5 days ago
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November 11, 2024 | 12:40 pm
TEMPO.CO, Jakarta - Indonesian Finance Minister's circular on slashing the budget for official trips has begun to affect the hotel industry. The Secretary General of the Indonesian Hotel and Restaurant Association (PHRI), Maulana Yusran, said that he had received reports from a number of hotels in some regencies about the cancellation of government activities.
The policy to streamline official travel for ministers and officials is outlined in a circular S-1023/MK.02/2024 issued by Finance Minister Sri Mulyani Indrawati on November 7, 2024. In accordance with President Prabowo Subianto's directive, ministries and institutions such as the prosecutor's office and the police have been asked to lower their official travel budgets by at least 50 percent.
Maulana said that after the directive was issued, government programs began to get canceled in several areas. "From what I heard, among the (cancellations) were in West Java. Yesterday I also heard from Makassar. There are several other provinces that have also reported the same thing," he told Tempo on Sunday, November 10.
According to him, the situation will have a huge impact as the budget cuts will be at least 50 percent. So far, Maulana added, the contribution of the government's agenda to hotel revenues can reach up to 40 percent. "Some even up to 60 percent," he said.
Government activity in hotels outside the capital usually begins to pick up in the second quarter or around April. It usually increases until the fourth quarter or in November. The increase in activity is in line with the government's budget pattern, which usually peaks at the end of the year.
After the official circular to rationalize the travel budget of officials, Yusran expected more hotels to submit reports, especially in provinces and regencies that are highly dependent on central government activities as their areas are not considered tourism destinations.
These cancellations are already affecting hotel revenue projections for the year. Business owners, Maulana explained, have been calculating profits in advance because most government agendas are usually made well in advance, as are hotel reservations. For MICE (meetings, incentives, conferences and exhibitions) activities, there are usually agreements or deals between the organizer and the hotels.
"Our hope is that (the cancellations) won't be at the end of the year, so it won't have a big impact on all sectors.
While PHRI supports the government's policy of budget efficiency, Maulana said that restrictions on official travel can have a multiplier effect on the regional economy. For hotels, Maulana said, the impact is on the workforce. For other sectors, it will affect the F&B businesses and the MSME sector.
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