Indonesia Tourism Industry Outook 2011

INDONESIAN COMMERCIAL NEWSLETTER

December 2010

OUTLOOK OF TOURISM SECTOR, 2011

Indonesia's tourism industry grew in 2010 despite setback in November as a result of eruption of Mt Merpai in Yogayakarta. The Adisucipto airport of Yogyakarta had to be closed for 11 days because of the volcanic ashes covering the airport and endangering flight over that area. Many foreign tourists cancelled plan to visit Yogyakarta because of the long delay in flights. Hotels also suffered a decline in occupancy rates. The number of visitors to Yogyakarta fell 58,300 flights during the 11 days with 23 domestic flights and three international flights were cancelled.

However, the target of 7 million foreign tourist set by the Tourism and Culture Ministry for 2010 was achieved. Based on the official data of the Central Bureau of Statistics the number of foreign tourists visiting Indonesia in 2010 reached 7,002,944 or an increase of 10.7% from 6,323,730 in the previous year. The increase in the number of visitors was partly attributable to many international events in 2010 such as Sail Banda.

In 2011, the Tourism and Culture Ministry has set Wonderful Indonesia as the brand for the Indonesian tourism. The tourism theme is Eco, Culture, and MICE, backed up by Indonesian tourism concerned with the environment and having various cultures from Sabang to Merauke. This has become the strength of Indonesia in developing tourism attracting foreign visitors.

Meanwhile, the government raised the target for the number of foreign tourists to 7.7 million in 2011. In order to increase the number of foreign tourists, the Culture and Tourism Ministry will focus on 10 main tourism market targets including Singapore, Malaysia, and Australia. It also has secondary market targets such as Germany and Middle East in addition to opening new markets including former Soviet republics and Latin American countries.

In 2011, there is also plan for international events that would draw foreign visitors such as Sea Games in Jakarta in November 2011. The number of visitors is also expected to continue to increase from five main markets - Singapore, Malaysia, Australia, China, Japan as well as from Europe mainly from France and Germany.

Bali and Jakarta still the main destinations

Bali and Jakarta remains the main tourist in Indonesia. Bali recorded 2.54 million tourists in 2010 or an increase of 6.7% from 2.38 million in 2009.

In the first nine months of 2010, the number of Asian tourists from Japan visiting Bali dropped 26.61% from 333,905 in 2009 to 245,040 in 2010. The number was around 9.51% of the total number of foreign tourists to Bali. Meanwhile, Chinese visitors dropped 4.48% from 206,151 to 196,925, from South Korea down from 124,889 to 124,729 and from France down from 113,453 to 104,029.

On the contrary, an increase was recorded in the number of visitors to Bali from other countries in the same period. The number of visitors from Taiwan rose 1.5% to 122,255 from 120,445, from Australia rose 43.67% to 641,588 from 446,570 from Malaysia up 16.3% from 135,190 to 156,858, Singapore up 73.96% from 56,992 to 97,402 , Britain up 2.91% from 93,688 96,412 and from Germany up 12.77% from 74,849 to 84,406.

The number of foreign tourists to Jakarta continued to scale in 2010 to reach 1,893 million or an increase of 33.8 % from 2009. The largest number of visits was recorded by foreign tourists from Malaysia reaching 23,821 visits, followed by those from Singapore with 15,034 visits, followed by those from China with 11,608 visits, Japan with 10,280 visits, South Korea with 7,288 visits, Australia with 5,912 visits, the United States with 4,931 visits, the Netherlands with 4,674 visits, the Philippines 4,470 visits, and India 4,416 visits.

Foreign tourists came Jakarta via 3 gateways - Soekarno-Hatta international airport, Tanjung Priok port, and Halim Perdana Kusuma airport. The largest number visits were via Soekarno Hatta airport with 1,823,636 visits, followed by visits via Tanjung Priok totaled 63,859, and via Halim Perdana Kusuma 5,371 visits.

Domestic tourists to Jakarta in 2010 totaled 18 million, up 11% from 2009.

In 2011, the number of visits by foreign tourists to Jakarta is expected to increase further as Indonesia has been chosen as Asean chairman this year and there are around 500-700 international events scheduled to be hosted by Jakarta including Java Jazz in March and Sea Games in November. .

Tourists from Singapore drop

In 2011, Indonesia sets a target of 1.5 million for the number of visitors from Singapore. Singapore has become a potential market for Indonesian tourism as the number of visitors from that country has continued to increase from year to year. In 2010, the number of tourists from Singapore reached 1.12 million or decrease of 11.0% from 1.27 million in the previous year.

The largest number of visitors from Singapore has been recorded by Batam. Most of them visit Batam for shopping, playing golf, and attending meetings.

Other destinations include Jakarta, Bali, Surabaya, Medan, Padang, Solo, Manado, and Lombok mainly for holidaymakers.

In a bid to boost the number of visitors from Singapore to Indonesia, collateral branding strategy and joint promotion are organized by airlines and promotion support by Singapore in Bali, Manado, and Surabaya, and Great Sales package to Jakarta and Bandung

In addition to Singapore, Indonesia has 14 other countries as potential market targets. The second largest contributor to the number of visitors is Malaysia. On 2010, Malaysian visitors to Indonesia reached more than 1.3 million.

Other potential markets for Indonesian tourism include Japan, South Korea, Australia, China, Britain, Germany, the Netherlands, Frances, Russia, India, the Philippines, Saudi Arabia, and the United Arab Emirates.

Foreign exchange earning target set at US$ 8.5 billion for 2011

According to Minister for Culture and Tourism Jero Wacik, the government's target for foreign exchange earning from tourism in 2011 has been set at US$ 8.5 billion or an increase of 10.3% from last year's US$ 7.7 billion on assumption that a visitor will spend US$ 1,100 per visit. The number of domestic tourists is forecast to reach 119 million with total spending of Rp 100 trillion, or an increase of 11.1% from last year's Rp 90 trillion.

In 2011, an increase of around 10% was predicted in the number of foreign tourists to 7.7 million from 7 million in 2010 when the number grew by 8.5% from 6.45 million in 2009.

In 2010, the tourism sector grew 9.3%, exceeding the country's economic growth rate of 6%. The government sets the target for the GDP from the tourism sector contribute 5% to the country's GDP in 2011.

In order to achieve the foreign exchange earning target of US$ 8.5 billion, the government of Indonesia has provided a budget of US$5 million for the country's tourism marketing and promotion. In comparison with the budgets set by other neighboring countries including Singapore, Malaysia, and Thailand, the tourism budget set by the Indonesia government is the lowest. Singapore, for example, provides a budget of US$ 100 million every year for the tourism budget.

Meanwhile, based on BPS data, the number of foreign tourists visiting Indonesia in 2010 totaled 7,002,944. In November alone the number of foreign visitors totaled 578,152 or an increase of 8.74% from 531,669 a year earlier.

The number of foreign tourists recorded by the 8 main gateway increases in 2010. Soekarno-Hatta airport recorded 1.8 million or an increase of 31.2%, Ngurah Rai air port recorded 2.5 million or an increase of 8.7%, Juanda airport 168,888 or up 6.8%' Polonia 162.410 up 9.6%, Batam 1 million up 5.9%, Adi Sumarmo 22,350 visitors up 5.5 %, , Entikong 23,436 up 10.6% and Tanjung Priok 97,952 up 6.4%.

Declines were recorded by Sam Ratulangi airport to 20,220 visitors or down 31.9%, Tanjung Pinang 97,952 visitors or down 4.4 %. The number of visitors from other gateways dropped 57.7% from 1 million visitors to 427,521.

The number of foreign tourists to Bali via Ngurah Rai airport in October 2010 totaled 229,651 or up 1.8% from the same months in 2009. The number fell from 232,516 visitors in September 2010.

Spending by foreign tourists in 2010 averaged US$ 1,085.70 per visit each or an increase of 9% from US$ 995.93 in 2009. Average spending by foreign visitors in Indonesia in 2010 rose 4.20% to US$135.01 per day from US$ 129.57 in 2009. The daily spending was still higher than in Malaysia, where foreign visitors spent only US$ 560 per visit each on the average.

The length of stay of foreign tourists in 2010 averaged 8.04 days each, up 5% from 7.69 days in 2009.

The number of domestic travelers in 2010 reached 234 million with spending totaling Rp 138 trillion or an increase of 3.05% from 229 million in 2009. In 2011 the number domestic tourists is forecast to reach 237 million.

In 2010, the number of domestic air passengers increased. The number of domestic passengers totaled 43.8 million in the first 10 months of 2010 or an increase of 22.77% from the same period in 2009. The number of international passengers reached 9.6 million or an increase of 20.74% from 8 million in the same period in 2009.

Meanwhile, the number of sea passengers has also increased. The number of domestic passengers reached 7.1 million in 2010 or an increase of 18.93% from 5.94 million in the previous year. On the contrary volume of cargoes dropped to 109.3 million tons from 147 million ton.

The number of railway passengers in 2010 fell 1.75% from the previous year and railway cargo rose 1.01% to 19.1 million tons.

Occupancy rate of star rated hotels

In general the occupancy rates of four and five-star hotels in 2010 declined to 53.77% and 55.28% respectively from 55% and 57.57% in 2009. On the contrary the occupancy rates of one and two-star hotels increased from 2009. The occupancy rates of one star hotels rose from an average of 40.18% to 46.55%. The highest increase was recorded by three-star hotels reaching 56.21%.

The occupancy rates of star rated hotels in 17 provinces in December 2010 averaged 53.84% or an increase of 1.31 percentage points from a year before. The highest occupancy rate was recorded by start rated hotels in Central Sulawesi reaching 65.10% and the lowest at 40.92% was recorded by hotels in Yogyakarta.

The length of stay of hotel guests in Bali averaged 3.94 days in December 2010 or the longest, followed by 2.76 days in West Nusatenggara. The shortest length of stay of 1.24 days was recorded by hotels in Central Sulawesi.

The longest stay among foreign guests was recorded by hotels in Lampung averaging 4.32 days, followed by hotels in Riau 4.12 days. The shortest stay was recorded by hotels in Central Sulawesi averaging1 day.

Hotels in tourist destination areas such as Central Sulawesi, East Java and Bali recorded the highest occupancy rate. In 2010, hotels in Central Sulawesi recorded the highest occupancy rate of 70.10%. In Central Sulawesi, there are a number of major tourist objects including natural and cultural objects such as sea parks, sparkling sand beaches, waterfalls, caves, megalith statues and royal graves.

The second highest occupancy rate was recorded by hotels in Bali averaging 60.67% in December 2010, down from 62.51%. In 2009, followed by hotels in Jakarta with occupancy rates of 55.48% on the average. In 2011, the tourism office of Jakarta set a target of 68% for average occupancy rate of hotels in the capital city. The next highest of 41.01% was recorded by hotels in North Sumatra which is known to have submarine park known as Bunaken.

In November 2010, the highest occupancy rate of 68.60% was recorded by hotels in East Java with the lowest rate of 24.59% recorded by hotels in Yogyakarta. The low occupancy rate in Yogyakarta in 2010 was as a result of the eruption of Mount Merapi forcing the suspension of the operation of Adisucipto airport for 11 days in October that year.

In order to attract foreign visitors, the government offers attractive incentives. Foreign tourists will be entitled to a refund of value added tax (VAT) and luxury sales tax of at least Rp 500,000 effective as from 1 April 2010. The refund is given for every goods bought worth at least Rp 5 million each.

In the first phase, the incentives will be offered to tourists visiting the country via main gateways of Jakarta's Soekarno-Hatta airport and Denpasar's I Gusti Ngurah Rai airport. Such attraction has been used in Singapore, Japan, and China.

Investment in tourism sector limited

The government has offered investment in 18 potential tourism areas in 2010 in West Java, Kalimantan, West Nusa Tenggara, East Nusa Tenggara and Papua Barat. Among the potential areas are Ciamis, Alor, Ternate, Tarakan, Berau, and Balikpapan, Pantai Beang on the Pantar Island, Central Lombok, West Sumbawa, Raja Ampat, and island of Wai.

Hotel Company Aston International opened 11 new hotels in 2010 in Java, Kalimantan and Papua. Aston has hotels in various areas with total rooms of 1,600 rooms. The occupancy rates of Aston's chain of hotels in Indonesia averaged 70-80%. In 2010, new hotels coming on line included Aston Grand Kuta Hotel & Residence in Bali, a three-star hotel with 96 condominiums of one, two and three bed rooms. In Jakarta, it opened three hotels including Aston Cengkareng City Hotel & Conference center, Aston Paramount Serpong and Aston Kuningan Suite

Other Aston's hotels newly opened in Java include Aston Bogor Hotel & Resort, Aston Primera Pasteur Hotel & Conference Center and Hotel Quest Semarang, a three-star hotel with 155 rooms.

In Kalimantan, it opened Aston Pontianak Hotel & Conference Center, in West Kalimantan and Grand Aston City hall Hotel & Serviced residences in Medan a 5-star hotel with 245 rooms, 1 ballroom having a capacity of 1,700 guests, & conference. In Papua there are Aston Niu Manokwari Hotel & Conference center and Aston Jayapura Hotel & Convention center, both are 4-star hotels. Aston International operates only to manage hotels or as the operator of the hotels. It has share in the hotels.

Aston plans to continue to expand its operation in 2011 by opening 13 new hotels in Indonesia, Malaysia, and the Philippines. The 13 new hotels will be opened in 2011 including five-star hotel Grand Aston Yogyakarta, four-star hotel Aston in Bangka, Solo, Purwokerto, Palembang, Banjarmasin, and Makasar. In Bali, there will be four units - Royal Kamuela Vila & Spa, Royal Kamuela Villa Monkey Forest, and Ubud which will consist of villa houses with private swimming pool. Two other hotels will be 2-star hotels Favehotel Seminyak and Favehotel Legian, Bali.

Prospects of Tourism Sector

In 2011, the government provides a budget of Rp 492.l billion for the promotion of tourism The Culture and Tourism Ministry has established cooperation with private airlines and with the governments of Malaysia and Singapore to open new routes such as Malaysia-Manado, Malaysia-Makasar, etc.

The government has announced the program of Wonderful Indonesia to promote the country's tourism industry in 2011 with a theme of Eco, Culture, and MICE. The government has set a target for the number of foreign tourists to rise to 7.7 million in 2011 or an increase of 10% from 7 million in 2010. It is predicted the target could be reached if the economy continue to grow. The country could still expand tourist destination areas to include maritime tourism of Raja Ampat in Papua, maritime tourism of Wakatobi in Southeast Sulawesi.

The government will concentrate more to attract tourists from other Asean countries although efforts continue to attract visitors from Europe and America. Other potential tourism markets include Japan, South Korea, Australia, China, India, the Philippines, Saudi Arabia, and the United Arab Emirates

The occupancy rates of hotels in 2011 are expected to increase to follow the improved condition of the economy. So far domestic guests dominate hotel guests in various large cities. Foreign guests are dominant only in tourist destination like Bali in 2011, the occupancy rates of hotels are forecast to reach 60%-70% on the average.

The number of domestic tourists is estimated to reach 237 million in 2011 with total spending of Rp 139.5 trillion. Therefore, the prospect of the country's tourism industry is still encouraging. Domestic tourists provide potential marketing target especially amid the global crisis that caused a decline in the world tourism industry.

Investment in tourism sector in the country is relatively low worth only Rp 3.1 trillion in 2010. Most of the investment has been in hotel and restaurant sectors. Investment in various other areas such as maritime tourism, and recreation has been insignificant.

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