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.