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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.