Jakarta. Government budget cuts are dealing a severe blow to Bandung’s hotel industry, with businesses reporting significant revenue losses due to cancellations of government meetings and events.

The policy, which aims to cut Rp 306.69 trillion ($18.7 billion) from state and regional budgets, has led to the cancellation of numerous government-organized events typically held in hotels, causing financial strain for the hospitality sector.

Dodi Ahmad Sofiandi, Chairman of the Indonesian Hotel and Restaurant Association (PHRI) for West Java, said that in February alone, Bandung’s hotels lost an estimated Rp 12.8 billion due to event cancellations.

"The impact of this budget efficiency policy is hitting the hospitality sector hard, especially in Bandung. Government-related meetings, incentives, conventions, and exhibitions (MICE) account for 40 percent to 50 percent of the market for three- to five-star hotels," Dodi said Friday.

As a result, hotel occupancy rates in West Java have plummeted to just 35-40 percent on average, far below the 50-55 percent break-even point needed for financial stability. With occupancy declining, most hotels can only sustain operations for about four months before facing serious financial trouble.

"If this situation continues beyond the Eid holiday, hotels may be forced to lay off up to 50 percent of their employees," Dodi warned. "This will also affect supporting industries such as food and beverage suppliers, housekeeping services, and vendors supplying hotel necessities."

Dodi urged the government to reassess the policy to prevent further economic fallout in the hospitality sector.

Add as a preferred source on Google +