Regional Original Revenue, commonly known as PAD, is a key indicator of a local government's financial independence. It allows provincial and municipal governments to fund infrastructure, public services, and development programs without relying heavily on transfers from Indonesia's central government. While East Java consistently ranks among Indonesia's top provinces for PAD, the specific contribution of tourism-related sectors has remained unclear until now.
East Java is home to some of Indonesia's most popular destinations, including the Bromo-Tengger-Semeru National Park, cultural attractions, and the business hub of Surabaya. These destinations attract millions of domestic and international visitors every year, generating economic activity across transportation, accommodation, food services, and retail. However, not every tourism-related business contributes equally to government revenue, making a detailed analysis necessary.
To examine these relationships, Dela Puspita Sari analyzed secondary data from Statistics Indonesia (BPS) East Java and the Directorate General of Fiscal Balance of the Ministry of Finance. The research covered the period from 2020 to 2024 and included all 38 regencies and cities in East Java Province. Instead of focusing on individual businesses, the study evaluated three major tourism indicators:
- Number of tourist arrivals
- Number of accommodation facilities
- Number of restaurants
These variables were then compared with Regional Original Revenue to determine which sectors contributed most to local government income. The analysis used panel data techniques to identify long-term patterns across regions and years.
Tourist Arrivals Produce the Strongest Economic Impact
The research found that tourist arrivals have a positive and statistically significant impact on Regional Original Revenue. Simply put, regions that attract more visitors tend to generate higher local revenue.
This finding supports the well-known tourism multiplier effect. When tourists visit a destination, they spend money on accommodation, restaurants, transportation, entertainment, and local products. Those expenditures circulate throughout the regional economy, creating additional business activity and increasing tax revenue collected by local governments.
Cities and districts such as Surabaya, Malang Regency, and Batu—well-known tourism destinations in East Java—illustrate this pattern by recording relatively higher PAD alongside stronger tourism activity.
Restaurants Significantly Increase Local Government Revenue
The restaurant sector also emerged as a major contributor to Regional Original Revenue.
According to the study, an increase in the number of restaurants significantly raises PAD because restaurants generate tax revenue while also serving as an essential component of the visitor experience. As tourism expands, demand for dining services grows, encouraging business development, employment creation, and higher local tax collections.
The findings suggest that culinary tourism should be viewed as an important economic development strategy rather than simply a supporting service for visitors.
More Hotels Do Not Automatically Mean Higher Revenue
One of the study's most interesting findings is that accommodation facilities—including hotels and other lodging businesses—did not have a statistically significant effect on Regional Original Revenue during the study period.
According to the analysis, simply increasing the number of accommodation facilities does not guarantee higher government income. Factors such as hotel occupancy rates, service quality, and the effectiveness of local tax collection appear to be more important than the number of hotels alone.
This means regional governments should prioritize improving accommodation performance instead of focusing solely on expanding hotel capacity.
Tourism Variables Explain Nearly 98% of Revenue Variation
Although accommodation alone was not statistically significant, the three tourism variables collectively had a strong influence on Regional Original Revenue.
The study reported an Adjusted R-squared value of 0.97843, indicating that approximately 97.8% of the variation in PAD across East Java's districts and cities could be explained by tourist arrivals, accommodation facilities, and restaurants together. The overall statistical model also showed a highly significant relationship between tourism development and regional revenue.
Implications for Government and Business
The findings have practical implications for regional governments throughout Indonesia.
Rather than concentrating investment primarily on building new hotels, policymakers may achieve greater economic benefits by:
- Increasing tourist arrivals through destination promotion and improved attractions.
- Supporting restaurant and culinary business development.
- Improving hotel occupancy rates and service quality.
- Strengthening local tax administration to maximize tourism-related revenue.
For business owners, the research highlights the growing importance of the food and beverage sector within the tourism economy. Restaurants, cafés, and culinary entrepreneurs can play a central role in regional economic development while simultaneously contributing to local government finances.
Researcher's Perspective
Based on the findings, Dela Puspita Sari of Universitas Negeri Surabaya concludes that tourism development policies should integrate destination promotion, culinary industry expansion, and more effective local tax management. The study indicates that increasing visitor numbers and strengthening the restaurant sector offer greater potential for improving Regional Original Revenue than simply expanding accommodation capacity.
The researcher also notes that the study covers the 2020–2024 period, which includes the COVID-19 pandemic and subsequent recovery. Future research could incorporate additional variables such as hotel occupancy rates and tax collection efficiency to provide a more comprehensive understanding of tourism's contribution to regional finances.
Author Profile
Dela Puspita Sari is a researcher from Universitas Negeri Surabaya (UNESA) specializing in regional economics, public finance, fiscal decentralization, and tourism economics. Her research focuses on how tourism-related sectors contribute to local government revenue and regional economic development in Indonesia.
Source
Article Title: The Influence of Tourist Arrivals, Accommodation Facilities, and Restaurants on Regional Original Revenue in East Java Province
Author: Dela Puspita Sari
University: Universitas Negeri Surabaya
Journal: International Journal of Sustainable Applied Sciences (IJSAS), Vol. 4, No. 6 (2026)
DOI: https://doi.org/10.59890/ijsas.v4i6.5
URL: http://ijsasjournal.my.id/index.php/ijsas
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