This article aims to explore the concept and practice of neo-exoticism as an ideal-flexible formula for developing ethnic arts in the midst post-colonial society and neoliberal tourism industry. By analyzing our field data from various events of cultural tourism in Banyuwangi, East Java, Indonesia, we will elaborate some concepts and practices of neo-exoticism. We adopt and develop the idea of neo-exoticism from the concept of "post-colonial exotic" by Huggan (2001), which describes the contestation between the desire of intellectuals and activists to preserve traditional cultures continuously as a significant marker for national identity and the state's policy to incorporate the beauty of exotic cultures into commercial activities. The framework will help us to analyze primary data from participatory observation in cultural tourism activities in Banyuwangi and interview with some folk artists from 2012-2019 as well as secondary data from online news media. The result of this study shows that the neo-exoticism formula in the development of ethnic arts has several advantages. For the state regime, this formula makes local government easy for repackaging ethnic artistic richness in the form of tourism products such as carnival, festival, spectacular event, and collaborative performance. Indeed, the artists and residents will benefit through their cultural participation, but the investors in tourism with neoliberal flexible principles which incorporate exotic characteristics into their services will get greater profits. However, the neo-exoticism formula will not have a major impact on ethnic arts that still follow the traditional standard performances.