Price war in hotel industry to continue

JAKARTA (JP): The price war between Indonesia's star-rated hotels will continue because of the phenomenal increase in new hotels over the last few years, according to tourism expert Oka A. Yoeti.

He said there was an oversupply of hotel rooms in the major cities and this would continue with the opening of new hotels in the coming years.

The oversupply would put stronger pressure on the hotel industry's occupancy rates, he said at a seminar on the hotel industry in the global era.

Oka said hotels in Indonesia had had their golden day in the 1988-1990 period, and such a boom era would not come again.

In 1990, there were just 420 star-rated hotels with 35,677 rooms and 6,093 non-star-rated hotels with 96,204 rooms.

"The number of star-rated hotels reached 710 in October 1996, a 169.04 percent increase over 1990. In 1996 there were 67,562 rooms (up 52,79 percent). There were 7,964 non-star rated hotels in 1996 (up 1.3 percent) with 126,989 rooms (up 131.99 percent)."

There are 60 additional star-rated hotel being built in 1997, to offer another 10,261 rooms, he said.

"We can see that over the last six years, star-rated hotels have increased by 290, most are in Java and Bali," Oka said.

He said the large rise in investments in hotel projects has increased the number of foreign hotel management firms in Indonesia.

"Foreign hotel chains operating in Indonesia have been growing faster than domestic ones. Currently there are 47 foreign hotel operators and eight domestic operators."

Oka said the average hotel room occupancy rates in Indonesia were above 51 percent in the 1989-1993 period. It has dropped below 51 percent since then.

"In 1994, the national occupancy rate was just 50.52 percent. It went up to 52.34 percent in 1995 but dropped again to 49.79 percent in 1996."

The average rate in 1996 was 50.25 percent, lower than the 51.14 percent of the previous year, he said.

In Oka's opinion, the drop was due to oversupply rather than any other reason.

He said a price war would not be effective and would harm the industry. "Hotels should compete in products and service over the long term."

"Hotels must have a plan for the next five, eight or 10 years. A Hotel's vision will give it the advantage," he said. (icn)