Double-digit growth in hotel construction to help Indonesia accommodate a growing number of visitors

Although public infrastructure projects including highways, ports and rail continue to dominate Indonesia’s construction landscape, the hotel segment is fast becoming a major growth driver for private contractors, with Jakarta standing as one of the world’s largest hotel construction markets, driven by rising foreign visitor arrivals and the growing business travel segment. Growth in hotel construction project value is expected to hit double digits in 2016, and while the majority of new builds are concentrated in Jakarta, Bali and East Java, considerable potential exists outside of these areas, as evidenced by a surge in new investment in Mandalika and its planned special economic zone.

Hospitality Growth 

Visitor arrivals to Indonesia have grown rapidly in recent years, rising by 7.3% in 2014 to reach 9.4m, according to a November 2015 report by Indonesia Investments, a subsidiary of the Netherlands’ Van der Schaar Investments. Although Statistics Indonesia (BPS) reported in February 2016 that the country missed its 2015 target of 10m foreign arrivals, BPS data showed that visitor numbers still rose by 3.5% in 2015 to 9.7m, while a new system for counting foreign visitors showed that arrivals, including land border crossings and non-Indonesians living in the country for less than a year, hit 10.4m in 2015, exceeding government targets.

Although the country still lags behind Singapore and Malaysia in numbers of foreign visitors, President Joko Widodo has targeted reaching 20m arrivals by 2020, with hotel infrastructure set to significantly expand in the wake of rising tourism promotion, as well as integration of the ASEAN Economic Community (AEC), which should lead to a swell of new business travel arrivals.

Hotel Development 

The number of hotels in Indonesia expanded by between 9% and 14% annually between 2011 and 2014, according to BPS, with 2014 witnessing a 12.3% expansion in the number of hotels in the country, to 1996, compared to 1778 in 2013. The number of hotel rooms surged as well, rising by 14.3% to reach 195,890 keys, which is the fastest growth rate since 1997.

STR Global reported in March 2015 that Jakarta has more hotel rooms under construction than any other city in the Asia-Pacific region, with the exception of Shanghai, with 6743 rooms, while developers in the tourist hotspot of Bali have an additional 5613 rooms in the pipeline. In November 2015 business-to-business construction and building publication BCI Asia reported that as tourism revenues and visitor arrivals rise, the value of Indonesia’s hotel construction segment is forecast to rise by 16% to Rp21trn ($1.5bn) in 2016.

According to the company, roughly 21% of new projects worth Rp4.4trn ($321.2m) will be concentrated in the Greater Jakarta area, as developers move to tap the city’s rising business potential in the wake of ongoing AEC integration. Major projects under development include the Harris Hotel in Tangerang, with 200 rooms, Vivo Sentul in Bogor, with 150 rooms, Grand Dhika City Hotel in Bekasi, with 143 rooms and the Boulevard Centre in Tangerang, with 200 rooms. East Java and Bali are leading hotel construction, after Jakarta.

Business Travel

Outside of these three areas, investors are also increasingly looking to new tourism developments. French hotelier AccorHotels, for example, held a ground-breaking ceremony for a planned new Rp400bn ($29.2m) Pullman hotel in Mandalika, West Nusa Tenggara, in December 2015, which will capitalise on a rise in anticipated business and meetings, incentives, conferences and exhibitions tourism arrivals. Jusuf Kalla, AccorHotels’ vice-president, called on the government to accelerate infrastructure construction in the area, slated for development as a special economic zone.

You have reached the limit of premium articles you can view for free. 

Choose from the options below to purchase print or digital editions of our Reports. You can also purchase a website subscription giving you unlimited access to all of our Reports online for 12 months.

If you have already purchased this Report or have a website subscription, please login to continue.

The Report: Indonesia 2017

Construction & Real Estate chapter from The Report: Indonesia 2017

Cover of The Report: Indonesia 2017

The Report

This article is from the Construction & Real Estate chapter of The Report: Indonesia 2017. Explore other chapters from this report.