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.
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.
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.