Bali’s War on Unregulated Online Rentals: Are Too Many Airbnb Listings Driving the Island’s Overtourism Crisis?

Published on December 5, 2025

Bali — the famed Indonesian island paradise — is now intensifying efforts to curb the proliferation of online‑marketed rentals such as those listed on popular platforms. The move arrives amid a surge in foreign arrivals and a swelling number of unregistered villas and guesthouses that operate outside formal licensing systems. Local authorities argue that these accommodations sidestep hotel taxes, undermine public‑service funding, and worsen pressures on Bali’s infrastructure.

In response, the provincial government has established a special task force to audit tourism‑business permits. The aim is to enforce existing regulations, crack down on unauthorised properties, and protect Bali from what officials describe as “economic, social and tourism setbacks” arising from illegal foreign‑owned businesses.

How Unregulated Rentals Feed Overtourism and Environmental Strain

Research on tourism in Bali reveals significant environmental and socio‑cultural impacts when growth outpaces regulation. Rapid expansion of villas, guesthouses, resorts and related infrastructure has encroached on farmland, wetlands and natural green zones.

The strain on resources is evident: water tables are dropping, wetlands are being converted, ecosystems are disrupted, and natural flood buffers are lost. Waste generation and pollution are growing faster than waste‑management systems can handle, with beaches and rivers increasingly choked with plastic and refuse.

Moreover, traffic congestion, noise pollution and rapid urbanisation in once-rural areas have altered the character of local communities — particularly in hotspot zones where short‑term rentals and holiday villas cluster densely.

The Economic Motivations Behind the Rental Surge — And the Risks

From the visitors’ perspective, online‑rental platforms offer attractive, often cheaper alternatives to traditional hotels and resorts. This affordability and flexibility have helped drive a boom in bookings, particularly among international travellers seeking informal or budget‑friendly stays. However, many of these accommodations operate without proper permits — lacking construction approvals, business licences or formal registration with tourism authorities.

This regulatory gap creates multiple problems. First, it erodes the hotel‑tax base, limiting government revenue that could support public services and environmental management.
Second, unlicensed rentals often bypass safety, environmental and zoning standards—raising risks for residents, renters, and the island’s fragile ecology.
Third, the surge in such rentals intensifies competition against legally registered hotels and guesthouses, creating unfair market dynamics.

Overtourism Isn’t Just About Numbers — Infrastructure and Social Fragility Take the Hit

Studies of communities heavily affected by tourism — particularly in areas like Canggu — show that locals frequently report rising noise, traffic jams, land‑use change, gentrification and communal tensions as visitor numbers soar.

Even as tourism remains a major economic driver, sustainable‑tourism research emphasises that balancing economic gains with environmental protection and social equity is becoming increasingly difficult.

In short: unregulated online rentals amplify the symptoms of overtourism by increasing density of stay‑overs without commensurate investment in infrastructure, services, or environmental safeguards.

Can Legalised Short-Term Rentals Offer a Middle Path?

Some experts argue that regulated short‑term rentals could serve as a compromise — preserving tourist accommodation diversity while ensuring compliance with taxes, safety and environmental regulations. Formal registration, licensing, proper waste management and adherence to zoning laws could mitigate many of the adverse impacts linked to illegal rentals.

Indeed, a regulated rental sector might alleviate the pressure on traditional hotels — distributing the tourism load more evenly, especially across less‑crowded areas — and reduce over‑concentration in hotspot zones.

However, implementing such a system would require robust regulatory capacity — consistent inspections, transparent licensing, enforcement mechanisms and close monitoring of environmental impact — aspects that the current crackdown suggests have so far been insufficient.

The Verdict: Unregulated Rentals Are a Catalyst — Not the Sole Cause — of Overtourism

In the complex equation that is overtourism, unregulated online rentals like those on large global platforms have become a significant accelerant. They magnify existing problems — environmental degradation, infrastructure overload, social strain, tax leakage, unfair competition — by enabling a rapid influx and dispersion of tourists without adequate governance safeguards.

Yet, it would be simplistic to point to rentals alone as the root cause. The broader tourism‑management framework — encompassing land use, waste management, transport infrastructure, zoning regulation, cultural preservation and licensing — plays an equally critical role.

If properly regulated, short‑term rentals could coexist with sustainable tourism goals. But the current pattern — unlicensed, unchecked, and expanding rapidly — undermines Bali’s capacity to absorb tourism growth without compromising its natural beauty, cultural heritage and residents’ well‑being.

A Make‑or‑Break Moment for Bali’s Tourism Future

Bali stands at a crossroads. The crackdown on unregistered Airbnb‑style rentals underscores the island’s recognition that its tourism boom has outpaced its regulatory and infrastructural capacity. Without decisive reform, the environmental, social and economic costs of mass tourism may irreparably alter what made Bali “paradise” in the first place.

Implementing a transparent, enforceable licensing and regulation framework for all types of accommodation — from luxury resorts to small villas — is not optional anymore. It is a necessity to ensure that tourism remains an engine of inclusive prosperity, without sacrificing the island’s ecological balance, cultural identity or long‑term viability.

If Bali succeeds, it could model sustainable tourism governance for resort destinations worldwide. If not, the cost may be paid in eroded culture, damaged ecosystems, and a fractured tourism industry.