Economic Update

Concerns that one of Indonesia’s best-known tourism destinations, the tropical island of Bali, is being overrun by foreign holidaymakers and that its very popularity is putting at risk the natural attractions that draw so many visitors have prompted renewed calls to broaden the base of the country’s tourism industry, with greater emphasis put on developing new and sustainable resorts.

Tourism is a major contributor to the Indonesian economy. The World Travel and Tourism Council (WTTC) estimates the sector directly accounted for 3.1% of GDP in 2013 and 9.2% when indirect contributions such as marketing, infrastructure development, and tourist spending on products and transport are factored in. Growth will increase by 7.5% in 2014, with the industry expanding by an average of 5.7% year-on-year through to 2024.

While lauding both the rise in tourism earnings and in sector employment – which the WTTC expects to top 11.3m within 10 years – there are concerns the industry is too narrowly focused, with the expanding development of the resort island of Bali in particular being singled out recently for debate.  

Bigger may not be better

There are fears that Bali is falling victim to its own success. Bali’s Tourism Agency is targeting 3.5m overseas visitors to the island in 2014, a figure that could be within reach after a 14.8% jump in arrivals in the first quarter – traditionally a slower period – with just over 835,000 tourists checking in.

To cater for this rising demand, hotel room numbers on the island have increased from 22,000 in 2011 to 50,000 as of the beginning of in 2013, with a further 5100 expected to be added to the accommodation stock by the end of 2014, according to the Indonesian Tourism Promotion Board.

Addressing a hotel investment conference held in Bali on June 6, former tourism minister Gede Ardika warned that Bali was close to reaching saturation point, with its resources unable to sustain further growth. The supplies of water and food, along with available land for development, were being stretched, he said.

“Tourism practitioners in Bali should rethink whether the current model of development will continue to be tolerated,” said Ardika.

Nyoman Sukma Arida, a lecturer in tourism at the Udayana University, is also advocating a shift in tourism policy. He told the Australian Associated Press agency on June 10 that Bali should be seen as a gateway to the other attractions of Indonesia, rather than the first and last stop on a holiday.

“I’ve written that Bali should be used as a hub, as the distributor of tourists all over Indonesia,” Nyoman said. “When I went to Perth recently, I saw that people there still see Bali as their only option. It’s just that their knowledge of other places in Indonesia is very limited.”

At the Bali and Beyond travel fair, held in early June, a number of new projects aimed at diversifying the island’s tourism appeal were unveiled. Plans include the construction of large-scale sports facilities and a trade centre, which officials say will boost sporting and business tourism. Other proposals, such as strengthening transport infrastructure to facilitate travel away from the main coastal resort areas and improved promotional activities to showcase other facets of Indonesia were also mooted.  

Thai cloud a silver lining for Indonesia

While such developments will take time, one area where Indonesia can look for a shorter-term boost for its tourism industry is the recent military take over in Thailand. With many countries warning their citizens to avoid unnecessary travel to Thailand, throwing the holiday plans of thousands into chaos, Indonesia’s appeal as a leisure destination has received a further burnish.

According to Ketut Ardana, chairman of the Association of Indonesian Tour and Travel Agencies, there could be an upswing in arrivals over the coming months, with operators in Bali expecting a 10% rise in arrivals.

“Bali usually sees an increase in foreign tourists when there are conflicts or disasters in neighbouring countries. We predict the same thing will happen this time,” he told English-language daily The Nation on May 30.

If the proposals to spread the focus of tourism away from a few key regions are adopted, the effects of such a policy will take some years to be felt, with a long lead time required to develop the necessary infrastructure and, more importantly, build a promotional profile for the new centres among holidaymakers. Though this is a long-term undertaking, such developments will allow Indonesia to make more permanent gains and reinforce the sustainability of its tourism sector.

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