Local hotel chains try to look on the bright side

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.

Occupancy

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.

Uniqueness

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.