A Comprehensive Guide to Starting a Hospitality Business in Indonesia

The hospitality industry in Indonesia may be hit by the COVID-19 crisis, but the “new normal” approach has helped the industry to recover from the crisis.

The Indonesian government has shown strong support to encourage the comeback of domestic travel by providing incentives to travel agencies and airlines, tax waivers to hotels and restaurants in specific destinations and discounts to local travelers.

In addition, the government has implemented several plans that include easing the restrictions for visa (a visa-free travel granted for 169 countries) and foreign investments.

What sectors are the best to explore?

There are many sectors covered by the hospitality industry in Indonesia, but the following are the ones worth exploring.

Accommodation

Do not postpone when it comes to starting an accommodation business in Indonesia. The property prices are decreasing sharply, between 20 and 50 percent, in plenty of areas in Indonesia, particularly in Bali.

Foreign investors need to secure an accommodation license and a building permit. There are several types of accommodation licenses, depending on the accommodation type and number of rooms, but the most common ones are homestay, hotel and villa licenses.

A homestay license known as Pondok Wisata License is required to rent out an Airbnb villa with three to five rooms and a land size of less than 1,000 m2. This option is available only to solo entrepreneurs. For villas or rental properties with bigger sizes and more rooms, you need to secure a Villa License.

The good news is, 100% foreign ownership is granted to foreigners who want to open a hotel (3-star, 4-star or 5-star hotel) or a villa. To operate a hotel, secure a Starred Hotel License. Other licenses such as an environmental license, a sanitation license and an alcohol license (SIUP-MB) may also be required, depending on your business activities.

Culinary

Opening a restaurant or a coffee shop in Indonesia allows 100% foreign ownership. Upon the completion of the company registration process, you are required to obtain a Tourism License (TDUP) and additional licenses (if necessary) such as SIUP-MB and Business Identification Number for Excise (NPPBKC).

Retreat

Retreats are extremely popular in Bali and other tourist-packed destinations. Both local and international visitors like to indulge in yoga, health and wellness, luxury and outdoor retreats.

Organising a retreat in Bali requires company establishment. Once established, you need to secure a business license. An Indonesia temporary stay permit known as KITAS or ITAS is also required.

Starting a Hospitality Business with Property or Land Purchase

You can choose whether to set up a foreign owned company (PT PMA) or a locally owned company (PT) to be able to buy property or land.

Foreign Owned Company (PT PMA)

With a PT PMA, you can secure the HGB. The land certificate will state the name of a foreign owned company. You can enjoy fully protected ownership through a legal agreement, permission to construct property and income earning through selling or renting the property when establishing a PT PMA.

Locally Owned Company (PT)

The Freehold Title can only be granted to Indonesian citizens. If you wish to secure a Freehold Title for land or property, you will have to establish a PT.

Another option would be securing the Leasehold Right if you are not interested in setting up a PT PMA or a PT. With the Leasehold Right, you can use the property for commercial purposes.

Building Permit in Indonesia

Building Permit (IMB) is a building registration document that informs you about the purpose of a building, either for commercial or residential purposes.

All buildings in Indonesia must secure an IMB. Ensuring that the proper use of the building is in accordance with the written objectives on the IMB is obligatory, regardless of whether you are buying or renting it.

Prepare these documents to secure an IMB: a land certificate, izin kavling, building drawings, correct land zoning, signed permission from owners of neighboring buildings and service and structural drawings.

Starting a Hospitality Business in Indonesia with Cekindo

Starting a hospitality business in Indonesia is exciting and the journey is going to be rewarding, but only if you do it right from the very beginning. That is why consultation with business incorporation specialists in Indonesia is highly recommended.

It may be challenging for foreign investors to comply with local regulations of company setup, permit and right acquisition and business licenses, among others.

With more than 10 years of experience, Cekindo’s team of experts is ready to provide you with the guidance you need on starting a hospitality business in Indonesia, every step of the way.

Consult with us now. Fill in the form below.