Indonesia’s latest stimulus effort leaves battered hotel sector out in the cold

Indonesian hotels are being pushed to the brink of collapse, and disintegrating further by the day, as the central government neglects to answer their call for tax holidays and further financial assistance to cushion the fallout of Covid-19, according to association leaders.

The outbreak, which has infected 2,273 people and killed 198 in the country as of April 5, has triggered mass layoffs and forced hotel closures, no thanks to plummeting demand amid lockdowns worldwide aimed at curbing the virus.

The ongoing Covid-19 crisis pushes Indonesia’s tourism sector deeper into the doldrums, forcing the closure of nearly 700 hotels across the archipelago, including at least 50 in Bali; aerial view of luxury hotel in Ubud, Bali pictured

Nearly 700 hotels across the archipelago have shut down, according to Maulana Yusran, deputy head of the Indonesian Hotel and Restaurant Association (PHRI).

He said that the outbreak hit the industry so severely that occupancy rate had plunged to below two per cent as of April 5, prompting a wave of mass layoffs, and hoteliers worry that more are to come if they did not receive tax waivers and immediate financial assistance from the government.

“The PHRI expects the government (to waive temporarily) the income taxes of workers and companies. Hotels have already incurred financial losses due to the sharp decline in occupancy. Employees have also already taken unpaid leave and their salaries have also been cut,” said Maulana.

The body also hopes that the central government will instruct regional governments to temporarily exempt hotels from paying land and building taxes, allow them to defer health insurance premiums for employees, as well as give them a discount of up to 50 per cent for electricity bills.

Such requests have been conveyed by PHRI through multiple letters to president Joko Widodo and the relevant ministries.

Maulana bemoaned the fact that hotels and restaurants have been overlooked in the government’s stimulus package totalling 405.1 trillion rupiah (US$24.5 billion) that was launched last week through regulation in lieu of law to shore up the coronavirus-battered economy.

Of the package, the government will allocate 75 trillion rupiah for medical needs, 110 trillion for social safety, 70.1 trillion for tax incentives and credit for businesses, as well as 150 trillion for recovery programmes for SMEs.

In response to being left out in the cold, Maulana said that PHRI would be sending an additional letter to the president and relevant ministers to address the hotel sector’s financial woes.

“It seems that we have to fight very hard (to get the government’s assistance). I understand that it’s a very sensitive issue and it has massive implications. But I hope that the government will focus on helping employees first,” he said.

I Made Ramia Adnyana, deputy chairman of Indonesian Hotel General Manager Association (IHGMA), said that he had spoken to Wishnutama Kusubandio, minister of tourism and creative economy, in a web meeting with his association, after the president issued the regulation in lieu of law last week.

During the meeting, he said, the minister told IHGMA that he had voiced the concerns of industry players to the president and Sri Mulyani, minister of finance. When asked why the tourism sector was left out in the cold in the government’s regulation, Wishnutama said that their requests will be followed up by the minister (Sri Mulyani) and president.

Made also said that he was waiting on the government to implement the six-month tax exemption that was promised to hotels and restaurants situated in Indonesia’s 10 priority destinations.

In early March, Airlangga Hartanto, coordinating economic minister, announced that the government would grant regional governments 3.3 trillion rupiah to compensate for the loss in tax revenues caused by the tax exemptions given to hotels and restaurants.

However, that promise has yet to materialise, according to Made.

In Bali alone, Made said, at least 50 hotels have temporarily closed. To date, layoffs in those hotels have yet to happen, but many employees have been sent home and had their salaries cut. If the government fails to act, there will be massive layoffs in Bali, he added.

He added that during the meeting with Wishnutama, the minister said that he would convey the trade’s concerns to the minister of finance and president, and strive to fulfil the industry’s demands to prevent layoffs.

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