and the decline could squeeze profit margins. Diversifying into MICE, food and beverage services, and online travel agency partnerships may help, but “room rates still contribute the most to revenue, so margins remain pressured,” Indy said.
Indy also observed that tourism-focused hotel operators tend to be more resilient than those reliant on corporate bookings. She urged investors to be selective and monitor fundamentals closely. While hotel stocks are generally undervalued, she currently maintains a hold position, pending further developments.
Source: detik.com, mediaindonesia.com, kontan.co.id
Photo Credit: Mikhail Nilov via pexels.com
