Hotel tariff war hurts tourism industry: Soeharto
JAKARTA (JP): President Soeharto expressed his concern yesterday over the current tariff war among star-rated hotels in Indonesia, saying the unhealthy competition could damage the national tourism industry.
The President said the tariff war would only benefit foreign travel agencies while Indonesia would become the loser because state revenues from the tourism sector would decline.
"I received reports on the oversupply of hotel rooms which forces hotels to sharply discount their tariffs," Soeharto said when opening the national conference of the Indonesian Hotel and Restaurant Association (PHRI) at the State Palace.
He said he hoped the association would work closely with the government to solve the oversupply problems.
Despite the tariff war trend, the President was confident the tourism industry would grow steadily. Quoting official statistics, he said the number of tourists to Indonesia had increased from 3.4 million in 1993 to more than five million in 1996. More than 725 star-rated hotels with 70,000 rooms operate in this country.
"I hope the tourism sector will become the country's biggest foreign-exchange earner by the end of the Seventh Five-Year Development Plan period in 2004," he said.
The government expects 11 million tourists will visit Indonesia in 2004 and will spend $15 billion. At least 65 million room nights will be sold at the time compared to only 30.3 million in 1996.
The chairman of the 4,350 strong-members association, Pontjo Sutowo in his report to the President said the tourism industry earned US$6.2 billion last year, and 50 percent of the revenue was received by hotels and restaurants. Their revenue in 1995 was $5.2 billion.
The government has projected $7.2 billion in foreign exchange from the services sector for 1997/1998 fiscal year.
Pontjo said that the hotel and restaurant sector contributed not less than Rp 1 trillion in property tax and development tax receipts for local administrations per year.
Pontjo, the President of PT Indobuildco, which owns the Jakarta Hilton Hotel, noted that the industry still had other financial burdens, which made it less competitive.
Pontjo expected the government to lower electricity tariffs and property tax and abolish unnecessary levies to help the tourism industry become more competitive.
"Electricity tariffs for hotels are even higher than for the manufacturing industry," Pontjo told reporters after the ceremony.
Minister of Tourism, Post and Telecommunications Joop Ave confirmed the tariff war problems, but declined to give further details.
"PHRI must discuss this in their conference to find a solution, because once they reduce the price then it would be very difficult to raise it back," Joop said.
When asked about the room oversupply Pontjo said: "We tend to imitate what other people are doing. When someone builds hotels other people will follow without a feasibility study."
The oversupply problem would continue to haunt hoteliers because the room supply target was 168,341 rooms until 2004, and the current supply had reached 200,000 rooms, he said.
Meanwhile, the secretary-general of the association's Bali chapter, Adnyana Sudibya, said the price war among star-rated hotel was inevitable, especially during the low season in Bali.
"But the association has never had any authority to take action," he said.
He said the PHRI Bali chapter had proposed to set up a so- called Tariff Council to control star-rated hotel room rates in the tourist island.
"Such a council will set up, namely, minimum rates. We also propose the council have an authority to take action against violators," Sudibya said.
The association's 12th national conference this year is scheduled to elect its new chairman for the 1997-2001 term.
Pontjo was seen by Sukamdani Sahid Gitosardjono, chairman of the Sahid hotel chain, as highly prospective for reelection.
Timber tycoon Mohammad (Bob) Hasan and television baron Peter F. Gontha were rumored as potential candidates to chair PHRI. (06/icn)
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