This study aims to analyze the product differentiation of the Munggu and Kapal tourism villages in Badung Regency, Bali, based on local potential, design strategies, and development models to enhance their appeal to tourists. The research uses a qualitative approach with data analyzed using sustainable competitive advantage analysis to determine product differentiation and SWOT analysis to define development strategies for Munggu and Kapal tourism villages. Data were collected through observations, in-depth interviews, documentation, and focus group discussions with stakeholders in the Munggu and Kapal tourism villages. The research findings suggest that the cultural tradition of mekotek can be developed as the product differentiation of Munggu tourism village, while the cultural tradition of perang tipat bantal can be developed for Kapal tourism village. The main strategy for developing Munggu and Kapal tourism villages is to develop product differentiation based on mekotek and perang tipat bantal, focusing on maintaining authenticity and preserving these cultural heritages, while uncovering their tourism benefits. A development model for product differentiation based on local potential is proposed, referred to as Modeprodesa.
