The Rise of the Recreation Economy: Opportunities, Risks, and Indonesia’s Policy Challenge
Mohammad Nur Rianto Al Arif
(Professor at UIN Syarif Hidayatullah Jakarta,
Secretary General of the Central Executive Board of the Indonesian Lecturers Association,
Executive Board Member of the Jakarta Chapter of the Indonesian Economists Association (ISEI),
Assistant to the Presidential Special Envoy for Food Security)
Over the past few decades, recreation has no longer been understood merely as a leisure-time activity. It has evolved into a central component of the modern economic structure.
Tourism, amusement parks, music concerts, sports events, cultural festivals, and creative public spaces have transformed recreation into a high-value-added industry that generates employment and delivers significant economic multiplier effects.
This transformation has given rise to what is now widely referred to as the recreation economy—an ecosystem of economic activities built on experiences, entertainment, tourism, and lifestyle consumption. In many countries, the recreation economy has become a backbone of post-industrial growth, particularly as manufacturing stagnates and experience-based services assume a strategic role.
Indonesia, with its demographic dividend, rich natural resources, and extraordinary cultural diversity, possesses substantial potential to develop this sector. The key questions, however, are how far the recreation economy has contributed to national economic performance, what opportunities and challenges it faces, and how public policy should be designed to ensure it becomes an engine of inclusive growth.
At its core, the recreation economy encompasses all economic activities related to the use of leisure time for enjoyment, relaxation, entertainment, and experiential enrichment. It includes tourism (nature, cultural, religious, and artificial attractions), the entertainment industry (music, film, performing arts, and events), sports and active recreation, and creative industries (culinary arts, fashion, crafts, and performance), as well as urban public spaces such as city parks, art centers, and heritage districts.
What distinguishes the recreation economy from conventional service sectors is its emphasis on experiential value. Consumers do not merely purchase goods or services; they buy impressions, narratives, and memories.
Globally, the growth of the recreation economy has been driven by rising middle-class incomes, urbanization, changes in work patterns, and greater awareness of quality of life. Leisure time has become a valuable commodity, and countries that manage it effectively reap substantial economic benefits.
In Indonesia, the recreation economy has existed for decades, although it has often been viewed in fragmented and sectoral terms. Only in the past ten years has it been approached more strategically, particularly through the prioritization of tourism and the creative economy. Government initiatives have promoted experience-based tourism, tourism villages, national events, and the development of super-priority destinations.
The Covid-19 pandemic dealt a severe blow to the recreation sector. Yet the recovery phase underscored its importance. Once mobility restrictions were lifted, domestic tourism, concerts, festivals, and entertainment activities became key drivers of economic recovery. This study confirmed that the recreation economy is not a peripheral sector but an integral component of the national economy.
Its economic impact is evident in contributions to gross domestic product and employment absorption. Tourism and the creative economy consistently make significant direct and indirect contributions to GDP. Recreation activities generate strong multiplier effects, as spending extends to transportation, accommodation, food services, souvenirs, local guides, and digital services. Major events often stimulate local economies intensively within short periods.
Equally important, the recreation economy is labor-intensive, absorbing workers across education levels, from informal labor to creative professionals. For Indonesia, which continues to face unemployment and underemployment challenges, this sector offers strategic value.
A major strength of Indonesia’s recreation economy lies in its close linkage with micro, small, and medium enterprises (MSMEs). Nearly all recreational activities involve MSMEs as providers of food, crafts, local services, and creative products. Tourism villages, for example, create economic opportunities without requiring rural residents to migrate to cities, generating relatively sustainable income streams.
In this sense, the recreation economy serves as a tool for economic inclusion and regional development. However, a critical challenge remains: ensuring that MSMEs are not merely accessories but principal beneficiaries within the value chain.
Beyond economics, the recreation economy has social and cultural implications. On one hand, it encourages the preservation of local culture, traditional arts, and indigenous knowledge. On the other, it risks cultural commodification when economic motives overshadow cultural meaning. Ethical and participatory development approaches are therefore essential, positioning local communities as cultural owners rather than passive objects.
In urban areas, the recreation economy drives spatial transformation. City parks, cycling lanes, art districts, culinary hubs, and creative public spaces have become vital elements of modern urban planning. Recreation-friendly cities tend to attract investment, talent, and tourism. Yet urban challenges such as gentrification, congestion, and unequal access to public space must be carefully managed.
Digital technology has added a new dimension to the recreation economy. Online booking platforms, social media, and the creator economy have reshaped how people experience leisure. Destination promotion now relies heavily on digital content and visual storytelling, while influencers and content creators have become integral actors. Digitalization expands global market access for small players but also intensifies competition and demands higher digital literacy.
Despite its promise, Indonesia’s recreation economy faces structural challenges, including uneven infrastructure, inconsistent human resource quality, overlapping regulations, reliance on mass tourism, and environmental sustainability concerns. Without serious reform, growth risks becoming unhealthy and unsustainable.
A deeper concern arises when an economy becomes overly dependent on recreation. Global experience shows that excessive reliance on a single sector creates vulnerability. The pandemic illustrated how tourism and entertainment can collapse almost overnight. Long-term dependence on recreation risks economic fragility if productive sectors such as advanced manufacturing, modern agriculture, and technology-based industries do not develop in parallel.
Moreover, many recreation sub-sectors—especially informal and personal services—tend to have relatively low productivity. Without innovation and skills upgrading, this can trap the economy in low productivity growth, limiting wage increases and long-term competitiveness.
Overreliance on recreation may also trigger premature deindustrialization and widen regional inequality, while socially it can displace local communities, inflate land prices, and erode traditional livelihoods. Environmentally, uncontrolled growth threatens ecosystems and undermines the very resources on which recreation depends.
For these reasons, the recreation economy should be positioned as a complementary sector, not the sole economic pillar. In Indonesia, it should support broader economic diversification, strengthen MSMEs, foster innovation and digitalization, and align with productive sector development.
Strategic policy priorities include integrating the recreation economy into national and regional planning, improving human capital through vocational and creative education, expanding financing for community-based MSMEs, protecting culture and the environment through regulation, and strengthening digital and innovation ecosystems.
If managed with a long-term vision, the recreation economy can serve as a source of value creation and improved quality of life rather than short-term growth alone. It demonstrates that economic development need not rely solely on heavy industry or resource extraction.
For Indonesia, the recreation economy is not merely an opportunity but an inevitability. The challenge lies in ensuring that its growth delivers broad-based welfare, preserves cultural identity, and safeguards the environment for future generations. When guided by sustainable principles, the recreation economy can become a more humane, culturally grounded, and environmentally responsible face of Indonesia’s economy.
This article was originally published in Kompas on Wednesday, December 17, 2025.