Star-rated hotels face tough competition from shop-houses

Star-rated hotels face tough competition from shop-houses

Fadli, The Jakarta Post, Batam

Twenty-eight-year old Uta, who works at a two-star hotel on Batam
island, idly sits behind a desk in the hotel lobby. There is
little for him to do because there are so few guests dining in
the restaurant or staying at the hotel.

"We know we won't get much in the way of tips in the middle of
the month if the hotel falls short of guests. This has gone on
for almost a year. I heard it was because there are so many more
hotels opening in Batam.

"Many people prefer to stay in shop-houses-cum-hotels rather
than in star-rated hotels," Uta, a father of one, told The
Jakarta Post recently.

Uta, who has worked at the hotel since 1999, receives a
monthly salary of Rp 637,000, in addition to tips, the amount of
which depends on the number of guests at the hotel.

He used to receive tips of between Rp 500,000 and Rp 700,000 a
month before the occupancy rate began to fall. Now he is lucky to
get Rp 400,000.

"We have to please the guests, especially the foreigners, to
get tips. We put some into our pockets and hand over the rest to
the cashier," Uta said.

Tips are supposed to be divided equally among hotel employees.
However, with less money to go around some employees keep their
tips to themselves instead of handing them over to share with
other employees.

Similar stories are told by hotel employees grouped in the
Batam branch of the Indonesian Hotel and Restaurant Association
(PHRI). According to data from the PHRI, about 100 shop-houses
are functioning as hotels in Batam.

These shop-house hotels have taken away guests from star-rated
hotels by offering guests rooms that are not much different from
those in established hotels.

"We have asked the Batam municipality and the Batam Authority
Board to stop issuing permits to shop-house hotels because we do
not consider this to be in line with the stated function of shop-
houses. But after complaining for almost three years, nothing has
been done," said Urmy Sungkar, chairman of the Batam branch of
the PHRI.

Urmy said the presence of shop-house hotels had resulted in a
drop in earnings for star-rated hotels, of which there are 34 on
the island.

Shop-house hotels offer room rates as low as Rp 100,000
(US$11.00), while star-rated hotels must comply with set standard
rates.

"The fierce competition between established hotels and shop-
house hotels is quite damaging because we are competing for the
very same guests. I and the other PHRI members have done our
utmost to voice our complaints to the government but to no avail.
Not only have we felt the impact, but our employees have too,"
said Urmy.

The proprietor of the Batam Novotel, Anas, said established
hotels in Batam were relying on guests who were more concerned
with quality than price.

"We acknowledge that room facilities in shop-house hotels have
improved and the rates they offer are beyond reason. But guests
who expect quality and comfort still prefer staying in hotels
that already have a name. Yet, the presence of shop-house hotels
has caused a drop in our income," Anas said.

The owner of a shop-house hotel, Asun Hasiang, said he had not
had any trouble with officials while renovating his shop-house
into a lodging place.

"We have not targeted a specific market segment for our hotel,
but if there are guests who used to stay in star-rated
hotels now staying at our place, I think it is only natural. No
need to make a fuss about it. I do not think it is fair to blame
us for a decline in earnings of the established hotels," said
Asun, who owns the Hotel Cipta Prima.

The head of the Batam Tourism Office, Raja Supri, said the
issuance of permits to shop-house hotels was not intended to
stunt the growth of higher-end hotels. Shop-house hotels are
aimed at those in the middle and lower classes, while the major
hotels are for the middle and upper classes.

"We cannot stop rich people from staying in shop-house hotels
if they prefer to do so. The Batam municipality has allowed shop-
house hotels on the condition that they cater to a different
segment than star-rated hotels.

"They (shop-house hotels) employ more local people, while most
of those working in established hotels are from outside of Batam
because they are required to have special skills," said Raja
Supri.