The main objective of this study is to identify the challenges of Homestay Programme in Look Butun and Gellam-Gellam Villages, of Bum Bum Island, Semporna, Sabah. These two villages were chosen as a case study because their homestay programme has recently started their operation in November 2014. The homestay programme product was based on seaweed cultivation activities, but less attention was given to the challenges faced by the homestay operators. Thus, this study is significant to identify the challenges of homestay programme. This study was carried out in July 2014 until January 2015. First of all, in-depth interviews were conducted with 5 homestay operators to gain qualitative data. Then, field observations were also performed by researchers in order to understand the social and the environmental landscape of the homestay programme in Look Butun Village. Moreover, secondary data through document sources were used to support the primary data. The findings revealed that there were two categories for challenges faced by the local community for participation in homestay programme, namely 'internal challenges' and 'external challenges'. Specifically, the internal challenges were (i) lack of capital resources and financial assistants, (ii) language barriers, (iii) lack of skills and knowledge in management of homestay. Whereas the external challenges were both the lack of 24 hours' electricity and lack of clean water supply. Therefore, the findings of this study have been significant to the stakeholders in order to develop tourism activities in Bum Bum Island of Semporna, Sabah. The challenges faced by the homestay operators could be solved systematically through active involvement of the stakeholders to ensure the homestay programme could be developed in a sustainable manner.