Star-rated hotels go for modest hike in rates

Arya Abhiseka, The Jakarta Post, Jakarta

Luxury hotels in Jakarta, faced with weak demand and oversupply, will likely increase their room rates within the range 3 percent to 5 percent in response to this month's hikes in fuel, telephone and electricity prices.

Chairman of Jakarta International Hotel Association George Benney said the hikes in utility rates would tremendously affect major four- or five-star hotels in the capital.

But most hotel managements would have to absorb the higher costs rather than passing them on to customers.

"The rise will not exceed 5 percent. We have an oversupply of hotels in this city," Benney said.

"As a result, hotel managements are trying to limit rate increases to prevent sales from dropping," said the general manager of Jakarta Mandarin Oriental hotel.

"Our operating costs are high. Unlike smaller hotels, we cannot turn off our electricity, water and air conditioner on days that occupancy levels are low," he said.

The hotel industry throughout Indonesia has been badly hit since the Oct. 12 bombing in Bali, especially after the U.S. and other Western governments issued warnings to their citizens against traveling to Indonesia.

Most luxury hotels had still to fully recover from the impact of the 1998 financial crisis, which forced them to change their rates to rupiah from U.S. dollars, when the Bali bombing had a damaging impact on occupancy.

Mandarin Oriental, for example, currently charges Rp 825,000 (US$91) for a deluxe room per night for Indonesian patrons and $109 for non-Indonesians. Jakarta Hilton International sets its room rates at Rp 649,000 to Rp 849,000 for its Indonesian guests. Both hotels charge dollar rates for their suites.

Benney pointed out that after last week's 6 percent increase in electricity rates, the power cost of running a five-star hotel in Jakarta would be double that of a hotel of the same caliber in Kuala Lumpur.

"That is what kills us. Customers are limiting their spending due to the uncertain economic and security outlook," he said.

He recalled that most hotels reported rising occupancy rates last year before the Bali bomb blast.

In order to bring tourists back to Indonesia, hotels would be heavily dependent on the country's stability, security, image and public relations.

"The government must take charge on the public relations side, in communicating to the world that the country is safe for tourists," he said.