What 2016 holds for Indonesia’s key hotel markets

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Bali and Lombok have struggled with occupancy rates in the last 12 months

bali-and-lombok-hotel-market

Long considered as one of Southeast Asia’s most treasured tourist destinations, Bali over the years has attracted local, regional and international visitors to its beautiful shores and well-developed infrastructure. Lombok has recently joined the party as an alternative Indonesian island destination to Bali, with tourist arrivals growing year-on-year.

The past year has been tough for both markets, however, with occupancy rates and occasionally average daily rates (ADR) suffering due to factors like the depreciation of the Indonesian rupiah, volcanic disruptions and the cancellation of various important flight routes.

A series of new joint reports from consultancy firm C9 Hotelworks and Horwath HTL illustrates the state of the markets as we usher in 2016.

Bali

A slowdown in demand has left Bali’s hotel market with declining occupancy rates and the US dollar ADR in the year to September 2015. The C9 Hotelworks report isn’t confident that there will be a pick-up this year.

Factors affecting 2015’s performance included the nationwide devaluation of the rupiah, volcanic disruptions, foreign tourists spending less, and the fact that the growth in arrivals is slower than the growth in hotel supply.

More: Upbeat Bali property market sees steady interest from foreign investors

While progress is slowing in the projects currently under construction, there is still a huge amount of supply scheduled to hit the market in the coming years – a further 115 new hotels with 15,000 additional rooms by 2019.

While these problems are expected to continue in Bali in 2016, increased airline routes and the long-awaited expansion of Soekarno-Hatta Airport are expected to ease the bottleneck arrivals issue on the island next year and support growth in arrivals. Bali will also benefit from the visa-free policy enacted by the government which currently allows 45 countries to enter Indonesia without a visa, increasing to 90 by the end of the new year.

Lombok

Although Lombok’s total arrivals grew 13 percent year-on-year in September 2015 to 1.16 million, the figures are likely to be affected by the significant cancellations of the Jetstar route from Perth, Australia, and Tiger’s operations from Singapore, as well as the bankruptcy of a number of low cost domestic carriers that served the island.

More: Regional visitors bet on Lombok’s resort residential market

The Jetstar cancellation from Perth has already seen Australian tourists drop from accounting for 25 percent of Lombok’s total arrivals in 2014 to just 3 percent in 2015. This is also thought to be the reason for the severe drops in occupancy in the top-tier hotels on the island.

While problems are expected to continue into 2016 thanks to the depreciating rupiah and the cancelled flight routes, Lombok’s hotels are revamping their strategy to attract more domestic and regional demand instead to make up for the lost Australians.

A much as 16 new hotels are expected to enter the market between now and 2019, adding an approximate 1,500 rooms to the island.

 

Image is by Jo@net and used under a Creative Commons licence

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