Sun, 19 Jan 2003

Occupancy rates remain high despite fall in new demand

Sudibyo M. Wiradji, Contributor, Jakarta

Although the Oct. Bali bombing severely hurt the country's hotel industry, the occupancy at expensive apartments remains relatively high.

The bombing attacks last year that had scared foreigners, either investors or tourists, to come to Indonesia only affected new demand, apartment owners said.

"Apartments are designed for long-term stay, and our existing occupants will stay, provided that the situation does not endanger them individually and the companies where they work are not closed down," said senior marketing executive Herlina of Executive Menteng Apartment.

Due to their long-term lease contracts, the Bali tragedy has not made any significant changes in terms of occupation rates. "At our apartment, occupants who have returned to their countries (following the Bali incident) account for between one and two percent," she said.

The average length of stay in most apartments is between one and two years, but unlike previous years, most clients prefer to pay on a one-year basis. "They will pay additional rental fees only when they have decided to extend their stay," she said.

Although there has been a decline in new demand, most apartment owners in Jakarta have no plans to lower their leases. "What we should do is maintain the quality of our services," said Herlina.

Executive Menteng Apartment, which has 240 apartment units, expects an occupation rate of between 98 percent and 99 percent this year. "Our minimum target is 97 percent," she said.

Despite the declining number of foreigners in Indonesia, the management had no intention to shift the target market from foreigners to locals as several hotels have done, she added.

Apartemen Golf Pondok Indah's Tower Two, which opened only three months ago, has an occupation rate of 17 percent, partly due to the decline in new demand in the market.

Unlike Tower Two, Tower One, which has been open for seven years, has an occupancy rate of about 85 percent.

"Tower Two has only operated for few months. We hope that when the situation improves, our occupation rate will also improve," said assistant apartment manager James U. Moniaga of Apartemen Golf Pondok Indah.

"We try our best to maintain quality services and we even wish to improve it," he added.

Their minimum occupation rate target for 2003 is 70 percent of the 133 units in Tower Two. "In a bid to attract foreigners to stay in Tower Two, we have kept the same rates," he explained.

The lease at Apartemen Golf Pondok Indah, strategically located in the elite Pondok Indah residential area, is relatively high compared to similar apartments of the same class. "Quality service is our utmost priority," James said.

Plaza Residence, located on Jl. Jend. Sudirman in Central Jakarta, managed to retain its occupancy rate of 100 percent despite the decline in the number of foreigners visiting Indonesia.

"The 100 percent occupancy rate has been maintained since two years ago," said associate marketing manager Ratu Neilla of Plaza Residence, adding that the 75 percent of its tenants were Japanese nationals.

The Japanese know the high quality of Plaza Residence through word-of-mouth, she said. "When bad things happen in Indonesia, Japanese tend not to panic so easily," she said.

As part of its strategy to attract foreigners, especially Japanese, the management at Plaza Residence had been trying to boost the degree of comfort and convenience offered by the apartment by completing necessary facilities, such as a shopping gallery, a minimarket, a salon and a bar in the apartment complex. "But, of course, we place quality as our top priority," Ratu said.

For Puri Casablanca Apartment, the drop in new demand from foreigners has led to changes in the lease terms, from long-term to short-term.

Puri Casablanca, which is located in the central area of Kuningan, expects that its large apartment complexes, reasonable prices, and good services would continue to lure foreigners to stay.

"Our serviced apartment is also famous for its cleanliness and its vast garden. Puri Casablanca is quite popular among people with small families, as they can play with their children in our garden areas," noted general manager Hans Pola at Puri Casablanca Apartment.

"We recently launched a program in which tenants could opt for a monthly payment scheme for our serviced apartments, in view of the current political and economic situation. The program is very effective as our tenants' cash flow is more manageable and in fact, most of them have extended their stay with us," he said.

Puri Casablanca is comprised of four towers with 988 apartment units and an average occupancy rate of 70 percent. The occupancy rate of its serviced apartment tower is at 85 percent.

The apartment, which mainly targets Westerners, expects more than 250 foreigners to check in this year. "We are very optimistic that we will achieve the target, as our occupancy rate has been increasing ever since we began operating the serviced apartment concept," said Hans.

The Ascott Group Indonesia, which manages several apartment complexes in the country, also saw an increase of between seven percent and 20 percent in their occupancy rate last year.

"Currently, the occupancy rate is at about 80 percent, with an average daily rate of US$75 for Jakarta properties," they said, adding that the increase resulted from their brand awareness and recognition campaign.

It is said that the possibility of a U.S. attack on Iraq, the terrorist threat and Indonesia's general elections campaign to commence in 2003 are factors that might affect the apartment business outlook this year.

When it comes to luxury apartments, Indonesian occupants account for a small percentage, with most preferring to buy the unit instead.

"Most Indonesians who stay in the apartment are young professionals, because older and established executives usually prefer to live in their own house," said Herlina.

Practicality and comprehensive facilities are among the major reasons why young Indonesian executives prefer staying in an apartment.

At Puri Casablanca, the interest among Indonesians in living at the apartment has grown over the past few years. As of now, the ratio of foreign versus local tenants is about 70 to 30. For serviced apartments, the ratio stands at 90 to 10.