Hotel tariff war hurts tourism industry: Soeharto

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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