The weakening of the Indonesian Rupiah against the US dollar over the last few weeks has brought both benefits and challenges for both Bali tourists and the travel sector.
Local industry leaders have been coming together to develop solutions that benefit everyone in a rapidly evolving economic landscape.
Speaking to reporters, Putu Winastra, Chairman of the Association of Indonesian Tours & Travel Agencies (ASITA) Bali, explained that the issue lies in inbound tourism operators selling tourism services to foreign markets, but that transactions conducted in Indonesia are still required to use the rupiah in accordance with applicable regulations.
In practical terms, this means that the strengthening of the dollar does make tour packages marketed in rupiah appear cheaper to foreign tourists.
In reality, though, this does not automatically increase business profits, as several cost components in the tourism industry are also affected by exchange rate changes.
The tour packages in question cater to all types of tourists traveling to Bali, ranging from all-inclusive vacations to packaged day tours and trips.
Winastra shared, “This is a dilemma for us. On the one hand, we sell products abroad, just like service exports. But on the other hand, there are regulations regarding the use of the rupiah.”
Adding “When we have already sold packages in rupiah, and then a component increases due to the strengthening of the dollar, we can suffer losses.
Winastra shared his belief that using the US dollar as a pricing reference can help business operators manage the risk of exchange rate fluctuations.
Moving forward, ASITA Bali hopes the government will provide flexibility for the tourism industry targeting international tourists, enabling the promotion of tour packages in USD to help make it clear for international tourists, in turn helping to incentivize booking, and to help local tourism businesses mitigate losses due to the weakening rupiah.
He added, “Transactions remain in rupiah. What we hope for is a policy that allows package prices to be displayed in dollars, then converted to rupiah at the exchange rate at the time of payment.”
He concluded that ASITA Bali believes this policy could strike a balance between compliance with national regulations and the needs of tourism businesses heavily dependent on international markets.
With this scheme, businesses no longer face the risk of losses from exchange rate changes after the tour package price is agreed upon with potential tourists.
For tourists coming to Bali, this would mean there would be several benefits. Tourism businesses in Bali, from hotels to tour providers to independent attractions, will have more ability to create, promote, and operate high-value travel experiences… e.g., budget-friendly travel deals.
The next benefit is that pricing would be clear from the start, and enable holidaymakers to book with confidence that they are getting the best deal and that there would be no risk of surcharges later down the line.
There have been concerns from tourism leaders in Bali that even if the economy is stabilized, it’s only a matter of time before the benefits of the weakening rupiah will have to be passed on to tourists.
For tourists right now, the weakening rupiah makes it feel like vacation budgets are going further, but some tourism businesses are soon going to have to pass on these increased costs to tourists, especially when fuel subsidies end.
Local Bali tour operator Erna Saenah told reporters last week, “Since the restrictions on subsidies and the increasing difficulty in obtaining subsidized fuel, most tourist transportation vehicles have switched to Pertamax. So today’s increase is certainly very noticeable and quite heavy for us.”
Adding “When it comes to guests, around 50 percent of the package cost is transportation. With this fuel increase, the selling price of transportation will definitely increase.”
Tourists booking travel in Bali in the coming months can rest assured that tourism leaders in Bali are working around the clock to keep everything as affordable and accessible as possible.
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