Hotel slug it out in starry-eyed war

Hotel slug it out in starry-eyed war

New star-rated hotels are rising across Jakarta's skyline
while the market for them is in the doldrums. Competition is
fierce; top-end hotels compete head-to-head not only within their
own star category but also against lower rated hotels and fully
serviced apartments. Jakarta's target market is shifting away
from its traditional customer base of commercial travelers toward
clients from the service sector. In addition, the city is being
promoted as the place for Meeting, Incentive, Convention and
Exhibition (MICE), both moves are expected to boost demand. The
Jakarta Post's reporters Aloysius Bhui, I. Christianto, IGGP Bayu
Ismoyo, Imanuddin, Kosasih Derajat, Primastuti Handayani and
Riyadi have prepared the following article and related stories on
page 6 about hotel competition in Jakarta.

JAKARTA (JP): Competition between Jakarta's star-rated hotels
has intensified as the increasing number of rooms on offer has
left the buyer with greater bargaining power.

Star-rated hotels are competing against each other to lure
both staying guests and business diners.

Visitors have a far greater choice of high-class accommodation
than they did just five or six years ago, when five-star diamond
hotels and luxurious serviced apartments were few and far
between.

Now when you come to Jakarta for a week-long stay, you can ask
for a discount of up to 40 percent off official room rates in any
star-rated hotel, said a hotel consultant here.

"Competition among all hotels is already very strong but it
will become much stronger in the near future, with the
anticipated price war," said Dieter C. Becht, general manager of
Hotel Ciputra Jakarta.

The direct spinoff for customers is that Jakarta's five-star
rated hotels sell rooms at four-star prices and so on down the
line.

"It is cheap marketing. That is a very desperate attempt, an
easy way-out... It is probably common in some hotel chains around
the world," said Brendan Inns, marketing director of the Grand
Hyatt Jakarta Hotel.

Cut-throat competition is heightened during the low season and
when a new hotel enters the market.

Jakarta's official daily room rates average US$260 for five-
star diamond hotels, $215 for five-star hotels, $160 for four-
star hotels and $80 for three-star hotels.

And almost all hotels offer discounted room rates to selected
guests. Discounts average 35 percent for five-star and five-star
diamond hotels, 40 percent for four-star hotels and 25 percent
for three-star hotels.

"Competition is fierce..of course this is to the benefit of
consumers as hotels review their margins and offer great bargains
especially for Jakarta residents," said Christopher L. Green,
chairman of Casa Grande, an association of Jakarta's four and
five-star hotel managers.

Some hotel experts believe that the real competition is just
beginning for star-rated hotels, after years of easy takings.
Three five-star hotels and six four-star hotels have opened in
Jakarta this year.

They are the Holiday Inn, Gran Melia and Sheraton Bandara,
while the four-star hotels are Dusit Mangga Dua, Acacia Hotel,
Medium Hotel, Grand Ancol, Golden Hotel and Hotel Cempaka.

Battle intensifies

The battle for customers will intensify in next year when the
Borobudur Intercontinental Hotel reopens and Le Meridien Hotel's
extension will offer an extra 180 rooms.

In addition, several new upper four and five-star hotels are
being built for 1998 or early 1999 openings. They are the Four
Seasons, the Omni Marco Polo, the Kempinski, the Westin Jakarta,
Park Plaza, New World Hotel, Sheraton Delta Media, Rosewood
Hotel, Pasaraya Hotel, Sahid Perdana Hotel and Conrad Jakarta
International Hotel.

This influx of new hotels will eventually affect hotel
occupancy rates which currently average at some 65 percent in
Jakarta. Property consultant PT Procon Indah, with Jones Lang
Wootton, projects that Jakarta's average occupancy rate will dive
throughout the next few years until it bottoms at 55 percent in
the year 2000.

But this does not signal doomsday for Jakarta's hotel
business. With the opening of new hotels, the market will have an
additional growth spurt, said Leo Volkers, a hotel analyst from
Jones Lang Wootton.

Marlock, sales directorate the Century Park Hotel, agreed.
Demand will automatically be generated by the new hotels as they
promote themselves abroad, across the country and in the city.

"If we go abroad, it is impossible for us to promote just the
hotel...because people who come here ..want to enjoy the city and
the country," Marlock said.

Therefore, new hotels stimulate demand with innovative
gimmicks in their promotional campaigns. Newly-established
Millennium Sirih Jakarta Hotel, for instance, plans to begin
telemarketing.

With telemarketing, the hotel is "knocking prospective
costumers by phones, which will be followed by sending written
brochures," said Millennium resident manager Michael Wetzlar.

But well-established hotels will be fighting to maintain their
position. To combat the low season slump, Jakarta's hotels are
doing their very best to attract wealthy locals to spend weekends
and holidays at city hotels.

"Our weekend package not only attracts Jakartans but also
people from Bandung (West Java) and Surabaya (East Java)," said
Faisal Risa, an assistant manager at Dai-Ichi Hotel.

Currently, Jakarta's hotel market is dominated by foreigners
at 61.3 percent, while Indonesians take up the remaining 38.7
percent.

Data from property consultant PT First Pacific Davies
Indonesia shows that as of last June, Europeans top the list of
foreign hotel guests, followed by those from Japan, North
America, Singapore, South Korea, Australia, Malaysia, China, Hong
Kong and Taiwan.

Demand for hotel rooms is projected to increase as the city
marketing diversifies.

Until the early 1990s, the hotel market was still very young,
and still driven by commercial demand from local companies. There
were less international meetings, conventions and exhibitions.

Now, the services sector makes up a significant slice of the
market as more foreigners are coming here for Meetings,
Incentives, Conventions and Exhibitions (MICE).

Jakarta has become a popular regional MICE destination,
although still far behind Hong Kong and Singapore. This is since
the opening of Jakarta Convention Center, the Jakarta Fairground
in 1992 and the Jakarta Convention Bureau in 1994.

Jakarta Hilton International Hotel, which is directly attached
to the Jakarta Convention Center through an underground passage,
benefits most from the MICE trade.

Jakarta Hilton general manager Michael Nigitsch said MICE-
related businesses is projected to contribute 11 percent to the
hotel's total revenue this year, up from 4 percent last year.

According to Procon Indah, corporate businesses still dominate
Jakarta's hotel market by 75 percent, followed by meetings and
conventions 6 percent, air crews 5 percent, group tours 4 percent
and others 10 percent.

Indonesia's economy is expected to be buoyant enough to
generate more hotel room demand in the city.

Continuing deregulatory packages in banking and finance,
foreign investment, tourism, trade and industry are expected to
boost more foreign investment here, and attract more foreigners
as investors, business partners and consultants.