What is the forecast for Indonesia and ASEAN tourism?

What is the forecast for Indonesia and ASEAN tourism?

JAKARTA (JP): Most of the countries in the Association of
Southeast Asian Nations (ASEAN) have experienced the inclement
weather of crisis in the last three years. Tourism, hotel and
leisure industries consultant Horwath Asia Pacific looks at what
lies in store for tourism in select markets in the region.

Bali: The beat of the gamelan is definitely picking up in
the Bali market this year, but somewhat cloudy skies are likely
to continue as the market remains influenced by the larger market
forces at play in Indonesia. Occupancy has leapt back up past the
60 percent mark for two years in a row, but it is still a far cry
from the 75 percent to 80 percent average maintained prior to the
regional crisis. The average room rates for top tier hotels,
though reduced, remain relatively high at approximately US$112,
which when converted into rupiah are currently yielding
extraordinary Gross Operating Profits (GOPs) for hotels.

Nevertheless, although Bali is definitely an international
favorite when it comes to resort destinations, it will take some
time for conditions to turn completely sunny again in the island
of the gods.

Jakarta: Severe thunder showers in addition to torrential rain
could very well arise, but for the moment the market is wallowing
along with the slow process of reform.

Investors are curious but business has generally stagnated.
Year-to-date occupancy remains below 40 percent for the third
year running, while rates are down by another 10 percent from
last year. Without any clear sign of political stability,
consensus or a strong commitment to true reforms, such conditions
are expected to persist.

Bangkok: Beginning with a relatively brighter side of the
region, the clouds finally appear to be parting for the Thai
capital's market in 2000. Demand levels are up 10 percent this
year, an acceleration in growth which really began along with the
devaluation of the Thai baht in 1997, when this already favorite
destination suddenly became cheaper by 40 percent overnight.

At the same time, Thailand also became a favorite among
foreign investors when everything in the country was going to be
for sale. Certainly several banks were sold, some securities
firms were recapitalized and investment in various manufacturing
concerns was realized. However, few property deals, particularly
for hotels, were consummated. Nevertheless, a new
internationalization of the business environment has taken hold
to such an extent that business for hotels is becoming quite
brisk.

Occupancy in Bangkok has finally breached the 65 percent
ceiling off which the market has been bouncing since 1991, as
year-to-date occupancy reached a high of 67 percent.

The occupancy outlook for 2001 and 2002, however, is estimated
to be held back from reaching the 70 percent level despite
further positive demand growth, due mainly to the opening of the
Plaza Athenee and Conrad International hotels.

As for room rates, cloudy conditions are expected to remain
for the next few years as only limited growth has been achieved
to date and any significant growth is unlikely until the market
exceeds 70 percent occupancy in late 2003 or 2004.

Vietnam -- Ho Chi Minh City and Hanoi: Thunder and lightning
are considered the best representation for the market conditions
facing Vietnam's two major cities. Occupancy in Ho Chi Minh City
remains stifled below the 50 percent level for the third year
running and below 30 percent in Hanoi, while average room rates
for most top tier deluxe hotels are in the $50 to $60 range.

With no clear change in the investment climate and plenty of
promising opportunities to explore elsewhere in the region,
Vietnam has clearly been relegated to the "what could have been"
bin. The visit of U.S. President Bill Clinton encouraged
speculation of business interest, though subject to certain Hanoi
concessions and reforms. However, the latter objective may be
difficult to achieve under the current political climate in the
country.

Regardless, word is out that the formerly dormant Marriott,
Westin and Park Hyatt projects are due to open in 2001 and 2002,
thus crashing the market with a very unnecessary additional 1,000
hotel rooms. As a result, the evening storm is likely to be heavy
for some time, prolonging the wait for a good morning in Vietnam.

Manila: After all the promises fueled by the Aquino-led
revolution and the mending created by Ramos, the current slip
backwards is hard to watch. Yet looking at those jubilant faces
in the house of representatives after the recent impeachment vote
gives hope that all is not as before; just as those
representatives rejoice in the expectation that their powers are
indeed real. Regardless, the tussle is likely to disrupt the
market for some time, bringing foul weather with it.

Kuala Lumpur: Murky conditions remain, particularly for
achieved hotel room rates. Occupancy, however, has improved
significantly this year, exceeding 60 percent on a renewed
positive business environment and special events such as the
Formula 1 race.

Looking to foil this positive momentum, however, is the
restart of several previously stopped projects, such as the
Westin, the Novotel and KL Sentral hotels. As a result, sunny
skies are likely to be a long way off for this capital city of
Malaysia (but don't those Petronas Twin Towers sure look great?).

Singapore: Perpetual sunny skies are forecast for this
smallest member country of ASEAN. By far the most sophisticated
market in the group, the hotel market in Singapore was probably
least affected compared to its neighboring markets.

Nevertheless, Singapore's turnaround from the doldrums of the
regional economic crisis is nothing short of extraordinary, with
15 percent growth in top tier hotel demand driving occupancy to a
heady 85 percent year-to-date. The tourists are back with a
vengeance, as are a whole new generation of business visitors
responding to Singapore's aggressive reforms in the banking and
telcom sectors and attractive incentives for nurturing IT and
Internet startups.

Room rates grew only modestly at around 5 percent in 2000, but
double digit growth is fully expected next year as occupancy
remains near full capacity. With a net decrease in rooms supply
due to hotel redevelopments into private condominium projects,
Singapore is actually worried about how to promote new investment
for hotel development, or face losing tourist arrivals and their
spending in the economy.

Phuket: Sunny skies continue in Phuket as the market heads
into another stunning high season of strong demand. Overall,
market occupancy is pressing up again to the 80 percent level
after taking a dip in 1999 due to some wholesaler reactions to
perceived excessive rate hikes in 1998. For 2000, with further
depreciation of the baht, average room rates in U.S. dollar terms
appear to have changed very little since 1998 at approximately
$95 for the top tier segment of the market.

Having reached this market stabilization, sunny skies are
expected to continue to shine upon Phuket, preparing the way for
a new round of hotel development and the introduction of several
new international brands whose absence has been somewhat
surprising compared to the hotel scene in Bali.

The article was compiled from a speech by Robert Hecker, the
managing director of Horwath Asia Pacific, at the opening of the
11th Annual Asia Hotel Investment Conference in November in Hong
Kong.