Fri, 22 Dec 2000

Local hotel chains try to look on the bright side

By Gedsiri Suhartono

JAKARTA (JP): Having survived 40 months of a dire monetary crisis and ongoing political uncertainty, the Indonesian tourism industry has little choice but to remain optimistic that the hard times will eventually pass.

The man in the street, government officials as well as local hotel chains have grown accustomed to earning lower revenues and coping with the reality that business, however tough, must go on as usual.

Some local hotel chains were particularly hard hit.

Aerowisata, a state enterprise which managed 12 hotels prior to the crisis, had to relinquish the management of several hotels, postpone several expansion projects and lay off two thirds of its workforce.

"When we operated 12 hotels we had 6,000 employees. Now we only operate four hotels and employ 2,000 people," Aerowisata public relations manager Netty Djohan Kalalo said, referring to the remaining Hotel Sanur Beach, Senggigi Beach Hotel, Grand Hotel Preanger and newly opened Pool Villa Club in Lombok.

The divested hotels include Hotel Pusako in Bukit Tinggi, West Sumatra, Biak Beach Hotel in Irian Jaya and several resorts in Bali.

A subsidiary of Garuda Indonesia Group, the Aerowisata chain has been able to survive the crisis through cross-subsidies from Bali's Hotel Sanur Beach and Lombok's Senggigi Beach Hotel. Then there is the Aerowisata aircraft catering industry and Satriavi tours and travel, all under the auspices of Garuda Indonesia Group.

"It's been a difficult three years, and we have not yet completed a full cycle of recovery," lamented Kalalo.

Recovery has not been easy, made more difficult by the piecemeal attempts at reformasi (reform).

"It hasn't recovered up to the speed we'd like it to be, but it is on the brink of recovery. And that is a good sign," said the general manager of the Borobudur Hotel, Poul E. Bitsch, who insisted that recovery could go faster.

For others, business goes on as usual. Santika Hotel Group, a growing national hotel chain that specializes in providing two- star to four-star accommodation, contends that its clientele needs to carry on with business. Their businesses have enjoyed steady 60 percent to 70 percent occupancy rates.

"When you're in business or sales, you need to keep selling your product. Commerce continues. Life goes on. You can't allow apprehension about a possible riot or the distress of past riots to halt trade from continuing. People take adequate precautions and continue to try to lead a normal life," said Rudy Setiawan, Santika Hotel Group's corporate director of marketing.

Since the outset of the monetary crisis, which plagued most Asian countries in July 1997, Indonesia's rupiah plunged in value, from around 2,400 to the U.S. dollar to the current level of 9,400. For nearly a year, Setiawan said, most Indonesians sought survival methods to outlive, if not profit with, the crisis.

The local tourism industry was at a standstill. Hotels waged price wars against each other, drastically reducing the price of their services. Some even cut their prices by two thirds of the published rate in an effort to lure guests.

However, the purchasing power of locals was diminishing. Economic activities were at a prolonged standstill. Despite becoming a cheaper market to attract foreign tourists, the political turbulence and sporadic violence erupting in different parts of Indonesia did little to hearten travelers' confidence to visit the archipelago.

From 1997 to 1998, Jakarta's Sahid Jaya suffered a slump in occupancy rates, to as low as 15 percent to 18 percent. Up until January 2000, across the board occupancy rates for the group, which operates 10 hotels across the archipelago, fluctuated between 30 percent to 35 percent. This year it has enjoyed a steady 40 percent occupancy rate, mostly Asian business clients.

"It's been better because people no longer care about the political situation. In the first two years, many people were in a state of shock, and they've been trying to adapt to the shocks and seem to have been able to leave behind the tranquility of 32 years of being asleep," Langka said.


General manager of Patra Jasa Semarang Basari Bachri said that the lowest occupancy his hotel suffered was a steady 41 percent from April 1998 to March 1999.

"The economic crisis may have affected companies' budgets for business travel and corporate meetings/conferences," Bachri said, representing the seven hotels owned by the state-run enterprise.

Consequently, the hotel altered its marketing strategy to emphasize cost, labor, and energy, as well as enhancing selective marketing. Categorically, the hotel promoted all-inclusive packages such as a full board package, wedding package, meeting package, etc, rather than solely promoting its rooms and hospitality.

Aerowisata's worst occupancy rates, even for the cash-cow resorts of Bali and Lombok, were 15 percent to 20 percent over a span of one year following the May 1998 political and social turbulence.

Sectarian riots on the resort island of Lombok in January 2000, however, managed to once again tarnish Lombok's Aerowisata charm to foreign visitors. Usually enjoying a steady 80 percent to 90 percent occupancy, the resort's occupancy rates dropped to an average 40 percent. Slowly, despite the peak season, it's picked up to a steady 60 percent occupancy rate, mostly comprised of foreign guests.

Others fared better. Having survived the crisis by catering to local professionals, Santika enjoyed a steady flow of guests. In turn, the group of nine hotels feels it has more flexibility in determining its rates.

As Vivi Herlambang, the group's promotion manager, puts it, they could better adapt to the market because their rates were not very high to begin with. Business packages and incentives similar to a frequent flyer program have been Santika's competitive advantage.

Over the past three years, Santika recorded a hike in the number of local guests who could previously afford to stay at a bigger hotel chain.

"Looking only at the percentage of overseas guests, we suffered tremendously. The plunge is largely attributed to diminishing levels of safety and security, " Setiawan added.

Others are of the opinion that competition was harsher before the monetary crisis started, when the well-heeled had more money to spend on recreational activities. There were also more hotels, of both national and international reputation, offering competitive prices.

According to Ciptadi, competition among hoteliers is more intense because the number of tourists has gone down while the number of hotel rooms remains stable. As a result many hotels are trying to open new markets, or offer greater added value for the existing market.

Since the crisis indiscriminately hit every hotel business, Setiawan said, international hotel chains have become less competitive.

"They were spending more dollars than they could afford to earn. It was during this period that international ownership of various hotels was beginning to undergo a metamorphosis, with many changing names and becoming independent hotels," he added.

Local hotels also contend that international hotels could afford a larger slash in their prices to win consumers' patronage. The rates they offered came very close to those of local hotels', who had a weaker reputation and credibility. At its peak, the price war, which lasted for nearly 1.5 years, recorded a 60 percent price cut from published rates.

However, these hotel executives agree that every other hotel, local or international, is a competitor in one way or another. Differences in competitive advantages, such as strategic location, market segmentation, and the level of quality sought, are what makes a hotel and its reputation.

"First impressions will make or break the guests' assessment," Bitsch said.


One national hotel's claim to fame is their incorporation of local culture into the hotel's general atmosphere. Anything from architecture to landscape, from staff's attire to the music played in the background, are noted as distinctive images.

"International hotel chains are usually more recognized by overseas tourists and the services they offer are more standardized. Take for example, the same level of service, and similar room layout," says Elina Ciptadi of Patra Jasa.

Each local hotel chain, indeed, has their own special drawcards. Sahid Group, for example, asserts its forte as the only chain that blends tradition, culture, and service.

"There might be lots of hotels, but not many that provide and offer the uniqueness of what we're able to offer -- to present Indonesian culture in line with international standards," said Langka of her custom-designed hotel on Jl. Sudirman.

Pronouncing itself as a trendsetter in its category by emphasizing services and facility maintenance, Santika believes it has earned itself a good reputation.

"People have come to recognize Santika as being clean hotels. Clean from prostitutes and other disrepute. Women feel comfortable staying at Santika. Trivial as it sounds, it matters a great deal for us that our women guests feel comfortable in the hotel's compound," Setiawan added.

Santika has been a choice of many members of the political elite. "

We're relatively inexpensive and, therefore, high-profile figures often choose to stay at our hotels so that they aren't criticized for spending public money on expensive accommodation," said Herlambang, as she cited Vice President Megawati Soekarnoputri, Speaker of the House of Representatives Akbar Tanjung and Speaker of the People's Consultative Assembly Amien Rais as a few examples of high-profile guests.

A slightly different example is Hotel Borobudur, once a state enterprise, which launched a totally different image at the beginning of the crisis. First opened in 1974, Hotel Borobudur Jakarta was relaunched in November 1997 after a 22-month renovation program. The legendary hotel was conceived and visualized by the late president Soekarno as the plushest luxury hotel in the Southern Hemisphere with 6 floors containing only 220 rooms and intended mainly for use by state guests. Soekarno performed the initial blessings of the planned building in 1963.

As a hotel with its own legend, Bitsch believes that Hotel Borobudur's name is itself a major advantage. Guests who have stayed at the Borobudur Hotel need no promotional packages, knowing that they can expect the standards and service befitting the five-star rating.

Being in the neighborhood of the State Palace, Hotel Borobudur has hosted many state guests and members of international delegations. During the peak of the crisis, the hotel also reaped a handsome benefit from various international consultants who had come for marathon meetings with Indonesia's Ministry of Finance, located just around the corner from Hotel Borobudur.

Bad publicity

One common thread of the continuing plague suffered by the Indonesian tourism industry is the political instability which has affected nearly all walks of life. The hardship endured by most of Indonesia is exacerbated by media coverage that tends to live by the motto "bad news is good news". Quite predictably, the image of Indonesia abroad is one of constant turbulence and enduring violence.

"I hate the media's bad portrayal of Indonesia. They paint with a broad brush, focusing only on the bad things that happen in one part of the country, and exposing it as if the whole country is in trouble. They tend to use old footage, usually from the May 1998 riots, making people think that Indonesia is undergoing another major political, racial and ethnic upheaval," grumbled Langka.

Challenges ahead are to attain and maintain economic and political stability. Once safety is no longer the talk of the day practitioners agree that tourists will start to flock in. One convincing measure of stability, according to Kalalo, is the exchange rate. Once stable, almost nothing else matters.

"Price no longer becomes an element of decision making. We can offer the most attractive price but if we cannot guarantee safety during their visit, rest assured, no one is interested in visiting Indonesia," she added.

"It is very difficult to convince foreign tourists that Indonesia is a safe destination," said Kalalo.

Actions speak louder than words. "The best way to inform people is to attract them to come and experience the situation for themselves. The real thing is much better than what you see on television," Bitsch added.