Over the next two years the Indonesian government wants to see an additional 100,000 homestays rise across the Archipelago to absorb the expected 275 million domestic tourists and 20 million foreign tourists by 2019. Currently, there is a lack of hotels and homestay accommodations in Indonesia. Therefore, whenever there is a big event in Indonesia, especially if it is an international event, there usually occurs a supply shortage in terms of lodging. For example, on 4-5 March 2017 the Indo MXGP 2017, a motorcross series, is organized in Pangkal Pinang on Bangka island. However, there have been a lot of complaints from those who want to visit this event because they were not able to reserve a room in a hotel.

Read more: Tourism Sector of Indonesia

Considering it may not be economically viable to develop new hotels in certain regions, the answer for the short-term (according to the government) is the homestay. If more homestay accommodations are developed and show sufficient demand from tourists in a specific area, then investors will start to become eager to develop a hotel in that area (as well as establishing supporting infrastructure).

Indonesian authorities allocated IDR 60 trillion (approx. USD $4.5 billion) for the development of homestays. These funds will be sent to the villages in ten priority destinations where programs are to be developed to build homestay accommodations as well as to teach locals how to manage a homestay appropriately.

Homestay Development Target of Indonesian Government:

Destination Amount
Toba Lake 1,200
Tanjung Kelayang  700
Tanjung Lesung 1,200
Batavia City & Thousand Islands 1,200
Borobudur 2,200
Bromo-Tengger-Semeru 1,200
Mandalika 2,200
Labuan Bajo  700
Wakatobi  700
Morotai  700

Source: Tourism Ministry

Based on data from Statistics Indonesia (BPS), there were 2,387 hotels in Indonesia in 2016, with the total number of rooms at 233,007, up 8.7 percent (y/y) compared to one year earlier.

Hotels in Indonesia:

1-Star Hotels    384
2-Star Hotels    528
3-Star Hotels    839
4-Star Hotels    453
5-Star Hotels    183

Source: BPS