We see high revenue contribution from Asian hotels: Four Seasons
We see high revenue contribution from Asian hotels: Four Seasons
In line with an upward trend in economic growth over the past few
years, tourism and business travel have started to grow as well,
resulting in positive implications for the hotel business here.
The Jakarta Post's Tubagus Arie Rukmantara talked recently to
Paul Iacovino, Four Seasons vice president of marketing for Asia
Pacific, on the outlook for the hotel business in Indonesia. The
following are excerpts from the interview:
Question: How do you see the hotel business here in the wake of
the terror attacks that have taken place in recent years?
Answer: I see two distinct types of customers that come here. One
is those who are particularly going to Jakarta. They have
business reasons that require them to come here. But,
unfortunately, in the last two or three years, there have been
various incidents that are particularly worrying to Western
travelers.
However, these travelers are staying away from Indonesia for less
and less time. Two years ago when the bombing at the Marriott
happened, people stayed away for the whole month. But after that,
people have been coming back very quickly. These people have to
come here for business reasons because the country has so much
potential for growth in every sector.
In fact, in Jakarta, the return of foreign travelers has been
stronger than ever. Our statistics show that hotel occupancy is
stronger and total numbers of travelers are up quite
significantly year over year.
Meanwhile, those who go to Bali are the travelers who come
because they want to come. After the Bali bombing, it was only
the Asian travelers who stayed away for a short period of time,
while European and American travelers remained reluctant to came.
The U.S. travelers still have a traveler advisory from their
government and that has been very significant for the Four Seasons
because, although we are a Canadian company, our single biggest
source of leisure business heavily depends on U.S. travelers. So
when they stop coming, that really hurts the Four Seasons more
than any other five-star hotels.
That's why on a business level, we are recovering much more
slowly.
In the past few years, many international chains have opened
hotels here. How do you see the competition between five-star
hotels?
In a market like Jakarta, I think the hotel business here is
overbuilt compared to the demand in the market. When you look at
the hotel business now, hotels are not extremely busy. Besides
two or three very well established hotels, of which two are
Indonesian brands, the other hotels are really fighting for
market share.
Hotels are not seeing big enough growth, although this year's
growth has been quite good.
So, to me, I'm not so sure that I would be keen to see
additional hotels in Jakarta.
What is the impact of the Jakarta market being overbuilt? Will we
see hotels being closed down?
No, I don't think so. I think the operating costs here are low
enough that people seem to be able to run hotels at less than the
optimum level but still keep their businesses running.
I think the major impact is on the profitability of the
existing hotels. The question will be, can you charge a price
that is really more competitive.
For us, our strategy is that we build urban hotels in
financial centers. So you will find our hotels in the major
capitals in the world, but you won't find us in remote cities.
We look at Jakarta as a significant world business capital, a
regional business capital. Therefore, we need to be here because
we know our customers will come here.
But the prices that we charge our customers here are far lower
than what we charge in most other Four Seasons hotels in the
world.
If you compare Jakarta and other capitals of Southeast Asian
countries, like Singapore, are we lagging behind in the
development of the hotel business?
I don't feel that way. Every major brand is here in Jakarta. Most
of the international players are here. I don't think Jakarta is
lagging behind. But I do think that we need more business
travelers to come. The good news is, that it is happening.
What I see from the oneness of your new government with
business, I would be optimistic that the city will match other
Southeast Asian business centers.
Do you have any expansion plans here?
Frankly, no. We have opened our hotels in Bali at Jimbaran and
Sayan. Now we have over 200 guest rooms in Bali, which for us is
a lot. We are a company that focuses on small-size properties. In
Tokyo, we have only 57 rooms, but in Jakarta we have 365 rooms.
This is a large hotel for us.
Therefore, our business development plan for now is to get
this one to work well.
In your company's first-half report, you mention that revenue
from Asia has boosted the Four Seasons overall revenue. How do
you see the revenue outlook from this county?
Even though the Jakarta hotel is not running full, we have
tripled our business over the years. We could double it or triple
it again in future years.
I think we are optimistic that our Asian hotels will
contribute a lot to our revenue. In 2004, Asia's growth led
company growth. And we've opened hotels in Mumbai, Beijing and
Shanghai, and Hong Kong. We've set ourselves up for really strong
growth from 2005 to 2007.
However, Jakarta will see slow growth because of pricing. When
we opened in Hong Kong, pricing began at around US$300 per night,
but here our pricing begins at around $150. Therefore, the
Jakarta hotel won't have a significant impact on revenue. But
again, its existence is important. We have invested $10 million
to improve our facilities, which it is expected will attract
Indonesian travelers to come on weekends because we expect more
domestic customers to come.
In Bali, the return of American leisure travelers, who are
less price sensitive than most travelers, and they're also very
familiar with our brand, will boost our revenue. But we need the
U.S. government to take Bali out of their travel advisory.