INDONESIA would do well to mimic Bangkok’s experience in maintaining hotel rates at a reasonable level for a quicker recovery in the face of falling demand.
This was a key point raised by Jesper Palmqvist, area director of Asia Pacific for STR Global, who was speaking at the Hotel Investment Conference Indonesia in Jakarta yesterday.
“As seen in 2014 in Bangkok, where demand and occupancy took an even bigger hit than currently seen in Indonesia, hotels managed to not drop rates too much and as a result when demand came back, overall performance was up to normal standard quite quickly,” he said.
An STR Global Report also highlighted that there is still room for Indonesia’s room rates to grow towards levels befitting at least the major cities. It also noted Indonesia’s progress in doubling average rates over the last 10 years and moving away from rates generally regarded as “too low”.
After years of consistently strong growth in average daily rate alongside stable occupancy, the Indonesian government’s memo issued last November brought visible drops in demand and occupancy in many destinations across Indonesia by limiting government expenditure on conferences and meetings held in hotels.
As seen previously in China, centrally imposed cuts in government spending for meetings and travel that require hotel stays tend to have a very swift and wide-ranging effect on demand.
Furthermore, while Indonesia as a whole has seen occupancy remain fairly flat in the last seven years, with hotels working to improve daily rates, a surge in new supply most notably in Jakarta and Bali has left an impact on the industry.
STR Global figures showed that the number of people needing a hotel stay was down by five per cent year-on-year and occupancy tumbled 12 per cent in 1Q2015, even as national room inventory continued to grow at eight per cent.
Said Palmqvist: “The good news is rates remain positive compared to 1Q2014 at 3.4 per cent (in Indonesian rupiah). This number would most likely have been higher without the demand drop, but it’s still sending a positive signal of confidence from the hoteliers in the first few months.
