The consequences of the currency depreciation on the Asian tourism industry

The Indonesian economy is going through a turbulent period this Tuesday, January 27, 2026, as the rupiah (IDR) plunged to a historically low level against the US dollar, despite a paradoxical weakening of the greenback on Asian markets linked to speculation of a joint intervention by Washington and Tokyo to support the yen.

This sharp depreciation of the national currency is generating major shockwaves through the local tourism industry, a pillar of the archipelago, creating an unprecedented double whammy: on the one hand, Indonesia—and particularly Bali—is becoming a « windfall » destination for international travelers whose purchasing power in dollars or euros is soaring, promising an immediate surge in bookings and a corresponding increase in local spending on handicrafts and leisure activities.

Conversely, this fall in the rupee is severely weakening the margins of high-end hotel operators who are heavily dependent on imports for their luxury goods (spirits, technological equipment, gourmet foods) and are bearing the brunt of rising kerosene prices, which are pegged to the dollar, for domestic flights.

At the same time, Indonesian outbound tourism is collapsing, as the local middle class is forced to cancel its international travel plans and turn to domestic tourism instead. This shift in tourism could stabilize hotel occupancy rates, but with a reduced average spend.

This situation now forces the government to adopt a balancing act strategy for 2026, aiming to capture as much hard currency as possible while trying to limit the social impact of imported inflation on local service providers, making monetary management the true conductor of the upcoming tourist season.