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The Pandemic Effect: Downfall of The Late Great Tourism Industry in Indonesia

Updated: Apr 7, 2021

The outbreak of Covid - 19 has created several circumstances surrounding the changes in financial behavior, in this case, Indonesia. Research shows that the outcomes caused by this pandemic refer to unusual changes in different sectors of the economy. One of the few common sectors restraining a significant effect towards the pandemic is the tourism industry. This indicates how the industry adapts during the pandemic due to losses on income and development.

Based on data from UNWTO, it is possible to measure the impact of the Covid - 19 pandemic on the global tourism sector. The data shows that there are 120 million tourism-related jobs that are under threat during this global pandemic. It is estimated that the world economic loss will reach USD 1 trillion in 2020 alone. Sure enough, this is the case with the tourism sector in Indonesia. Being limited by the number of foreign tourists will undoubtedly have Indonesia’s tourism industry’s cash flow decreased, especially hotels. The absence of income and the cessation of operation in the hotel industry in Indonesia might affect the stock prices of hotel groups listed on the Indonesian stock exchange.

This decline was caused by the demise of Indonesia’s economy, which made people fear the Indonesian Hotel Industry’s uncertainty, so that people flocked to sell their shares. Based on data and analysis of the JCI percentage figures, there is a significant decline in the tourism sector. The Indonesian Journal of Development Planning Volume IV No. 2 - June 2020 decreased 49.17% in (Room Occupancy Rate) Star Class Hotels in Indonesia. The tourism industry also faces a series of challenges followed by a decline in tourist arrivals, such as vast booking cancellations in hotels, flights, and other travel essentials. The decline also occurred due to a slowdown in domestic travel, mainly due to people's reluctance to travel. It is worrying that the impact of Covid-19 might also affect MSME businesses and disruption of employment. Even though so far, tourism is a labor-intensive sector that absorbs more than 13 million workers. This figure does not include the derivative impact or the multiplier effect that includes the derivative industries formed under it.

Based on a theory from “Amadeus’ Destination X: Where to Next,” Asia Pacific travelers show several more than 34% of travelers who favor their preferences towards the knowledge of COVID-19. This information also accounts for prevention measures on travel and other mandatory accommodations. In Indonesia, popular tourist destinations emphasize substantial over-tourism issues, meaning that governments are forced to limit the number of tourists and close numerous iconic sites to prevent overcrowding.

There are several measurements on the accounted phenomenon following the tourism industry regarding international growth. United Nations World Tourism Organization (UNWTO) estimated a significant percentage in the down growth of foreign visits amounting to 1-3% in 2020 globally, and 3-4% during early January of 2020. In Indonesia, the percentage of foreign visits decreases as much as 7.62% from January 2020 compared to December 2019. This also means the total amount of visits lead to 1.37 to 1.27 million.

Revised 2020 forecast - International Tourist Arrivals, (% change)

The decline in foreign visits also estimates the amount of foreign exchange throughout financial measures, amounting to more or less than 1.3 Million USD of foreign exchange from tourism. Numbers are shown in data analysis from Tingkat Penghunian Kamar (TPK) that classifies the rate of occupancy of hotels in Indonesia. As of January 2020, the rate of occupancy reached an average of 49.17 percent, decreasing by 2.30 points compared to the rate recorded in January 2019 which was 51.47 percent. Namely, in comparison to December 2019, the rate of occupancy by January 2020 decreased by 10.22 points. The average length of local and foreign stays in star-classified hotels as much as 1.88 days, has a decline amounting to 0.17 points as of January 2020 in comparison with January 2019.

As an example, Pakuwon Jati Tbk. one of the most recognizable hotel groups in Indonesia, suffers from a massive decline in shares. This occurrence is observed as of February 2020 where shares encountered a down growth amounting to 600 IDR per share. However, followed by the national lockdown in Indonesia by March 2020, a significant decline in shares was met as much as 268 IDR per share. The number of shares declining is in complete translation with the rate of occupancy in the hotel group meaning the likewise percentage of stays are also affecting the rate of shares.

Pakuwon Jati Tbk. - Stock Graph of 2020 (StockBit)

We quoted from the UNWTO guidelines, countries that depend on income through the tourism sector, such as Indonesia, must start developing sustainable tourism as a step forward after the Covid outbreak. Sustainable Tourism is defined here by UNWTO as Tourism which takes into account the current and future economic, social and environmental impacts, as well as meeting the needs of visitors, industry, the environment and local communities. For short-term plans that can be implemented by Indonesia is to fix or clean up tourist spots that have been neglected for a long time due to the PSBB.

This will relate to the number of visitors who are expected to increase after the pandemic. For the hotel industry in particular, they can start collaborating with tourism spots to make bundling so that when ordering a hotel the customer gets a package to visit tourist attractions in the area. In the future, the tourism industry is predicted to recover after this pandemic is over, but efforts need to be made to accelerate the recovery of cash flow from the tourism industry itself.

Written by : Sindhunata & M. Nabeel Rizkee


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