JP/4/GRACE

JP/4/GRACE

Grace Emilia
The Jakarta Post
Contributor
Jakarta

Travel downfall: Big players suffer most

Talking about the hotel market situation in Indonesia means
discussing the ripple down effect of globalization, particularly
after the Sept. 11 terrorist attack in America.

The attack has sent the world airline industry into the
doldrums. Prior to the tragedy, the decline in the global economy
had led the International Air Transport Association (IATA) to
predict losses for all carriers of US$2.5 billion until the end
of this year. But after the WTC attack, IATA has increased its
prediction to $10 billion.

The attack has been translated worldwide into massive
financial losses, layoffs and cutbacks for airlines around the
globe.

U.S. airlines alone have responded by cutting 120,000 jobs and
reducing flight schedules by an average of 20 percent as both
business and leisure travel have dropped off sharply.

This fallout extends from air travel to other associated
sectors, including the cruise, hotel, convention planning and
food service industries.

The U.S. Chambers of Commerce warned in early October that
more than 1 million workers in the hospitality industry would
lose their jobs within weeks.

In Indonesia, the impact is probably less severe but is still
very harsh. According to State Minister of Culture and Tourism I
Gede Ardika, Indonesia will most probably lose 1.6 million
prospective tourists and nearly US$2 billion in foreign exchange
this year due to the war in Afghanistan.

In Bali, the number one indicator of this country's tourism
industry, the MICE (Meeting, Incentive, Conference, Exhibition)
business is the one that is most affected.

"It is dropping terribly," said I Gusti Bagus Yudhara,
Chairperson of ASITA (Association of Indonesian Tour and Travel
Agencies) Bali.

But hoteliers from the upmarket hotels which are often used
for MICE business are, however, still optimistic that this
particular segment will pick up again over the next two years.

"The incentive market needs one year in advance planning, so
it certainly will be going down next year. But hopefully it will
pick up again by 2003," said Craig Senior, Director of Sales &
Marketing for the Jimbaran-based Ritz Carlton Bali Resort & Spa.

Marc F. Dardenne, General Manager of the Ritz Carlton Bali
even sees a silver lining.

"Yes, we are losing the incentive and conference market as
they are mostly from the U.S., but we getting individual markets
from Japan which usually go to Hawaii or Guam. They are now
heading to short-medium haul destinations like Bali to avoid long
flights.

So we lost 15 percent, but will still get 5 percent back,"
Dardenne said.

Japan, as the medium-haul market, is hoped to be one of the
potential markets that will sustain Indonesia's inbound tourism.

"We are now focusing our marketing orientation on short- and
medium-haul markets in East Asia like Japan, South Korea and
China, also Singapore, Malaysia, Brunei and Australia," said I
Gede Ardika recently.

However, even Japan's largest travel agent, the Japan Travel
Bureau, stated that bookings for all international trips for
October and November 2001 were down between 10 percent and 15
percent from the same period last year.

But the opportunity for business should be grabbed, however
small it is.

Thus Rio Kondo, director of the Horwath Asia Pacific Jakarta
Representative Office, a tourism consulting company, warned that
the (tourism) industry in Bali should be very careful in
maintaining the security issue, especially for the Japanese
market, which is very security-oriented.

"Up to August this year, hotels in Bali were still enjoying
both a good occupancy rate and an average selling rate. Ever
since the beginning, Bali has not been much affected by the
crisis. Their ebb and flow in occupancy rates depends mostly on
holiday seasons.

However, after this September, Bali has started receiving
cancellations. Yes, the American market is not very influential
as there are not many of them. But the problem could be derived
from the Japanese market which is very conservative in security-
related matters," said Kondo, who is also the Chairman of
Research and Investment of the Indonesian Hotel & Restaurant
Association (IHRA).

Meanwhile, regarding Jakarta hotels, according to Kondo the
negative impact is obvious because many of the businesses in
Jakarta are somehow related to U.S. and European companies.

"We divide the hotel market situation into three levels: top
tier, mid tier and low tier. Regarding the recovery side, the low
tier hotels are the ones that recover quickly, because most of
their market is domestic. Up to August this year, their occupancy
rate had almost reached 60 percent.

Meanwhile, the mid tier hotels are not very bad either as
their market is mainly domestic and regional. Their occupancy
rate has been reaching 50 percent.

It is the top tier hotels which suffer the most as the
majority of these cater to the international market. The selling
rate of these top tier hotels is only around $80, while actually
they should sell at above $100. In 1997, their selling rate was
almost $140," explains Rio Kondo.

Paying attention to the domestic market is one solution
suggested by Kondo though this market's buying power will not be
as big as the international one.

Indonesia's Santika Hotels Group has foreseen the potential of
this domestic market.

"We are surviving because most of our hotels cater to the
domestic market," said Rudy Setiawan, Corporate Director of
Marketing Santika Hotels Indonesia.

"In Bali we will be losing about 20 percent of business,
mostly from the Europe and U.S. markets. In Manado we were
running at 37 percent in September but suddenly dropped to 23
percent in October. But it was also 30 percent in the same period
last year. So we are only losing three percent," Setiawan
explained.

But in other cities, he went on, business was going on as
usual. In Bandung, the occupancy rate was more than 90 percent,
whilst in Cirebon, Surabaya, Yogyakarta and Semarang it was more
than 80 percent.