Jakarta hotels wait and see for tourists to make a return
Jakarta hotels wait and see for tourists to make a return
By Mehru Jaffer
JAKARTA (JP): Dutchman Edward Douwes Dekker first described
the islands of the Indonesian archipelago as a string of emeralds
on the equator.
But it was only much later, long after the Dutch had left
these shores, that the government realized the country's beauty
could be the bait to lure tourists.
In the early 1970s, the number of foreign tourists totaled
86,000; it increased to 4.32 million in 1995 and over five
million the following year. Shortly before the economic crisis,
tourism with its revenue running into billions of dollars, stood
third as a foreign exchange earner after the oil and gas and
textile sectors.
Complimenting the growth of the massive hotel sector is the
restaurant business, and the rise in the number of tourists gave
birth to a boom in travel bureaus. From 297 units at the
beginning of the 1970s, the number stood at over 2,000 in the
mid-1990s. Tour leaders and tourist guides too joined the
industry in droves, their number running into thousands
today.
To realize its vision of retaining tourism as the country's
prime foreign exchange earner without harming the environment,
the tourism ministry continues to dream of meeting its initial
target of earnings of US$15 billion by the end of 2005 from 11
million foreign tourists expected to spend on average $1,375 per
visit.
As the growth rate of the world economy rockets ahead, much of
the world's economic activities shift to the Asia-Pacific region
and telecommunications and transportation technologies continue
to improve. There is little reason to doubt that Indonesia will
remain one of the most attractive destinations in the world for
both business as well as lovers of travel.
But there is a big if, especially for hotels in Jakarta.
The scene looks a little dismal today as many a hotel in the
capital trades at a historically low value although a bullish
outlook is predicted in the new year to come. But it will depend
on the law and order situation being under control before
visitors troop back to Indonesia, warned Said Umar Husin,
director of The Regent Jakarta and head of the Indonesian Hotel
and Restaurant Association.
The economic crisis has engulfed the entire region of
Southeast Asia but it has hit the hotel industry hardest in
Indonesia as it comes here hand in hand with grave political
problems.
In an exclusive interview with The Jakarta Post, Said, a
businessman who has been in the hotel industry since 1986, said
that hoteliers can provide world class service but that is not
enough to get all the guests to return as it remains the
responsibility of the government to create a conducive atmosphere in
society, promising visitors easy and safe access into the country.
"If the government is not consistent how can its tourism
policy be consistent?" he said.
Promotion
While both Thailand and Malaysia continue to spend more than
$50 million annually on tourism, Indonesia barely spends $1
million.
"Here in Indonesia we don't seem to realize how important
tourism really is to the economy. Tourism and business go hand in
hand as one creates the other, benefiting local populations at
every level," asserted Said.
When the local currency is weakest, it is a good time to draw
visitors to come so that they can spend here, bringing into the
country much needed hard currency. But any visitor will rightly
want to be assured of safety, he said, pointing out that the
government has not done enough for visitors to return here.
It was strong economic conditions along with the availability
of credit that facilitated the growth of the hotel industry in
Indonesia between 1993 and 1997, providing as many as 10,000
luxury rooms in a city of 12 million people. Strong occupancy
levels, average room rates and profitability levels boosted hotel
values during that period; the current turmoil has caused hotel
values to drop significantly below historical values achieved
earlier.
By the end of 1997, the economic crisis and the devaluation of
the rupiah caused domestic and social unrest and political riots
rocked Jakarta and other parts of Indonesia, severely affecting
both national and international demand. However research also
shows that each time there is any sign of economic recovery and
political stability, hope is also raised about the value of the
market becoming increasingly liquid.
According to the Asian Hotel Valuation Index (AHVI), hotel
values have dropped dramatically. A combination of new supply and
a growing negative perception of Indonesia by travelers has
resulted in a drop in room yields and although the immediate
economic outlook is improving, hotel room yields are expected to
increase only marginally as new supply in markets is likely to
dilute any future demand growth.
Hotel Borobudur opened in 1974 when just two five star hotels
existed in Jakarta. The 23-acre property in the heart of the city
changed ownership and was closed down for two years for
renovation after enjoying occupancy levels up to 85 percent.
"We reopened our doors in 1997 in the thick and thin of the
economic crisis," recalled director of sales and marketing
Jasmina Janik, and it took another two years for the hotel to
attract most of its guests back.
Yet it was not too difficult to do as the hotel was previously
owned by the Inter Continental chain, an association that had
left the staff of over 1,000 sufficiently seeped in the art of
hospitality.
Although only 50 percent of its almost 700 rooms are occupied
these days, Jasmina does not despair as Indonesia has too much to
offer travelers, both business and tourists, for them to keep
away from the country for too long.
"If for no other reason, visitors will continue to come to
Indonesia just to be in the company of people who
are very gentle by nature," said Jasmina.
Promising
Hotels like Gran Mahakam which earlier was no competition to
better known international hotel chains are happy at how
promising business has become. The occupancy rate at the hotel
has leaped from 30 percent in pre-crisis times to 48 percent last
year, and 52 percent now.
Another hotel doing well is the Aston Jakarta, located on Jl.
Sudirman.
"For next year, we think the business will be a bit low in the
first quarter, but we don't want to be pessimistic. We are quite
sure that the business will be better next year," said marketing
and communications manager Nike Handayani.
Business is already showing improvement, with Nike saying the
hotel is solidly booked through year's end.
The overseas business may be slow but product and marketing
services manager Accor Asia Pacific Fabrice Burtin said that the
middle management part of the domestic corporate market was quite
solid. The hotel has no big worries and looks forward to even an
increase in its present occupancy level of 60 percent to 70
percent.
According to a report on hotel development trends by Arthur
Anderson, intra-Asian business travel is on a rapid rise as the
business interests of major Asian and international corporations
drive further expansion in the region. A rapidly growing middle
class in countries such as this one also assures the need for
more affordable accommodation in the region, especially for
leisure travelers.
With an oversupply of first-class and luxury hotels in most
Asian cities today, the concentration is shifting perhaps to new
mid-market hotels as having the greatest potential, especially in
a population rich country like Indonesia.
The Grand Hyatt Jakarta is also doing good business. Occupancy
has improved 25 percent compared to last year, and year to date
occupancy in 2000 is 35.79 percent compared to 26.66 percent last
year.
"To attract more guests to the hotel, we have created some
special packages for business travelers and are promoting them
through local as well as international media," said the hotel's
director of business development, George H. Basoeki.
Given the rise of an Asian middle class and the desire of
western tourists to look for culturally rich and less crowded
vacation spots, major hotel chains are also working toward
increasing their resort portfolios. Change is embraced as hotel
owners and operators diversify and innovate to satisfy the ever
growing middle class who are eager today to use their money for
leisure purposes like vacationing and eating out on a regular
basis.
Asked to describe the hotel business in the city today, the
public relations offices at the Shangri-La Hotels and Resorts, a
major player all over Asia admit that the market is extremely
competitive and still underperforming.
But that is not necessarily a negative sign according
to Peter Carmichael, the hotel's general manager here.
"What we are trying to do is to face the challenges by making
adjustments. Previously we may have imported certain items. We don't
now, to save costs. However no adjustment is made at the cost of the
dignity of the flag that is flying on the rooftop."
Despite having seen occupancy levels dip from 70 percent
before the economic crisis to 48 percent, Carmichael is
optimistic about the future as business has to take off one day.
With a reliable reputation and a name like Hilton it is not
surprising that occupancy levels have increased 25 percent in
recent times at the hotel. Fathia Syarif in the marketing
communications department of the Jakarta Hilton is constantly in
the process of offering attractive proposals to the hotel's
corporate clients from abroad and here who use the property
regularly for both business meetings as well as a retreat
for the entire family.
The Dharmawangsa hotel and residences is conceived as a
retreat for those working for the affluent mines and energy
sector. The elegance in stone was sculptured especially to
coincide with the 103rd meeting of the Organization of Petroleum
Exporting Countries (OPEC) in December 1997 and remains a glowing
example of the discreet hospitality and elegance practiced by the
Rosewood Hotels and Resorts.
General manager Luis Fernandes feels that the economic crisis
has not done anything that is impossible to cope with. He
confessed that last year business was far too quiet but already
there is a big improvement.
Inspired by the philosophy of the sun-shaped chandelier in the
grand lobby of his hotel that symbolizes the power of each
sunrise, Fernandes obviously does not believe in dwelling about
the past. For it is the future that has to be looked forward to
in preparation of the red carpet for all those guests waiting to
experience the exquisite ambience of hotels like The
Dharmawangsa.