Outlook still dim for Jakarta hotel industry in 2000
Outlook still dim for Jakarta hotel industry in 2000
JAKARTA (JP): The hotel industry in the capital expects a slow
recovery in 2000 despite signs of improvement in the country's
economy and social and political climate, according to consultant
firm Horwath Asia Pacific.
The company said in its year-end report most hoteliers still
strongly believed Indonesia's image would remain bad, despite the
public's positive response to the establishment of a new
government.
"Human rights abuses ... coupled by the slow economic recovery
and worsened by issues to do with referendums, federalism and
separatism have changed Indonesia into a less than attractive
business destination," according to the report.
Jakarta hoteliers also feared such political issues could
further put downward pressure on the already low demand.
The number of hotel rooms in Jakarta has grown tremendously
during the last couple of years. However, demand for them has not
been able to keep up, resulting in a reasonably constant over
supply.
Even before the economic crisis, hoteliers' revenue per
available room was always below the optimum level, the report
said.
As most business activity slumped as a result of the economic
crisis which hit the country in mid-1997, the hotel industry has
been facing a serious financial downturn and tighter competition.
Jakarta has been considered as a less desirable destination,
hence its visitors numbers have begun to drop.
Hoteliers have been struggling to keep their operations
running amid skyrocketing operational costs, by cutting their
costs. Revenue is being generated from other services such as
food and beverages outlets and laundry.
In order to increase revenue and diminish the effect of
competition, hoteliers are using room rate differentiation
tactics and special packages to offset customers' stronger
bargaining power amid unstable currency exchange rates, according
to the report.
The report said hotels have engaged in large-scale efficiency
measures such as recycling paper for office use, closing down
floors and implementing a multiskilled staffing plan to minimize
the impact of the crisis.
Despite all the hard work, revenue has declined quickly while
operational costs and expenses have increased, it said.
Luckily, the existing hotels should not have to worry about
threats from new entrants, as the latter are expected to delay,
if not cancel altogether, their projects due to problems like the
increasing costs of new hotel developments, financing
difficulties, fragile cash-flow projections and the prolonged
bank restructuring process.
The largest threat, according to the report, is serviced
apartments and rented condominiums, which have become comfortable
alternatives for long-staying visitors, especially those
traveling with their families.
The report said shrinking demand, the increasing bargaining
power of customers and suppliers and increasing operational costs
have contributed to problems facing the industry.
"It makes it even more difficult to survive in a market which
has been over supplied since even before the crisis," the report
said.
The report said the accumulation of the pressures has
ultimately transformed the business environment, once believed to
be dynamic, into a fiercely competitive battleground.
Faced by the fact that political and economic situation
remains uncertain, hoteliers expect a slow recovery process in
the year 2000. (cst)