Battered hotel industry faces added insults

Battered hotel industry faces added insults

JAKARTA (JP): The outlook for the country's battered hotel
industry may become even bleaker in the months ahead, as fears of
escalating social unrest before and after the June elections will
further discourage foreign tourists from visiting Indonesia, a
tourism executive has said.

Chairman of the Indonesian Hotels and Restaurants Association
Pontjo Sutowo said the estimated decrease in tourist arrivals
would continue to drag down the already weak hotel industry.

He estimated that the average occupancy rate of star-rated
hotels might further plunge to below 30 percent, except for
hotels in Bali, where the rate is expected to remain high, at
over 60 percent.

"Three months into this year, there have been no signs of
recovery in the hotel industry. Business may even worsen in the
months ahead over fears of social disturbances around the general
election," he said.

He added that occupancy rates in most hotels in the country's
main tourism destinations, including Yogyakarta, Ujungpandang in
South Sulawesi and Medan in North Sumatra, have also plunged to
below 30 percent.

Pontjo said the average occupancy rate of star-rated hotels in
the capital in the first three months of this year ranged between
20 percent and 30 percent, down from an average monthly level of
30 percent to 40 percent in the same period of last year.

The average monthly occupancy rate was 75 percent before the
economic crisis hit the country in July, 1997, he said.

Pontjo said that last year local hotels had been forced to
reduce their room rates by about 80 percent to attract guests
amid the lower demand for hotel rooms and increasing upkeep
costs.

Room rates this year are expected to be 50 percent lower than
in 1998, he said. He warned, however, that a further rate cut
would incite a price war among star-rated hotels.

Pontjo said the association's members had tried hard not to
lay off workers despite the low occupancy rates, but if the
situation continued layoffs could not be avoided.

"It's going to be hard not to cut workers in the current
situation", said Pontjo, who owns the Jakarta Hilton
International hotel.

Some star-rated hotels in Jakarta have suffered losses during
the past few months, and if the cash-flow problems continue, the
hotels will not have much choice but to cut back their staff in
order to survive.

The decreasing number of tourist arrivals is a major
contributing factor to the industry's lack of income.

The downturn in tourism began in 1997 following a series of
natural disasters, such as the notorious forest fires that hit
Kalimantan.

Last year, the tourism industry suffered an even lower slump
following the massive riots in May when hundreds of properties,
mostly department stores and retail outlets, were burned down or
looted. Hundreds of people were also killed during the tragedy,
which led to the resignation of president Soeharto after 32 years
in power.

Many countries warned their citizens not to visit Indonesia
after the incident, dealing another big blow to the country's
tourism sector.

The prolonged economic crisis and a series of social upheavals
across the country caused foreign tourist arrivals to drop by 20
percent to about 3.8 million visitors last year, down from 5.04
million visitors in 1997. The number was far below the
government's initial target of 4.8 million foreign tourist
arrivals.

Foreign tourist arrivals are expected to decrease further this
year because of fears of social instability around the June
general election and the Special Session of the People's
Consultative Assembly.

"People are afraid to come to Indonesia now, and many airlines
have reduced their flight frequencies to the country," Pontjo
said.

Cutting prices, he said, is no longer an effective measure to
attract guests, because local hotel room rates are already very
competitive because of the weaker rupiah against the U.S. dollar.

"No one can beat the prices of our hotels. But foreigners are
still hesitant to visit Indonesia because they fear security
here.

"Right now all we have to do is convince them that it is safe
and secure to visit here," he said.

The head of the Jakarta Chapter of the Indonesian Tour and
Travel Association, Meity Robot, said separately that many
foreign tour groups have canceled their visits here.

"The cancellations are expected to continue for scheduled
tours ahead of the general election," she said. (gis)