Indonesia yet to fully unlock tourism growth potential

Tourists visiting the Prambanan Temple compound in Yogyakarta

As one of the world’s largest countries by land and population, Indonesia holds vast potential for tourism, some economy hotel players say, but there are obstacles in the way of unlocking growth opportunities, including the lack of local market understanding of international businesses as well as human resource challenges.

Hartono Liman, CEO of LoyalGuest.com said: “Compared to other destinations (in the region), there are so many untapped destinations in the country. The government has been developing infrastructure – airports, seaports and roads across the country, resulting in the growth of domestic travel.

Tourists visiting the Prambanan Temple compound in Yogyakarta

“Thanks to budget airlines, the middle to low income classes can now travel. The new infrastructure being built now allows people to vacation in nearby destinations,” Hartono said.

Speaking at a keynote panel at Travel Meet Asia organised by Messe Berlin in Jakarta, Hartono said that the growth of the vast low to middle class market would still be huge in the years to come as the national GDP climbs.

“Destinations within two- to three hours’ drive will be in demand,” he surmised, adding that the new highways built across Java and Sumatra have cut short travelling times and given travellers new options farther afield.

Amit Saberwal, founder & CEO of RedDoorz, a South-east Asian value hotel chain, said: “Indonesia is the most exciting travel market. It has among the (highest rates of e-commerce consumption) in the world. In fact, it is bigger than China: 76 per cent of the people have bought (at least) one e-commerce or done an economic transaction on the mobile phone, while China is 74 per cent.”

Saberwal added: “The government has really been pushing the domestic market, so we plan to go wider across the country and deeper into the cities.”

Domestic travellers typically pave the road for international tourism in emerging destinations. Local travel spurs the development of infrastructure, before these areas open up to the international travel community, he explained.

However, Albina Lanina, COO of Zen Rooms, a chain of independent budget hotels in South-east Asia, said: “Human resources in an asset but at the same time it is a challenge in Indonesia. The budget segment (accommodations) is not ready for international travellers. (There are) language and skills barriers.

Zen Rooms, which assists budget accommodation providers across South-east Asia in areas like operation efficiencies and online presence, also provides English language classes for staff in Indonesia.

She also noted that with only some three per cent of the population utilising cards for online payment, cash payment option is essential in the country.

Saberwal further highlighted the need for businesses to understand the situation and characteristics of local markets. Home-grown players like Traveloka and Tiket.com are more successful than global players in Indonesia because of this.

He said: “Cities in Indonesia are different. Online penetrations is not the same in each city. In Jakarta it is extremely high but it may not be the same in other cities. Therefore players like Traveloka, Tiket.com and all are reaching out to the customers both online and offline. You see their (promotions) at the airports, on TV, everywhere.”

Meanwhile, Hartono said that based on LoyalGuest data, Indonesians book more than one room (1.2) per visit, which suggests they travel either with families or groups of friends.

“They like to spend time together. Therefore, a hotel with limited common rooms is likely to be less favoured by the market,” he said.

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