Tourism sector: hotel industry in Jakarta facing downturn

Darrel Cartwright, General Manager of The Park Lane Jakarta talks about the tourism sector in Indonesia.

Are you looking at expanding in Indonesia?

This is our take on things. Expand, build new hotels in Indonesia, in Jakarta, not going to happen. Why? Because the infrastructure is not here. The tourists are not here. People do not come to Jakarta for leisure. Do not get us wrong. Jakarta from a leisure perspective has lots to offer.

I recently did a radio interview, and my precepts are very simple. But the way that Thailand tourism works, is they have integrated everything, from the airlines, public transportation, to hotels. The tourism industry in Thailand, they work hand-in-hand, even with retailers to get that message out. If we go to a shopping mall here, one of the mid-level brands, we are going to be able to buy it cheaper here. Nobody knows that, and the question is why?

The other issue is that the Ministry of Tourism and Tourism Jakarta are two separate entities. And these two entities do not work together. So you can see here, is that Jakarta as a city, it is not promoted as a tourist destination and it is a black hole because we think that Jakarta has just as much to offer in terms of culture, in terms of food, as Thailand. If you want to come to Southeast Asia for shopping from Europe or other counties, the flight time is the same, you are going to get better deals here, but nobody knows about it.

Will you be building any more hotels in Jakarta?

I think right now there are more hotel rooms than there is demand. If we look at Indonesia and it is such a beautiful country, and it has so many islands, so many opportunities, if you look at the airlines, to go from A to B here is not cheap, where if you am in Thailand, it is regulated, it is controlled, and you can fly from one end of the country in Thailand for a fraction of the cost that you can fly from here to Bali.

It is cheaper to fly from here to Bangkok on Lion Air, 270 dollars, than to go to Bali almost. And there are more flights. So the other thing is, that the government needs to regulate the carriers. They need to put systems in place for infrastructure, for airports. All of these amenities need to be linked together like they’ve done in Thailand so as a tourist, it become convenient. Only recently did Indonesia start the Visa Waiver Program.

Lots of things are happening. When do you see the boom?

We think the key factor is value. In Thailand, in Vietnam, other Southeast Asia, you get the value. Here, it is still expensive. There is not good value here. So this is prohibited. If you look at the national carrier, there is not good value. So a family of four sitting in Europe or America or Japan, or some other countries, they are on a budget. They have to look at value. That is the first thing. You also have to look at inbound transportation. And you’ll see that in other countries you can go online, one-stop shop, and you can do everything yourself.

But here, it is still quite mysterious. There are a lot of dead-ends, a lot of alleys. A family of four with young children would have to spend some serious time to research the country, local logistics, all of these things. And then Thailand keeps popping up everywhere, social media, in the space. You’re just going to go to the past of least resistance. So it is the integration of everything together. That is the way we see it, because people want convenience, they want value, and they want safety and security.

Some of the big brands are going to be building hotels.

I am an Indonesian tycoon. I have a big land bank. What do I do? I build a hotel. Have I done research? Do I understand the market? No, but I have lots of money. A hotel seems a nice arrow to have in my quiver. I have a shopping mall, I have an apartment. I have some manufacturing interests. I am going to build a hotel. I go talk to Hyatt and say, “Hey, Hyatt. I am building a hotel. Do you want to manage it?” Hyatt says, “Why not? I am going to get a fee.” So that is really what is happening. It is not savvy business people saying, “Yes, there is a big growth curve coming. There is a big boom coming.”

How challenging is the environment?

Maybe, but you know what I’m saying is that they have leisure and they have business all chunked together. So really, if you look at performance, for example, if you look at Bali, arrivals are down now. So if you look at the ADR in Bali, they have driven down the ADR to maintain occupancy. If we look at ADR in Jakarta right now, it is off 19, 20 percent.

The problem with Jakarta is that most people coming to Jakarta is business. And a big sector is oil and gas. So when oil and gas prices fell, large oil companies stopped exploration. A lot of the maintenance contracts are done. So you are seeing that in Jakarta particularly, hotels are having a very hard time. In terms of year to date revenues, some hotels are off by 25, 30 percent.