This paper analyses how different power relationships between tourism developers and operators and the local Sasak community affected tourism development on the island of Lombok, Indonesia. This study is set against the background of local and national tensions, and how these also have impacted on tourism. Two case studies are presented. The first example describes how tourism developers, operating under a system of privilege in the Soeharto era, attempted to force land acquisition at Rowok, in the south of Lombok. The subsequent protracted legal case has delayed any tourism development in this area. The second example describes a model of co-operative power relationships between the management of the Holiday Inn Resort and the local Sasak community at Mangsit, north of the main Senggigi Beach resort area. Local people are employed in a range of permanent positions, and there is clear evidence of a harmonious relationship between the hotel and the community. During three days of rioting in January 2000, the local community was unwavering in its support of this hotel. It is suggested that the way in which tourism developers and operators link with the local community is an essential indicator for tourism within the context of sustainable development.