The idyllic holiday island of Bali has been hit by the ripple effect of the coronavirus crisis, with tourism plummeting and suggestions it “does not have the capacity” to treat patients if they become sick.

Indonesia, the largest country in south-east Asia, claims to have no cases of coronavirus, but according to the Bali’s tourism board, there have been around 40,000 cancellations of hotel bookings in recent weeks nonetheless. In the first half of February about 740,000 people visited the island – 16.25% fewer than the same period last year – Bali’s airport spokesman told state news agency Antara this week.

Chinese tourists account for about one in six of the island’s visitors, and since Indonesia banned all incoming flights from China on 5 February, their absence has hit hard.

“We feel like there has been a significant downturn in terms of sales and customers,” says Michelle Anindya, head of development at Seniman coffee studios in the popular tourist hub of Ubud, in central Bali.

I Ketut Panjul, a driver based in Ubud, says the change has been very difficult: “As you know, tourism is the main part of our economy here. Ever since the government banned flights from China, it has been really slow,” he said.

January and February are already the low season in Bali, after the Christmas holiday bustle, but according to David Abraham, co-founder of Outpost, a co-working community with three locations on the island, “the main issue right now is the closed air travel routes from China”.

“It affects not only Chinese tourists but other Asian tourists as well,” Abraham said, adding that demand from Australian and other non-Asian tourists had remained stable so far.

Indonesia has been heavily criticised for potential under-reporting of coronavirus in its population of 262 million, especially after a Harvard public health study came out last week projecting that Indonesia should have found approximately five affected patients by now.

Adang Bachtiar, a public health expert at the University of Indonesia, said Bali “does not have the capacity” to adequately treat patients if they become affected on the island.

“The only laboratories that can even test for the virus right now are in Jakarta, so if someone were to get sick in Bali or Lombok, it’s concerning,” he said. “We are still very weak at both detection and management of this virus, especially outside Jakarta.”

More than 230 Indonesian citizens were evacuated from China and quarantined on Natuna Island for two weeks, but have reportedly all have tested negative for the virus and were released on Sunday.

But there have been concerns about the Chinese man who was on holiday in Bali last month, from 22 to 28 January, and later tested positive for coronavirus on his return to China. Bali tourist officials say they have checked the hotel where he stayed and no one appears to have been affected. The World Health Organization says the general incubation period for the disease is 14 days.

Business-related travel is also down: several conferences and meetings on Nusa Dua, a resort area in southern Bali, have been cancelled this month, preventing the arrival of at least 5,200 visitors, the managing director of the Indonesia Tourism Development Corporation says.

“But Bali’s been through a lot,” notes Abraham. “The volcano [Mount Agung, which spewed ash in a minor eruption in 2019 ], before that the bombings, and so on … this is an ongoing cycle,” he said, of events that cause temporary dips in tourism.

Tara Louise, a 31-year-old British nail technician on holiday in Bali, says she is “not worried right now, as I think you should live in the moment, plus it is spreading worldwide currently so it’s unsafe anywhere”.

She says she is more worried about passing through Singapore, which may lead to extra screening back in the UK.

Regarding the general atmosphere in Bali, she says “there are a few face masks around but it’s not too obvious, unlike in Thailand”, where she has also recently been on holiday.

Bali tourism officials have dug in their heels in recent days, arguing that, besides the slump in Chinese visitors, the island is doing fine.

“It’s a hoax,” said Bali Tourism Agency head Putu Astawa last week, of media allegations that Bali was a “ghost town”. Bali’s health ministry also issued an “Official Statement Regarding ‘HOAX’ Circulating About the Coronavirus” asserting that zero cases have been detected on the archipelago so far.

In Ubud, Michelle Anindya, head of development at Seniman coffee studios, says people are not outwardly scared or taking any major extra health precautions. “No one is really wearing face masks or panicking,” she says, “though there are a lot of rumours floating around”.

One group of tourists that is not fazed is other Indonesians.

“Indonesians are delaying plans to travel overseas because of coronavirus, so they’re opting for domestic destinations [like Bali] instead,” says James Hutauruk, Jakarta-based founder of the Giga Great tour company, which caters to Indonesian travellers. “We are seeing a spike in requests for domestic packages.”

Accordingly, Astawat, head of the Bali Tourism Board, has asked the Indonesian president if he can discount domestic flight tickets.

• This article was amended on 25 February 2020. An earlier version said a Harvard study had projected that Indonesia should have found “at least 10” people affected by coronavirus. In fact the study calculated an expected five cases, in a range from one to 11.