In Indonesia, the tourism sector is one of the largest contributors to GDP. This study aims to analyze the impact of tourist arrivals and hotel operations on labor absorption in Indonesia’s tourism sector. A quantitative approach was employed, applying multiple linear regression in natural logarithms with a stepwise method to examine how fluctuations in tourist arrivals and hotel performance affect the number of employed workers. The empirical results indicate that star-rated hotel occupancy has a positive and significant effect on labor absorption, with a high standardized coefficient, suggesting strong explanatory power. This finding confirms that employment in the tourism sector is more influenced by the performance of high-standard accommodations than by aggregate tourist arrivals. Moreover, the study found that external shocks, such as the COVID-19 pandemic in 2020 and short-term economic pressures in 2023, directly affected hotel occupancy rates and labor absorption. The decline in tourist arrivals during these crises reduced star-rated hotel occupancy, thereby limiting the hospitality sector’s capacity to employ workers. This underscores the high sensitivity of tourism employment to changes in tourist demand, which is mediated through formal accommodation performance. The study highlights the importance of developing quality-oriented star-rated hotels with larger operational scale and service intensity as an effective strategy to promote stable and sustainable employment. Policy implications include encouraging investment in star-rated hotels, improving service standards, and strengthening human resource capacity in the hospitality sector to ensure that tourism growth translates optimally into employment opportunities.
Dwiningwarni* et al. (Fri,) studied this question.