Moratorium on New Hotels and Minimum Selling Rates for Bali Hotels?
The Provincial Government of Bali is exploring changes to the Island’s tourism industry via the introduction of gubernatorial regulations that will dictate price levels to hotel operators.
As reported by Tribun-Bali.com, chief among the ideas being discussed are a moratorium on new hotel development and a program that would allow the Government to introduce fixed pricing as a means of minimizing unhealthy price competition in Bali.
Bali Hotels Moratorium – Unlikely to Happen
The need for a moratorium on new hotel developments is a familiar chorus among tourism industry stakeholders and has been lobbied for intensively over the ten-year tenure of Governor Made Pastika who recognized the many negative effects on the Island’s carrying capacity because of the chronic overbuilding and oversupply of hotel rooms. The reality of the situation, however, is that the decision to grant permits for new hotels is held by the Mayor of Denpasar and the Regents who head the Regencies who have proven themselves hell-bent on increasing their tax base regardless of any long-term effects on Bali tourism.
Setting Price Levels
The Provincial Government of Bali is asking through the Island’s Tourism Service that a system of price-fixing be introduced in order to prevent Bali hotels from engaging in “unhealthy” price wars.
“The phenomenon of price wars for hotel rooms is destroying the business image of Bali tourism. This is unhealthy,” said the Head of the Bali Tourism Service (Kasiparda), Putu Astawa, on Tuesday, January 21, 2020.
Based on data ending 2019, the number of hotel rooms in Bali stands at around 146,000 with the majority of hotels concentrated in Denpasar and the southern region of the Island.
While it is not clear if the Provincial Government will introduce hotel price controls, one proposed regulation being considered would make the minimum selling price of a room in a five-star hotel Rp. 4 million per night. Four-star hotels would have a minimum price of Rp. 3 million per night; three-star hotels a minimum price of Rp, 2 billion; two-star hotels would need to be sold for no less than Rp. 1 million; and one-star hotels to be minimally priced at Rp. 750,000. Under the program under discussion, Melati Hotels or guest houses would need to be priced at no less than Rp. 500,000 per night.
Also discussed, is settling the minimum price for a “Diamond-rated” villa accommodation at Rp. 3 million, “Gold-rated” villas at Rp. 2.5 million, and “Silver-rated” villas at minimally Rp. 2 million.
Bali Hotels – It remains to be seen if a minimum pricing mechanism will be introduced by the province and how such a system would be enforced. One of the recommendations tabled in the past, was that the calculation of hotel and restaurant taxes would be based on the on minimum pricing levels, regardless of whatever rate was actually paid. Another sanction discussed was a threat of expulsion from the Indonesian Hotel and Restaurant Association (PHRI) for hotels failing to comply with minimum pricing levels.
Yet another recommendation is for minimum pricing levels to be discussed and decided once a year, similar to how local minimum wage rates are established.