Bali Governor Wayan Koster has announced a proposal to significantly restrict or potentially ban the operation of Airbnb and similar short-term rental platforms on the island.

The announcement, made on December 3, 2025, during a meeting with the Indonesian Hotel and Restaurant Association (PHRI), marks an escalation in the provincial government’s efforts to regulate the tourism accommodation sector.

Why the Government is Targeting Short-Term Rentals

The primary driver behind this proposal is the discrepancy between tourist arrivals and government revenue. While arrival numbers have reached record highs in 2025, local tax revenue (specifically from the PBJT hotel tax) and hotel occupancy rates have not seen a corresponding increase.

The government attributes this “leakage” to three specific issues:

• Unpaid Taxes: Many private villas listed online operate as residential properties, bypassing the commercial taxes required of licensed hotels.
• Occupancy Imbalance: Licensed hotels are reporting occupancy rates of roughly 60%, suggesting a significant portion of tourists are staying in unregulated accommodations.
• Illegal Commercial Activity: Authorities are targeting the “shadow economy” of foreign nationals on long-term residential leases who illegally sublet properties daily without business licenses.

Immediate Impact: Stricter Enforcement on Unlicensed Villas

While Governor Koster used strong language regarding a “ban,” this is currently a high-level directive to enforce existing laws more strictly rather than an immediate shutdown of the platform.

However, the practical implication is that enforcement will intensify immediately. The government is expected to conduct more frequent audits on properties suspected of operating commercially without a Pondok Wisata (homestay license) or proper zoning permits.

Connection to New Construction Moratoriums

This announcement is not an isolated event but part of a coordinated 2025 strategy to shift Bali toward “quality tourism.” It follows two other major regulatory shifts this year:

1. Construction Restrictions: Following severe flooding in September 2025, the provincial government enforced a strict moratorium on building new commercial facilities (hotels, restaurants, villas) on “productive land” (green zones/rice fields) to prevent environmental degradation.
2. Immigration Crackdowns: Immigration authorities have ramped up deportations of foreigners found working illegally, including those managing villa rentals without a proper work permit or foreign investment (PT PMA) setup.

Impact on Investors and Property Owners

For foreign investors and property owners, the era of operating in a “grey area” is effectively over. The risk profile for renting out private villas on platforms like Airbnb has changed significantly:

• Zoning Compliance is Mandatory: Properties must be located in a Tourism Zone (Zona Pariwisata) to legally obtain the licenses required for daily rentals.
• End of Informal Subletting: Foreigners subletting villas for profit without a work permit and corporate entity face deportation and blacklisting.
• Tax Liability: Authorities are moving toward a system that will require proof of tax compliance for all online listings.

Impact on Travelers and Digital Nomads

• Fewer Options: Expect a reduction in “budget luxury” villa listings as illegal operators are removed from platforms.
• Higher Costs: Prices for compliant short-term rentals may rise as the supply of unregulated options decreases and legitimate businesses pass on tax costs.
• Strict Scrutiny: Long-term tourists should be wary of booking “off-the-books” stays, as authorities may conduct spot checks on unregistered accommodations.

How to Legally Operate a Rental Property

If you own or lease property in Bali intended for the short-term rental market, we advise taking the following steps immediately to secure your assets:

1. Check Your Zoning: Verify that your land is zoned for commercial use (accommodation), not residential or agricultural use.
2. Secure the Pondok Wisata: Ensure your property has the correct homestay license attached to the building permit (PBG/SLF).
3. Formalize Your Business: If you are a foreign national earning income from property, you must operate through a PT PMA to legally issue invoices and pay taxes.

Contact our local experts in Bali if you need a compliance audit on your current property or assistance restructuring your assets to meet the new regulations.