Hotel industry seen as shifting to three-star property

By Vincent Lingga

Karl Linus Waelti a Swiss national with more than 33 years of experience in hotel management around the world, including Indonesia in the late 1970s, projects the future trend in Indonesia's hotel industry in an interview with The Jakarta Post.

JAKARTA (JP): Karl Linus Waelti, President of PT Qualita Pelangi, a hotel management company which holds the master franchise of Choice Hotels International of the United States for Indonesia, is not greatly impressed by the mushrooming of deluxe hotels in Jakarta.

He, instead, foresees a strong move toward the development of three-star, economical accommodation facilities throughout Indonesia.

Waelti's main argument is that as the country's economy grows, the middle-class expands and more highways are built, the lifestyle of many people will begin to change and long distance car travel will become increasingly popular.

Below are salient excerpts from the interview:

Question: Why the trend toward three-star accommodation?

Answer: The biggest source of tourists in Indonesia in the future will be Indonesia itself. Assuming that a mere 10 percent of the people (about 190 million) become middle-class, that will be a huge market. Next come the other Asian countries which will form the second largest supplier of tourists to Indonesia.

All Asians are tough bargain hunters and are budget driven tourists, with the exception of the few in the top income bracket. Even tourists from the developed nations have become increasingly budget conscious. They don't want to pay for what they don't use. You may also have noticed that most airlines have sharply reduced or torn down their first-class sections.

Why, for example, pay US$200 for a room if you can get it for $80 with the same comfort but minus the crystal chandeliers in the magnificent marble lobby? You don't want to pay more for the rooms simply because the hotel lobby is so magnificent as to account for a big portion of the hotel's total construction cost. You want value for your money.

So I think the future is for three-star hotels (with rates of between US$50-$80) or even lower, but with comfortable nice rooms.

Hence, our business goal outside Jakarta is to manage 40 three-star hotels within the next few years. We now manage three, one in Anyer, West Java and two in Bali. Four are hotels under construction and nine more in the final stage of negotiations with investors.

We will have an advantage in a global reservation system because our franchiser has over 3,000 hotels bearing the Choice brand around the world, including 70 in the Asia- Pacific region.

Q: It seems that economical hotels in Indonesia also have lower quality management. Is this analog simply natural? How do you plan, develop and manage three-star hotels?

A:First of all, you should do the fundamentals-- select the site, study the potential customers and consult with the architect. The timing is also crucial. Then the financial success of a hotel project depends largely on construction costs. The rule of thumb here is that the achievable room rate should be calculated along with the construction costs. For example, if the hotel construction costs $30,000 per room, the room rate should be a minimum of $36. The generally accepted ratio is every $1,000 in construction cost per room equals $1 in room rate.

Operation management is the next crucial element. Many businessmen profess the wrong perception that smaller hotels need lower- quality management. There is actually no difference between deluxe and economical hotels regarding the quality of management. The only difference is the structure of the organization and the combination of the various job functions. But for sure, big and small hotels need the same high quality professional management.

In a small hotel with just 50 rooms, for example, the general manager may function simultaneously as the sales, public relations and purchasing manager. But his managerial skills should not be lower than those in charge of bigger properties.

Q: Experience at many hotels show look as if the hotels hire the wrong people. Since hotels are part of the hospitality or service industry, how do you go about recruitment?

A: Yes, recruitment is another vital component for successful hotel management. Here we talk about the intangible element of hotel operations, to differentiate it from the tangible ones-- building, architecture and interior design etc. But the intangible element-- service-- is the most crucial. Guests often complain about slow service, bad food and the indifferent attitude of room boys but very rarely about the size of the furniture in the lobby.

The intangible element depends on the employees. Many often do not realize that the service business depends on two factors: The system (organization, job description and procedures) and what I call the "conviviality" of the staff. This requires people who are friendly, obliging, attentive and willing to please.

So what a hotel really needs is feelers rather than thinkers. For the thinker, everything should be logic. For him one plus one must be two. But for the feeler one plus one could be three, if the guest says so, and look happy about it. They want to make you happy, that is all. Hence, aptitude tests should be thorough, because not all skilled people are fit for the hotel business. Waiters, receptionists and others who are in direct contact with the guests are the front-line staff whose performance counts a great deal in creating customer satisfaction.

I like to compare a hotel to a football team in the United States. The rank and file employees are the players (the service champions), the supervisors (department heads) are the coaches, the managers are the cheerleaders and the general chairman is the facilitator.

Window A: Hotels need more feelers than thinkers.

Window B: Three-star and deluxe hotels need the same high quality of professional management.