Here’s why Indonesian hotel performance weakened in 2025

The decline in public-sector activity weighed on the hospitality sector. 

Hotel market performance in 2025 deteriorated sharply from the previous year, largely due to a significant reduction in government-related activity, according to Savills.

Savills said government travel and events have historically represented the largest single source of hotel demand, particularly through meetings, incentives, conferences and exhibitions (MICE). The sharp pullback in this segment during 2025 weighed heavily on overall occupancy and revenue performance across major cities.

“The decline in government-related activity was the primary factor behind the weaker hotel market performance in 2025,” Savills said, noting that the impact was felt most acutely in markets traditionally dependent on public-sector demand.

However, Savills pointed to early signs of recovery emerging toward the end of the year. Entering Q4 2025, government-led MICE activity has begun to rebound as ministries accelerate budget absorption ahead of year-end, providing a late boost to hotel demand.

At the same time, Savills noted that international travel continues to strengthen, offering additional support to the hospitality sector. As of October 2025, international visitor arrivals reached 12,759,172, reflecting continued momentum in inbound tourism.

Savills said the combined recovery in government-related activity and foreign arrivals could help stabilise hotel performance into year-end, although overall conditions remain more subdued than in 2024.

“The pace of recovery will depend on the sustainability of government spending and the continued improvement in international travel flows,” Savills added.