New hotels continue to spring up in Yogyakarta

New hotels continue to spring up in Yogyakarta

By R. Fadjri

YOGYAKARTA (JP): Despite a limping hotel industry, new star-rated hotels continue to spring up in Yogyakarta. The city's 13 star-rated hotels are struggling to survive with only 48 percent capacity. This has been the situation for the last three years, but investors have not been discouraged from constructing new hotels.

Three major new hotels are joining the crowd, the Yogya Palace Hotel, Melia Purosani Hotel and Sheraton Mustika Yogyakarta Hotel. The first is already fully operational.

Melia Purosani Hotel, located east of famous Malioboro street, features a hefty 299 rooms. It will be the largest room provider among Yogyakarta's star-rated hotels when it opens later this month. Within the year, Sheraton Mustika Yogyakarta Hotel will follow on its heals. Owned by traditional cosmetics entrepreneur, Mooryati Sudibyo, this hotel will reside on a 5.2 acre piece of land and will boast 235 rooms.

"It's so strange. It's difficult to understand why people still build new hotels," mused Toto Sudarto, General Manager of Santika Hotel.

According to Toto, the over supply of hotel rooms in this city is the result of a belief that there will be a tourist boom in the year 2000. However, says Toto, if gateways into the country continue to be inefficient, Indonesia's ability to accommodate tourists will not change much. Furthermore, before the boom actually takes place, all these hotels will have to survive a very difficult period.

The fact is, the growth in the demand for beds has increased a scant 15 percent during the last three years. Compare this to the 35 percent growth in the number of rooms and the picture is bleak. Hotels are plainly in the middle of a slump, admits Toto.

Among the 12 fully operational star-rated hotels, Santika Hotel is the only one that can achieve the break-even occupancy rate of 60 percent. It manages to achieve 77 percent occupancy.

The Puri Artha Hotel achieves a 60 percent occupancy, Ambarrukmo Hotel (owned by PT HII) 56 percent, Natour Garuda Hotel 59 percent, Sahid Garden Hotel 52 percent and Century Hotel 59 percent.

As a newcomer in Yogyakarta, Santika Hotel -- which started operating in 1990 -- has enjoyed an above-average growth rate. It has even overtaken Ambarrukmo Hotel, the former market leader. During the off-season (January to April), Ambarrukmo Hotel, the oldest star-rated hotel in Yogyakarta, reached only 20 to 30 percent occupancy.

The situation may become even more bleak when the new Adisumarno International Airport begins operation in Surakarta. The airport will be equipped to accommodate wide-bodied airplanes from overseas.

In anticipation of the new status of this airport, Kusuma Sahid Prince and Sahid Hotel, both of which have been in Surakarta for some time, have expanded their hotels. The Sheraton is also going to expand its hotel in Surakarta.

The city is slated to become a gateway for foreign tourists wanting to visit Central Java and Yogyakarta. A toll road will connect Surakarta with both Yogyakarta and Magelang. Tourists will no longer have to stay in Yogyakarta to visit the Borobudur Temple near Magelang.

Toto Sudarto believes that this will definitely decrease the number of tourists staying in Yogyakarta and make competition among Yogyakarta's hotels tougher.

Optimistic

Despite all this, Mooryati Sudibyo is still optimistic that her hotel will attract foreign tourists to the city. The Sheraton Mustika will offer services not found at other hotels, even at other Sheraton hotels in Asia, claims Mooryati. Such optimism has inspired her to invest US$ 50 million into the construction of the new hotel located five kilometers east of Yogyakarta.

As a seasoned entrepreneur in the traditional cosmetics industry, Mooryati will complement her hotel with a SPA-based health and beauty care facility that will feature Javanese palace-like architecture and offer beauty care using Javanese traditional herbs. Patrons will be able to enjoy a steam bath with the fragrant herbs, mandi mangir, mandi lulur, as well as Javanese traditional massages.

Offering something new is the only way to beat the slump in the Yogyakarta hotel business. The hotel's management hopes to increase the average length of stay of foreign tourists from the present two nights.

"Our hotel will offer tourists who want something more than just a comfortable stay," added Antonio Zamora, vice president of ITT Sheraton Corporation. Such services, according to Zamora, is a mixture between the high-quality service typical of international Sheraton hotels and local hospitality.

The same spirit is shared by Antonio Escobar, general manager of Melia Purosani Hotel. Yogyakarta has a huge potential as a tourist destination, observes Escobar, however the potential has remained untapped, because most publications about Yogyakarta only feature the Borobudur temple. Escobar, who has been in the hotel industry for 17 years, is convinced that -- with its cultural potential -- Yogyakarta should be able to attract more foreign tourists.

Escobar has proven his optimism with a rapid increase of room sales right after the soft opening in July 1994. During the first few months, his hotel was able to garner a 32 percent occupancy. At the moment, it stands at 53 percent. He certainly owes the principal company, Grupo Sol, which is the largest hotel chain in Spain. Grupo Sol runs a special program called Gold Program, which currently has 50 thousand members all over the world. The program enables Melia Purosani Hotel to concentrate on other ways to attract guests.

Melia Purosani Hotel caters to upscale tourists. One potential market inside this high spending group is Japanese tourists. Consequently, it is not surprising to find a Japanese-style bath tub and sauna in each suite. Guests who wish to have privacy while having their meals can book exclusive rooms in the hotel's restaurant.

Melia Purosani Hotel was built by a consortium that included Singapore Airlines, Steamship Investment and Development, PT Suryaraya Idaman and Grupo Sol. The consortium operates its business under the flag of PT Suryalaya Aninoita International, which invested $ 50 million into the project.

According to Escobar, a serious impediment to tourist flow into Yogyakarta is the limited air transportation to the city. Most foreign tourists come by plane, and therefore more flights will mean more foreign tourists. At the moment, there are only 11 flights a day. Supposing each airplane carries 200 tourists, a maximum of only 2,200 people enter Yogyakarta each day by air. Compare this figure to the 6,400 hotel rooms -- both star-rated and economy class -- and the over supply is painfully obvious.

"Such as small slice of pie now has to be shared with the new hotels as well," says Abas Yunus, chairman of the Yogyakarta chapter of Indonesian Association of Hotels and Restaurants, who is the general manager of Natour Garuda Hotel.

Offering unique and better services is one way of beating the competition. Yogyakarta deserves hotels with first-class facilities, claims Escobar. With their first-class facilities, Melia Purosani does not hesitate to set their prices higher than the other hotels. Their standard rooms go for $ 125.00 a night. Better facilities and services certainly mean higher prices, explains Escobar.

Price-slashing

This decline in tourists, according to Abas Yunus, has not led to excessive price wars. However, he admits that there have been quiet price-slashing. According to a source that wishes to remain anonymous, the price-slashing practices among star-rated hotels in Yogyakarta is raising concern. About 80 percent of these hotels have offered discounts of up to 70 percent. The situation is no longer healthy, says this anonymous source.

Only a handful of the star-rated hotels are able to maintain their official rates. Abas Yunus believes that price cuts are a completely logical outcome of the imbalance between the growth of the number of rooms and the number of tourists.

This situation, according to Toto, should deter new investors from throwing their money into new hotels.

"Hold it, wait until the market situation improves," he says, "Otherwise, you'll lose money." According to him, the market situation will obviously improve when the number of tourists catches up with the supply of available rooms.

Unfortunately, there currently are construction permits for 20 more hotels, including permits held by the Hyatt, Hilton and Radisson groups.

Abas Yunus, however, insists that the arrival of new hotels should also be seen as a positive factor that could stimulate the hotel business. Existing hotels should compete with the new hotels by offering better facilities and service to their own patrons. Several star-rated hotels have demonstrated their commitment to improving their facilities. Century Yogya International Hotel and Phoenix Heritage Hotel, for example, have both renovated their buildings.

Abas Yunus appealed to new hotels to set their rates at a fair price. Five-star hotels should not set their rates at four- or three-star hotel levels. They should be consistent with their hotel's status, he says. Otherwise, they will ruin the current rate standards.