Hotels Eke Out a Living in Tough Times

Hotels Eke Out a Living in Tough Times

Sudibyo M. Wiradji Contributor Jakarta

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. And the Iraq war and the spread of Severe Acute Respiratory Syndrome (SARS) -- with the perception it is an "Asian" disease -- are not helping matters. "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 Jakarta 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. Difficulties are nothing new for the tourist industry after the political and social turbulence of the last few years, and more trouble may be on the horizon with the general election in 2004. "However, with Indonesian people becoming more mature, the political campaigns are not expected to be a threat but to be turned into an attractive tourism event," she said. 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. General manager of InterContinental MidPlaza Jakarta Diedier Beltoise and Hyatt area director for Indonesia Peter 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. "To go through difficult times, hotels should be flexible in seeking revenue sources, trying to understand the need of the market and look at new opportunities," he said. 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. "Indonesia offers many 'exciting' attractions in the respective provinces. But the problem is the attractions are not well promoted to local tourists," she said. Indonesia could look at the examples of the United States and India in nurturing the domestic tourist market. "Such a big country as India has only 2.5 foreign tourist arrivals because it focuses on domestic visitors," she argued. Indonesia should also work to lure visitors from the Association of Southeast Asian Nations (ASEAN), as well as China (including Taiwan and Hong Kong), Japan, Korea and Australia. Although the latter market may be traumatized by the Bali bombings, with Australians accounting for the vast number of victims, Yanti said she was confident the geographic proximity to Indonesia would overcome the problem. Non-traditional markets holding potential are India, what Yanti termed a "sleeping giant", and Russia, because the country's tourists are drawn by the opportunity to bargain hunt for low-cost quality items to be found in Indonesia. Middle Eastern visitors, a growing market before the Iraq war, have their own travel pattern. "They usually travel in a large group with families and neighbors. And their average length of stay is around one month. They travel to several areas in Indonesia, including Jakarta, Surabaya and Bali," she said. There is no denying Indonesia's potential, with over 18,000 islands and about 300 ethnic groups. Beside internationally renowned Bali, each province has its own distinctive tourist attractions. "The problem is how to package the products in such a way that they will attract the target markets. We must know which target market we should aim for," she said. The key is in effective promotional campaigns, based on long-term plans and with recognition of key markets. "In the case of hotel rooms, for instance, we should know what type of room (is on offer), and where to sell it to and what superior features the customers get ..." As part of PHRI's efforts to stimulate the domestic market, the association, in cooperation with the Ministry of Culture and Tourism and state-owned television station TVRI, will jointly launch a series of weekly TV promotional programs called Berwisata Ke Indonesia (Vacationing in Indonesia). The 30-minute programs will showcase the country's diverse tourism spots. PHRI is taking other measures to cope with the short-term problems, including cooperating with both national flag carrier Garuda Indonesia and regional organizations on niche-focused discounted tourist packages. With Garuda, PHRI offers "Let's Fly & Have Fun" for domestic travelers, with a trip to Bali costing only Rp 1.8 million, inclusive of return airfare, accommodation and tours. The association also has a Bali package for Malaysia and a golf package for Japan. The association is preparing hotel personnel for the advent of the ASEAN Free Agreement on Services (AFAS), which will take effect after the implementation of the ASEAN Free Trade Area (AFTA) in 2003. AFAS will allow for free investment, free labor, free market access and free market supply for ASEAN member countries, requiring a competitive edge among human resources. PHRI has launched quality standardization for hotel services, products and management throughout Indonesia. "With the certificate, Indonesian hotel employees are entitled to work in hotels in ASEAN member countries, in Malaysia, for instance, and vice-versa," she said. 1