Indonesia’s tourism ministry has ruled out shutting down unlicensed villas. Instead, it will guide owners through the permit process. For an industry struggling with fairness, the response raises questions.
NUSA DUA, Bali – Bali has a villa problem.
By some estimates, thousands of accommodation properties on the island are operating without proper permits. They are listed on global platforms like Airbnb and Tiket.com. They welcome guests. They collect payments. They compete directly with licensed hotels and villas that have followed the rules.
But when it comes to enforcement, the Indonesian government has chosen a different path.
Not closure.
Not fines.
Not removal.
Coaching.
“We are not going to delete them,” said Ni Luh Puspa, Indonesia’s Deputy Minister of Tourism, speaking on the sidelines of the Bali & Beyond Travel Fair (BBTF) 2026 on Saturday.
“We ask online travel agents to ensure that all their merchants have legal status, including a business identification number.”
The statement was delivered calmly. But its implications are significant.
For an industry already struggling with overcrowding, infrastructure strain, and rising competition from other Southeast Asian destinations, the decision to guide rather than enforce may shape Bali’s tourism landscape for years to come.
The Scale of the Problem
Approximately 1,600 accommodation businesses in Bali are currently operating without proper permits, according to previous reports.
These properties remain active on major online travel platforms.
They are not hidden.
They are not fringe operators.
They are part of Bali’s accommodation ecosystem — just without the paperwork.
The government’s response has been to offer assistance. Since 2025, the Ministry of Tourism has conducted coaching clinics in Bali, helping villa owners navigate the permitting process. The provincial government has collaborated on what officials describe as a “structuring” effort.
“The reason we are doing this is not only about tax revenue,” Puspa explained. “It is also about fairness.”
She added: “For those who already have hotels and villas with complete permits, it is not fair if there are accommodations without permits.”
Fairness, Deadlines, and Extensions
The fairness argument is difficult to dispute.
Licensed properties pay taxes. They undergo safety inspections. They comply with labor laws. They meet standards that unlicensed operators can ignore.
When unlicensed villas compete directly with licensed ones, they do so with a structural advantage: lower costs, less oversight, and no compliance burden.
But the government’s enforcement timeline has been flexible.
Officials initially set a March 2026 deadline for all accommodations to obtain permits. That deadline has since been extended.
“Originally we wanted it completed by March,” Puspa acknowledged. “But the minister provided an extension. If I’m not mistaken, until the middle of this year.”
She emphasized that no excuse can override the obligation to comply. “Whatever the reason, complying with regulations is very important because it maintains fairness.”
Yet the extension itself sends a signal. For unlicensed operators watching from the sidelines, the message may be that deadlines are negotiable.
The Technology Solution
The Ministry of Tourism is not relying solely on coaching.
It is also pursuing a technological fix.
The government is developing an application programming interface (API) verification system in collaboration with online travel agents. The goal is to ensure that only properties with valid permits can be listed on digital platforms.
If implemented effectively, this could be transformative.
Online travel agents such as Airbnb, Booking.com, and Agoda have enormous reach. Removing unlisted properties from these platforms would effectively cut them off from the international market.
But the system is not yet fully operational. And unlicensed villas remain active.
What This Means for Investors and Travel Executives
For international investors and travel industry executives watching Bali, the government’s approach reflects a familiar tension.
On one hand, Indonesia recognizes the need for regulation. Unchecked growth threatens quality, safety, and fairness.
On the other hand, aggressive enforcement could destabilize a significant portion of Bali’s accommodation sector at a time when tourism is still recovering from global shocks.
The decision to offer coaching rather than closures is pragmatic.
But pragmatism has costs.
For licensed hotel operators, the continued operation of unlicensed competitors represents lost revenue and unfair competition.
For travelers, the presence of unlicensed villas raises questions about safety standards, insurance coverage, and accountability when something goes wrong.
For investors considering entry into Bali’s hospitality market, the government’s reluctance to enforce its own rules may be read as a signal: regulation exists, but compliance is optional.
A Broader Challenge
Bali’s villa problem is not unique.
Thailand faces similar challenges with unlicensed accommodations. Vietnam has struggled to regulate its rapidly expanding short-term rental market. Portugal and Spain have both implemented crackdowns on unlicensed holiday rentals in response to housing crises.
What distinguishes Indonesia’s approach is the emphasis on assistance over punishment.
The question is whether assistance alone will produce compliance.
If the coaching clinics succeed and the API verification system functions as intended, Bali could emerge with a cleaner, more transparent accommodation market.
If they do not, the gap between licensed and unlicensed operators will continue to widen, and the government’s credibility on enforcement will erode further.
The Stakes for Bali
Bali’s tourism brand has long been built on trust.
Travelers book accommodations expecting certain standards: safety, cleanliness, accountability, recourse if something goes wrong.
When unlicensed properties operate outside regulatory frameworks, that trust is tested.
The Deputy Minister’s message was clear: legalization, not elimination, is the path forward.
“We even accompany them through the process of obtaining permits,” Puspa said. “We collaborate with the provincial government of Bali. We are fully supported.”
But for an industry watching closely, the proof will not be in the announcements.
It will be in the permits issued. The deadlines met. The platforms cleaned.
And the unlicensed villas that finally — after years of operating in the gray — come into the light.