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Keeping it Legal

Indonesian Hotel and Restaurant Association: Illegal Villa and Hotels Blamed for Unfair Price Competition in Bali

Bali News: Bali, Indonesia, Indonesian Hotel and Restaurant Association, PHRI, Bali Villa Association, NVA, IB Purwa Sideman, licensing, illegal
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Price wars among villa and hotel operators in Bali – evident even during the high season – is prompting the Bali Chapter of the Indonesian Hotel and Restaurant Association (PHRI) to try to intervene to stop potentially destructive price competition.

The executive director of PHRI-Bali, Ida Bagus Purwa Sideman, was quoted by Bisnis Bali, on February 7, 2012, as blaming unhealthy price competition on unlicensed hotels and villas, seen as the driving force behind price-cutting practices.

PHRI-Bali is increasing its efforts to persuade unlicensed hotels and villas to make their operations legal as the first step in toning down the current price war.

He described the many problems encountered by hotel and villa operators in their efforts to obtain permits and licenses. Villa and hotel operators who have building permits for their structures often discover later during the permit process that their area is not zoned for commercial accommodation operations. Due to permit problems, many unlicensed villas are unable to join the Bali Villa Association (BVA), which is a part of the PHRI.

He said the unhealthy price competition is most prevalent in the villa sector. 

Sideman blamed the increasing number of unlicensed hotels and villas as fueling the price war that has become a chief concern of PHRI members. The PHRI executive said those involved in the operation of illegal accommodation enterprises and price undercutting are failing to take a long-term view of what’s good for Bali.

Taking a cynical view of the illegal sub-sector of Bali’s tourism economy, Sideman postulated that the shortsighted villa operators would probably move to other locations in 10-20 year’s time.

Seeking profit only on a day-to-day basis, Sideman said the large number of unlicensed accommodation providers are undermining local hotel operators.

In seeking to encourage illegal operators to become licensed hotels and villas, PHRI hopes to persuade operators to adopt a more long-term business approach, eliminating the unprincipled motivations that are the foundation of price wars.

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