Bali’s Illegal Villas Are Thriving — And Online Platforms Aren’t Helping

Bali is grappling with a surge in illegal rental villas, and according to industry players, online booking platforms are making the problem worse.

Executives at local hospitality units warn that unregistered properties are threatening the island’s reputation, undercutting legitimate businesses, and contributing to environmental strain.

They are calling for stricter enforcement against illegal rental properties as the island faces mounting challenges from overtourism and environmental strain.

“Unregistered villas operate without proper hospitality standards and often disappoint customers,” said Adhiguna, chief operating officer of Villas at Nakula Hospitality. 

Mellonie Francis, owner of Mel Francis Villas, highlighted rampant illegal construction in protected green zones. “We see unchecked development in designated green zones, worsening environmental degradation,” she said.

Both argue that illegal rentals create unfair competition by sidestepping taxes and labor laws while also compromising safety standards. Francis urged immediate government intervention, including spot checks and the dismantling of illegal structures to protect Bali’s heritage.

The Online Platform Conundrum

Adhiguna and Francis claim that many unregistered property owners are using online platforms like Airbnb. 

Maya Rigg, CEO of Elite Havens, a management and marketing partner for villas, believes online platforms can be part of the solution. “By ensuring only registered, compliant properties are listed, platforms like Airbnb can help establish a level playing field.”

Rigg stressed the impact of illegal rentals on the market: “This reduces fair competition for professionally managed properties.” She also pointed out that the complex licensing system discourages compliance. “Simplifying and streamlining the process would encourage more villa owners to follow regulations, leading to better outcomes for the entire industry,” she said.

An Airbnb spokesperson told Skift that the company is working closely with the government to responsibly support the local tourism economy. “We encourage all Airbnb hosts in Indonesia to familiarize themselves with their legal obligations, and obtain necessary licenses to operate their business. To support this, Airbnb provides a dedicated Responsible Hosting Page for Indonesia, offering hosts resources and an overview of relevant laws, regulations, and best practices,” the spokesperson said.

Airbnb also said it actively runs a host education program, which notifies hosts with listings in Indonesia about the importance of obtaining the required licenses.

“Through these efforts, we are focused on promoting responsible hosting and being a positive partner to the local government and community,” the spokesperson said.

Tourism Growth and Its Hidden Costs

Bali had over 6.3 million international visitors in 2024, and the downside to this rapid growth has been overtourism challenges.

Popular areas like Seminyak, Canggu, and Uluwatu have witnessed a dramatic transformation, with natural landscapes giving way to a dense concentration of villas, hotels, and resorts. This surge in tourism infrastructure has overwhelmed local resources and disrupted the balance of traditional community life.

Bali Governor Wayan Koster recently dismissed calls for a moratorium on construction of new hotels and resorts, advocating instead for stricter oversight. “There is no need for a moratorium. What’s needed is stricter control,” Koster said.

While new developments drive investment, critics argue that without rigorous enforcement of existing regulations, unchecked building worsens issues of congestion, strain on local infrastructure, and environmental degradation.

The Bali Villa Rental and Management Association has proposed becoming the official verification authority for rental villas in collaboration with the Bali Tourism Office. The association aims to establish a trusted platform that lists only verified, legally compliant villas.

Adhiguna, who is also a member of the association, supports this initiative, suggesting that stricter oversight could help curb the spread of unregistered properties. “The association will be able to assure property owners of proper management and it would also help villa guests understand that the agent who they found in an online platform is a registered member and not a scammer.”

Towards Responsible Tourism

As Bali manages its booming tourism industry, the ongoing crackdown on unregistered villas, while necessary to protect travelers and legitimate businesses, is only one piece of a larger puzzle.

Experts further argue that sustainable tourism goes beyond enforcement — smart incentives for responsible development are also important.

Simplifying licensing, encouraging renewable energy, and improving waste management could help Bali stay a top destination while securing its future.

“Incentives for villa owners to adopt green solutions like solar power, water conservation, and energy-efficient design would go a long way in protecting Bali’s environment,” said Rigg.

Sustainable growth needs a team effort — from the government, industry leaders, and property owners. As Rigg put it, “With better guidelines and enforcement, Bali can remain a world-class destination while ensuring long-term sustainability for tourism, local communities, and the environment.”