Indonesia's hotel industry is seeing higher room occupancy during the 2026 school holiday period, but the improvement has not translated into stronger revenue as hotels continue to operate with lower room rates than a year earlier, according to the Perhimpunan Hotel dan Restoran Indonesia (PHRI).
The industry association also said that weak government and corporate activities continue to weigh on hotel performance, limiting the overall business impact of the seasonal travel period despite increased leisure demand.
PHRI Secretary General Maulana Yusran shared the assessment on Tuesday, July 7, 2026, describing the current school holiday as a period where occupancy has improved compared with regular business days but remains insufficient to restore hotel revenue to previous levels.
According to PHRI, the school holiday peak season has increased hotel occupancy by as much as 20 percent compared with normal periods. However, Maulana noted that occupancy during regular periods has already been relatively low, meaning the seasonal uplift is occurring from a weaker baseline than in previous years.
The association also pointed out that average hotel occupancy during the January-May 2026 period remained below 2 percent lower than the same period in 2025, reflecting continued pressure on the industry's operating performance throughout the first five months of the year.
While leisure travel has helped improve occupancy during the school holiday season, PHRI said the industry continues to face weak demand from two of its most significant customer segments: government institutions and corporate clients.
According to Maulana, hotel business generated from government activities and corporate events remains limited, preventing the peak holiday season from delivering stronger overall performance for the sector.
He questioned whether occupancy levels could be maintained once the school holiday period ends, noting uncertainty over business demand in the coming weeks.
"Once the school holiday ends, when will occupancy return? Can it still be maintained or will it fall sharply? That remains a question under the current situation," Maulana said.
Besides occupancy, PHRI highlighted another major challenge affecting hotel operators during the current holiday season: declining room rates.
Although occupancy has improved during the peak travel period, Maulana said average hotel room rates are approximately 5 to 10 percent lower than during the corresponding holiday period in 2025.
According to him, hotels have been unable to maintain their published rates because occupancy levels remain below the threshold typically required to sustain full pricing.
Maulana explained that published rates represent the maximum retail room prices offered by hotels before discounts are applied. He said those rates generally become achievable only when occupancy exceeds 80 percent.
With average occupancy remaining around 70 percent, hotels have instead relied on lower pricing to attract bookings during the holiday period.
The combination of higher occupancy and lower room rates illustrates the revenue challenge currently facing hotel operators. Although more rooms are being occupied during the holiday season, the average income generated per room remains under pressure because discounted pricing continues to dominate the market.
PHRI also attributed changing accommodation patterns to weaker consumer purchasing power.
According to Maulana, accommodation represents one of the largest expenses in a travel budget, leading many domestic travellers to choose more affordable lodging options during the current holiday period.
He observed that more consumers are selecting one-star and two-star hotels instead of higher-category accommodation, while travellers from certain market segments continue to stay in three-star to five-star properties.
Based on PHRI's observations, budget hotels have experienced stronger demand during this year's school holiday compared with previous periods.
The shift in accommodation choices reflects changes in traveller spending behaviour while maintaining travel activity during the holiday season.
At the same time, PHRI noted an increase in international visitor arrivals to Indonesia.
Maulana said the weaker rupiah against the US dollar has contributed to higher inbound tourism, making Indonesia more attractive for foreign visitors.
However, the increase has been concentrated in only a few destinations.
According to PHRI, Bali, Jakarta, and Batam continue to receive the largest share of international tourist arrivals, meaning the benefits of inbound tourism have not been evenly distributed across Indonesia's hotel market.
For hotel operators outside these destinations, the improvement in foreign visitor arrivals has therefore provided only limited support for business performance.
From a business development perspective, PHRI's assessment indicates that seasonal leisure demand alone has not been sufficient to offset broader weaknesses in the hotel market.
The association said the absence of stronger government and corporate business has reduced the overall commercial impact of the school holiday period, despite increased occupancy generated by leisure travellers.
Lower room rates have also prevented hotels from fully capitalising on higher occupancy, resulting in continued pressure on revenue performance during one of the industry's traditionally stronger travel periods.
PHRI's observations suggest that occupancy growth alone does not necessarily translate into stronger commercial performance when pricing remains below historical levels and demand from higher-value market segments remains subdued.
The association will continue monitoring occupancy after the school holiday season, as uncertainty remains over whether hotels can sustain current occupancy levels without stronger contributions from government, corporate, and other non-leisure travel segments.
The industry association also said that weak government and corporate activities continue to weigh on hotel performance, limiting the overall business impact of the seasonal travel period despite increased leisure demand.
PHRI Secretary General Maulana Yusran shared the assessment on Tuesday, July 7, 2026, describing the current school holiday as a period where occupancy has improved compared with regular business days but remains insufficient to restore hotel revenue to previous levels.
According to PHRI, the school holiday peak season has increased hotel occupancy by as much as 20 percent compared with normal periods. However, Maulana noted that occupancy during regular periods has already been relatively low, meaning the seasonal uplift is occurring from a weaker baseline than in previous years.
The association also pointed out that average hotel occupancy during the January-May 2026 period remained below 2 percent lower than the same period in 2025, reflecting continued pressure on the industry's operating performance throughout the first five months of the year.
While leisure travel has helped improve occupancy during the school holiday season, PHRI said the industry continues to face weak demand from two of its most significant customer segments: government institutions and corporate clients.
According to Maulana, hotel business generated from government activities and corporate events remains limited, preventing the peak holiday season from delivering stronger overall performance for the sector.
He questioned whether occupancy levels could be maintained once the school holiday period ends, noting uncertainty over business demand in the coming weeks.
"Once the school holiday ends, when will occupancy return? Can it still be maintained or will it fall sharply? That remains a question under the current situation," Maulana said.
Besides occupancy, PHRI highlighted another major challenge affecting hotel operators during the current holiday season: declining room rates.
Although occupancy has improved during the peak travel period, Maulana said average hotel room rates are approximately 5 to 10 percent lower than during the corresponding holiday period in 2025.
According to him, hotels have been unable to maintain their published rates because occupancy levels remain below the threshold typically required to sustain full pricing.
Maulana explained that published rates represent the maximum retail room prices offered by hotels before discounts are applied. He said those rates generally become achievable only when occupancy exceeds 80 percent.
With average occupancy remaining around 70 percent, hotels have instead relied on lower pricing to attract bookings during the holiday period.
The combination of higher occupancy and lower room rates illustrates the revenue challenge currently facing hotel operators. Although more rooms are being occupied during the holiday season, the average income generated per room remains under pressure because discounted pricing continues to dominate the market.
PHRI also attributed changing accommodation patterns to weaker consumer purchasing power.
According to Maulana, accommodation represents one of the largest expenses in a travel budget, leading many domestic travellers to choose more affordable lodging options during the current holiday period.
He observed that more consumers are selecting one-star and two-star hotels instead of higher-category accommodation, while travellers from certain market segments continue to stay in three-star to five-star properties.
Based on PHRI's observations, budget hotels have experienced stronger demand during this year's school holiday compared with previous periods.
The shift in accommodation choices reflects changes in traveller spending behaviour while maintaining travel activity during the holiday season.
At the same time, PHRI noted an increase in international visitor arrivals to Indonesia.
Maulana said the weaker rupiah against the US dollar has contributed to higher inbound tourism, making Indonesia more attractive for foreign visitors.
However, the increase has been concentrated in only a few destinations.
According to PHRI, Bali, Jakarta, and Batam continue to receive the largest share of international tourist arrivals, meaning the benefits of inbound tourism have not been evenly distributed across Indonesia's hotel market.
For hotel operators outside these destinations, the improvement in foreign visitor arrivals has therefore provided only limited support for business performance.
From a business development perspective, PHRI's assessment indicates that seasonal leisure demand alone has not been sufficient to offset broader weaknesses in the hotel market.
The association said the absence of stronger government and corporate business has reduced the overall commercial impact of the school holiday period, despite increased occupancy generated by leisure travellers.
Lower room rates have also prevented hotels from fully capitalising on higher occupancy, resulting in continued pressure on revenue performance during one of the industry's traditionally stronger travel periods.
PHRI's observations suggest that occupancy growth alone does not necessarily translate into stronger commercial performance when pricing remains below historical levels and demand from higher-value market segments remains subdued.
The association will continue monitoring occupancy after the school holiday season, as uncertainty remains over whether hotels can sustain current occupancy levels without stronger contributions from government, corporate, and other non-leisure travel segments.
