With some 17,500 islands, featuring diverse landscapes that range from volcanoes to white sandy beaches, as well as major cities with international-standard conference and entertainment facilities and a highly hospitable population, Indonesia has much to offer its visitors. In recent years, the economy has experienced rapid growth and, indeed, exceeds many of its peers. With such growth, a new middle class has emerged that is looking to travel, which has resulted in a dynamic and expanding domestic tourism sector.
The country also has a globally recognised destination in Bali. However, the country has a number of other equally enticing, yet far less exploited, locations.
FACTS & FIGURES: According to data from the World Travel and Tourism Council (WTTC) annual report on Indonesia for 2012, the travel and tourism sector directly contributed some Rp220.8trn ($22.83bn) to Indonesia’s GDP in 2012, or around 3%. When more indirect factors are added in, such as the effect tourism has on local incomes, investment and supply chain improvements, the figure was put at Rp640.8trn ($66.26bn), or 8.8% of GDP. Both figures are relatively high – for example, in 2011 tourism’s direct contribution to GDP in Australia was 2.4%, and in India, 1.9%.
According to data from Statistics Indonesia (BPS), in 2011 a total of 7.65m foreign visitors came to the country, spending an average of $1118 each per visit and staying an average of 7.84 days. The total revenue received that year from these visitors was $8.54bn.
These figures compared well with the previous year. In 2010 there were 7m foreign arrivals, spending an average of $1086 each, and staying for 8.04 days. Total income to the country from these visitors stood at $7.6bn. Going back further still, the figures show even more impressive growth. In 2007 there were around 5.51m foreign arrivals, spending $971 on average, and staying 9.02 days, with a total revenue of $5.35bn, according to data from the BPS. In terms of revenue, the 2007-11 period saw an impressive 59.8% rate of growth, as well as a 38.9% rise in foreign arrivals.
ASIAN TOURISM: Visitors are thus spending more, even if the number of days they stay is declining. This likely indicates a shift upmarket in terms of arrivals, though it may also represent the increasing purchasing power of Asian tourists. Malaysian visitors, for example, spent an average of $586 per visit in 2007, while visitors from the UK spent approximately $1354; by 2011 Malaysians were spending $715, a hike of 21.9%, while UK visitors spent $1399, an increase of just 3%.
Indeed, the changing nature of Asian tourism is a major dynamic behind the growth of the local sector, although traditional long-haul markets in Europe remain important. The biggest markets in terms of revenue remain Australia and Singapore. The former contributed $1.5bn of total revenue from foreign visitors in 2011, according to the BPS, some 17.6% of the total, while the latter contributed $1.05bn, or 12.3%, combining for around 30% of total revenue. Amongst Europeans, the UK was the largest contributor at $269.61m, just ahead of the Netherlands, with $263.02m.
From elsewhere around the globe, the US contributed $317.28m; China ($520.61m); Japan ($419.8m); and the Republic of Korea ($295.82m). Among the countries in ASEAN, other than Singapore, the top contributor was Malaysia, at $930.85m. In the Arab world, the only significant country in triple digits was Saudi Arabia, which contributed $211.06m.
The tourism sector also makes a major contribution to employment figures as well. The data from the WTTC show 2.9m jobs generated directly by the sector in 2011, or some 2.6% of the total employment in Indonesia. When adding in indirect employment, the WTTC estimated that some 7.7% of the workforce, or 8.6m people, were involved in the sector.
BUSINESS AND PLEASURE: According to the WTTC, in 2011 leisure travel was the main source of spending, accounting for 79.4% of the total, with the remainder classified as business spending. Some 79.1% of direct tourism GDP came from locals, illustrating the enormous contribution of the domestic market.
PLACES & PROSPECTS: To try to achieve further growth in the sector, Indonesia has implemented its National Tourism Development Master Plan 2011-25, which has targeted 20m visitors per year by the end of the plan period. In addition, the country has its Master Plan for the Acceleration and Expansion of Indonesia’s Economic Development (MP3EI), which will, in part, focus on national tourism development.
Indeed, in terms of the existing travel and tourism portfolio, Indonesia is already highly focused on Bali, and in terms of arrivals, the province’s airport and one other dominate the travel scene. The Soekarno-Hatta International Airport (CGK) is the main airport of Jakarta and Java, as well as the main entryway for the rest of the country. According to the BPS, there were approximately 1.93m foreign arrivals at the airport in 2011, up from 1.82m the previous year and 1.15m in 2007.
The second major arrivals gateway for overseas visitors is Ngurah Rai International Airport (DPS) on Bali. According to the BPS, there were 2.79m and 2.55m arrivals in 2011 and 2010, respectively, while in 2007, some 1.74m foreign visitors flew to the island.
The third-most-popular port of entry into Indonesia is Batam, which saw 1.16m arrivals in 2011, after 1.01m visitors in 2010 and 1.08m in 2007. Located on the Riau islands, Batam has been a special economic zone for several years, and has a regular ferry that connects it to the terminal at Tanah Merah on Singapore island.
Only three other ports of entry have annual arrival numbers in the six-figure zone: Polonia International Airport at Medan, in Sumatra; Juanda International Airport, near Surabaya in East Java; and Tanjung Pinang airport, in the Riau Islands. In 2011, their respective foreign arrivals totals were 192,650; 185,815 and 106,108, up from 162,410; 168,888 and 97,954, the previous year.
AIRPORT EXPANSION: As the main airport for the nation’s capital and a major transit centre for other parts of the archipelago, CGK has been under strain in recent years, as arrival numbers have steadily increased. Indeed, according to the Ministry of Transport (MoT), the airport was operating at 132% of capacity in 2011.
Thus, the airport saw a major expansion project officially launched in August 2012, worth some Rp7.6trn ($785.84m). This seeks to extend the capacity of the airport’s three terminals: Terminal 1, which is for domestic routes, will expand its capacity from 9m to 18m passengers; Terminal 2, which serves international routes, from 9m to 19m; and Terminal 3, which is the low-cost carrier terminal, from 4m to 25m. This last, significant expansion, will take half the total investment. The airport should also see the addition of a new apron, capable of handling 30 wide-bodied aircraft, boosting the existing four-apron capacity for 125 such aircraft.
The state-owned airport operator, Angkasa Pura II, says that the first phase of this expansion will be completed by 2014, with a capacity of some 62m passengers expected to arrive at the airport by then. Future phases will build capacity up to around 87m, with the construction of a new terminal and a new runway. As OBG was going to press, however, there was still debate on this future phase, or whether a new airport entirely, at Karawang, West Java, would go ahead instead.
Meanwhile, Bali’s airport is also straining to meet demand. MoT officials have predicted 12-15% expansion in passenger arrivals per year moving forward, and thus an expansion project is already underway to boost capacity at the DPS to 20m passengers per year. However, MoT officials also say this figure will be reached by around 2017, meaning that a new airport may be required to handle arrival numbers. If built, the airport will be located in the north of the island.
REGIONAL CONNECTIONS: Meanwhile, both the CGK and DPS expansion projects form key parts of a much bigger airport expansion scheme planned for the country. According to the Directorate General of Civil Aviation at the MOT, there are now plans to build a total of 45 airports nationwide between 2012 and 2022. Approximately 24 of these are to be constructed by end-2017, with work on a number of them already started, including: Muara Bungo airport in Jambi; Tual Baru airport in Maluku; Waisai Raja Ampat airport in Papua, Enggano airport in Bangkulu; Sumarorong second phase in West Sulawesi; Waghete Baru and Kamanap Baru, also in Papua; and Pekosarai airport in Lampung.
These are generally small airports, yet capable of taking STOL (short takeoff and landing) planes, such as the C-130 and Casa C-212. These airports, however, are vital for the tourism sector, as they should serve to ease one of the most severe bottlenecks in the country’s tourism development – namely, the lack of sufficient transport infrastructure beyond Java and Bali.
PLACES TO STAY: Indeed, these two islands take the lion’s share of Indonesia’s travel and tourism accommodation as well. According to data from the BPS, in 2011 the Jakarta region had some 39,272 beds in classified hotels, while Bali had 33,911 and West Java, 27,380. In total, there were 215,633 classified hotel beds in Indonesia in 2011, up from 191,948 in 2010 and 151,939 in 2007. In 2011 there were also 368,574 beds in non-classified hotels across Indonesia.
Raw numbers, of course, can hide many things, with the bed statistics covering all classes of accommodation. Jakarta and Bali comprise the majority of high-end offerings. In the former, most of the international chains are present, having moved in during the 1990s. The only new five-star hotel in the past two years has been the Keraton in Jakarta, operated by Starwood. In Bali the Regent is set to open in 2013, and a W Hotel & Retreat and Alila Villas Uluwatu are under construction. Other hotels in the pipeline include: Raffles, St. Regis, W, JW Marriott, Novotel and Doubletree in Jakarta; and the Ritz Carlton, the Regent, Andaz, Hyatt Regency, Jumeirah, and JW Marriott in Bali. Given the surge in visitors, it is expected that the fastest-growing segments in the next few years will be mid-tier and budget lodgings.
BALI: According to a report on Bali’s hotel sector by Knight Frank for second-half 2011, six five-star, five four-star and two three-star hotels are due for completion in 2012, with one more five-star, two four-star and two three-star hotels on course for completion in 2013. The report also says the second half of 2011 saw the fifth consecutive annual increase in arrivals since 2006. A particular growth market has been the US, with visits by US citizens up 24.9% year-on-year in 2011.
Bali had a lot of ground to recapture, following the infamous bombings of 2002 and 2005. The sector, however, appears to have done so admirably. According to the Bali Statistics Agency (BSA), around 2.16m people had visited in the first nine months of 2012, up from 2.05m for the same period the previous year. The BSA has predicted 2.8m arrivals by the end of 2012.
According to the BSA, hotel occupancy rates reached 80-100% in the June-August 2012 period. However, the BPS has stated the figures were much lower in 2011, with an average of 59.32% for classified and 46.33% for non-classified hotels throughout the year. At the high end, though, the Knight Frank report suggests that rates at five-star hotels averaged 74.24% in the second half of 2011, and 73.76% in four-star hotels.
According to figures from the BPS, Jakarta had similar ratios – 56.05% for classified and 60.03% for nonclassified – in 2011. While Jakarta has also suffered from terrorism, with hotel bombings as recently as 2009, the successful prosecution of anti-terrorism measures has led to a considerable reduction in threats.
MICE IS NICE: Part of the reason for Bali’s growing numbers of visitors – and for Jakarta’s – is the growth of the meetings, incentives, conferences and exhibitions (MICE) segment. Indeed, Bali saw a number of international events in 2012, with major highlights being the international Democracy Forum in November and the commemoration of the 2002 bombings in October, which saw many Australian visitors.
Jakarta is also set to radically increase its presence on the global MICE map following the 2012 launch of the Jakarta International Exhibition and Conference Centre (JIECC), which will be approximately 30% larger than any existing Indonesian conference centre by the time the first phase is complete in October 2014. A further phase, due to be completed in 2017, will make the JIECC one of the largest venues in Asia, with a 60, 000-sq-metre exhibition hall and a 6000-sq-metre ballroom. The whole site will cover approximately 20 ha.
OUTLOOK: For many years now, Indonesian tourism planners have been trying to both maximise the benefits of existing travel and tourism centres, such as Bali and Jakarta, while also pushing out “Beyond Bali” to encourage development in lesser-known islands.
Tourism development is a central plank of the government’s national development strategy. The main obstacle has always been the lack of infrastructure in the country, both in transport and accommodation, although there has never been a lack of destinations. Now the government is moving to develop transport links, while the private sector is taking a lead in promoting resorts in new areas, such as Raja Ampat, off Papua. It may be some years before such destinations can offer a marketable, higher-end international package. In the meantime, the established sites continue to dominate. While Lombok and the Gili Islands may take some traffic from Bali, it seems that the latter island is continuing to act as the main magnet for investment and arrivals. The challenge for sector professionals will be in creating a critical mass elsewhere, in order to help Indonesia realise its huge tourism potential.