Bali to curb hotel price war

The Bali administration is considering a special regulation to curb the ongoing price war between hotels, which some say threatens the island’s economy.

“The price war has reached an alarming level and if we don’t attempt to control it, the war will threaten the future of the tourism industry, the island’s economic backbone,” Governor Made Mangku Pastika said on Thursday.

The island suffered a similar war in the aftermath of the infamous 2002 Bali bombings. With the number of foreign tourists dropping to a historic low, the hotels struggled to fund their operational costs. The bombings and the ensuing price war crippled the island’s tourism industry.

In the last few years, tourism experts have warned that excessive competition among hotels would
return in line with the surging number of hotels on the island.

The increasing number of available rooms will tighten competition and drive room rates down, they said.

The warning has turned into reality as hotels are outbidding each other in their attempts to offer the lowest prices possible.

“Bali needs a specific regulation on standardized room rates for hotels. With the regulation, hotels do not have to offer abnormally low prices to their customers,” Pastika said.

The regulation would also provide more revenue for local administrations, particularly city and regencies, since the taxes the hotels must pay would be pegged to those standardized room rates.

For instance, the rate in five-star hotels is a minimum of US$400 per room per night and the tax calculation would be based on this standard rate. The hotels could rent out the rooms at a lower price, but it wouldn’t lower the amount of taxes they would have to pay.

The regulation could also play a critical role in rescuing Bali from the prevailing mass-tourism model of development that could damage the island’s environment.

Chairman of the Bali chapter of the Indonesian Hotels and Restaurants Association (PHRI) Cokorda Oka Artha Ardhana Sukawati said the idea to regulate hotel room rates.

“The price war is really dangerous for all of us. I think the idea is good. As a hotel owner, I think that we really need it,” said Sukawati, who is also the regent of Gianyar.

He said that the price war was being waged among all levels of hotels, including starred ones. A visitor can easily find a three-star hotel room for less than Rp 1 million ($111) per night.