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Wed, 23 Apr 2003, 00:00 WIB | Source: The Jakarta Post

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Hope lives on for ailing tourism industry

Sudibyo M. Wiradji
The Jakarta Post

Worldwide travel fears resulting from the war in Iraq and the
outbreak of Severe Acute Respiratory Syndrome (SARS) have come as
further setbacks for Indonesia's battered tourism industry.

Tourism officials and executives of the country's star-rated
hotels acknowledge they are already seeing repercussions from the
war and the spread of the killer disease, with travelers
canceling planned visits.

Despite the current bleak picture, they remain confident about
the long-term prospects of the tourism industry.

Minister of Culture Tourism I Gde Ardika said the current
events were likely to hamper the country's tourism efforts in the
short term only.

"Hopefully, all of these concerns can be settled soon because
all the people in the world want to live healthily, prosperously
and peacefully. Is there a country in the world yearning for
war?" he told The Jakarta Post in an interview.

With more varied tourism destinations being developed in the
country, Indonesia could become an even more attractive
destination for foreign tourists in the coming years, he added.

"Similarly, more prosperous Indonesians will have more
opportunities to spend their holidays traveling to different
tourist spots at home."

The government is currently working on its second phase of the
tourism rehabilitation plan which was introduced in the wake the
Bali bombings in October last year. Begun in January, the second
phase is scheduled to be completed in June 2003.

The first phase of the program, termed the rescue period to
salvage the tourism industry following the bombing, took place
from October to December last year.

The final stage, or normalization period, will be held from
July to November 2003.

About Rp 41 billion (about US$4.6 million) has been allocated
to finance the tourism rehabilitation project, also including a
worldwide media campaign and promotions. Some Rp 10.4 billion of
the total is earmarked for sales campaigns through international
media such as giant U.S.-based networks CNN, ABC and CNBC.

Funds will also be used to set up promotion agencies in Japan,
Australia and Europe by appointing public relation firms in those
countries.

Other programs to be held during the first half of 2003
include quality improvement in services, for which the ministry
has allocated Rp 22.5 billion. Funds will also be harnessed for
financing efforts to boost domestic tourism, which in 2001
generated revenues of $7.7 billion.

Ardika said his office would conduct active bilateral,
regional and multilateral cooperation, as well as organizing
events and improving service standards, during the normalization
period.

Tourism was one of Indonesia's most rapidly developed business
sectors until the economic crisis hit the country in 1997. The
mass riots which led to the end of Soeharto's more than 30-year
rule further worsened the industry's fortunes as security-
conscious tourists stayed away.

The number of foreign tourist arrivals peaked at 5.18 million
in 1997 but dropped to 4.60 million in 1998 and 4.72 million in
1999, due to the combination of the economic crisis and
uncertainty in security following the change in the country's
leadership.

Tourism began to pick up in 2000, with foreign tourist
arrivals rising to 5.06 million, but the Sept. 11, 2001,
terrorist attacks halted the positive trend, with a relatively
slight increase of 5.15 million foreign visitors recorded during
the year.

The shocking images of the Bali bombing and foreign media
reports about Indonesia as a haven for international terrorist
groups further chipped away at the advances made in repairing the
country's image in 2002.

With warnings against non-essential travel to Indonesia in
effect for nationals of several countries, tourist arrivals
plunged to 4.3 million in 2002.

Ardika is optimistic that this year's target of 4.5 million
foreign tourist arrivals will be achieved despite the global
problems, and projects they will reach between five million and
seven million in the next three to five years.

If all goes according to plan, the figure is expected to jump
to 15 million, with annual foreign exchanges earning of $15
billion in 2010, and to between 20 million and 25 million in
2020, with foreign exchange of about $20 billion.

Tourism-related industry executives are also upbeat about the
future of the sector even though they stress there are "terms and
conditions" that the country must meet to attain the projected
growth.

InterContinental MidPlaza Jakarta's general manager Didier
Beltoise said there was no denying Indonesia's tourism potential
with its varied attractions and destinations, but the country
needed to bolster foreign confidence by improving security.

"Foreign confidence in Indonesia and restored security are key
to tourism recovery," Beltoise told the Post.

He said the Bali tragedy had a tremendous impact on tourism in
Bali and Indonesia in general.

"However, with the ongoing hard work by the government and
various tourism-related partners like hotels and travel agents to
revive Bali tourism, I feel confident that eventually Bali will
recover after two or three years," he said.

With Jakarta traditionally positioned as a business
destination, the tourism recovery in the capital hinges on
foreign confidence in the economy.
"If the economic indicators are positive, then tourism in Jakarta
will also see positive growth. The question is whether there is
really potential of seeing again foreign direct investment (FDI)
rather than seeing corporations divested from Indonesia," he
said.

Hyatt area director for Indonesia Peter Stettler shared
Beltoise's view, saying that Indonesia boasted such an enormous
number of diverse tourist attractions that would tempt visitors
back to the country.

"Besides Bali as a trump card, it is not, in my opinion, a
question of if but more about when. How soon? This will depend on
both internal and external factors," he said.

Even with the recent difficulties, tourism ranks second in
foreign exchange earnings after the oil and gas sector for
Indonesia, contributing $5.7 billion, $5.4 billion and $4.3
billion in 2000, 2001 and 2002 respectively.

Of foreign tourists traveling to Indonesia, one-third visited
Bali, the nation's most famed resort, which contributed $1.35
billion of the total revenue in 2002. The industry provides
employment for about 12 million people.

The government has said the number of foreign tourists to
Indonesia, especially from western countries, decreased by 30
percent due to the Sept. 11 terrorist attacks, the Bali bombings
and Iraq war.

With the decline in tourists from traditional markets, tourism
promotion is concentrated on "short and medium haul" countries in
the Association of Southeast Asian Nations (ASEAN), East Asia
(including Japan, South Korea and China) and Australia.

Tourism industry executives said that finding "alternative"
markets would be a realistic move to weather the difficult times,
with China recognized as holding particular potential, once the
current problem with SARS is overcome.

Although the Chinese government included Indonesia as one of
its tourist destinations recommended for its citizens in 2001,
the Indonesian government has yet to capitalize on its Advisory
Destination Service (ADS) designation.

"Indonesia only saw 40,000 tourist arrivals from China in
2002, compared to 700,000 Chinese visiting Malaysia in the same
year," said Yanti Sukamdani, chairwoman of the Indonesian Hotel
and Restaurant Association (PHRI).

About 27 million Chinese travel abroad each year, and "this
means a good market opportunity for Indonesia", Yanti added.

Hotels

The continued drop in foreign tourist arrivals is heaping more
hardship on the country's star-rated hotels, most still heavily
dependent on international visitors for their revenue.

"With the current 30 percent occupancy rate, many hotels
cannot exist normally. The room revenues are only enough to pay
employees' salaries and routine expenditures like electricity
bills," chairwoman of the Indonesian Hotel and Restaurant
Association (PHRI) Yanti Sukamdani told the Post.

But for Yanti, whose family founded the Hotel Sahid Group
hotel chain, and executives of other star-rated hotels there is
nothing to do but hope the situation will improve.

Although short-term prospects for the hotel industry remain
uncertain, Yanti said the continued increase in business from
domestic travelers and encouraging improvement in the country's
security situation add up to better long-term prospects.

"Business will return to normal beginning in 2008, during
which the average occupancy rate is expected to increase from 60
percent to 70 percent, on the condition that tourism-supporting
factors such as political and security concerns are handled
seriously," she said.

Occupancy rates showed signs of recovery in early 2002 after
the post-Sept. 11, 2001 downturn, but the gains unraveled with
the October 2002 Bali bombings.

"Of the country's 125,000 hotel rooms, only 35 percent were
occupied in 2002, down from about 54 percent in 2001. This year's
occupancy rate is estimated to further decline to 30 percent,"
Yanti said.

Beltoise and Stettler also shared concerns about the
difficulties being faced by the country's star-rated hotels.

Beltoise said his hotel's occupancy rate declined to about 30
percent in early April from 40 percent in previous months due to
mass cancellations from foreign travelers.

He estimated the low occupancy rate would continue for the
time being but he was optimistic business would recover again
once global peace and stability return.

Stettler said the Iraq war and SARS created a tourist vacuum
not only for Indonesia but also the world.

"Business will recover once the SARS scare is under control
and the war in Iraq is over," he said.

Stettler advised the government and the private sector to
overcome the difficulties by honing safety features at all hotels
and tourist destinations that would instill confidence in
visitors.

A positive development amid all the woes has been recognition
of domestic travelers, who formerly took a back seat to their
foreign counterparts.

Yanti said the growing number of domestic tourists would play
an important role in the recovery of the country's hotel
industry.

In 2001, the number of domestic tourists reached about 107
million, contributing about Rp 77 trillion in hotel revenues,
compared to about $5.75 billion or about Rp 55 trillion from
about 5 million foreign tourists in the same period.

The domestic market provides good opportunities, Yanti added,
because there was growing interest among Indonesian families to
spend their holidays in local tourism destinations such as in
Bali or Yogyakarta.