Indonesia eyes up further growth as world leader in halal tourism

In early December 2016 Indonesia was named the best halal tourism destination in the world for the second year in a row at the most recent iteration of the World Halal Travel Awards. The country’s success at the awards ceremony, which was held in Abu Dhabi, UAE, did not end there, however. Indonesian destinations and companies dominated the awards, winning 12 of 16 total categories, including best airline for halal travellers, best halal beach resort, best halal honeymoon destination, among others. Hotels, tour operators, airports and other industry players from the islands of Lombok and Bali, and the Sumatran region of Aceh, performed particularly well, with the majority of Indonesia’s awards going to these three regions.

POTENTIAL: The positive outcome at the 2016 World Halal Travel Awards is the result of years of careful planning, ambitious investment, training and strategic global positioning on the part of Indonesia’s large and growing halal tourism industry. Federal regulations put in place in 2014 lay out specific requirements for hotels that market themselves as sharia-compliant, including the provision of a Quran in every room, signage marking the direction of Mecca, halal food options and restricted alcohol consumption. Federal expenditure by the Ministry of Tourism (MoT) on tourism promotion has also increasingly gone towards other predominantly Muslim countries. Indeed, in 2015 the state spent some $29m on attracting visitors interested in halal tourism, which was equal to nearly 15% of Indonesia’s total tourism promotion expenditure of $200m for the year. Much of this spending has gone towards attracting tourists from the Middle East and North Africa (MENA) region, and particularly from the GCC countries, namely the UAE, Bahrain, Oman, Saudi Arabia, Kuwait and Qatar.

A PERFECT FIT: Indonesia is particularly well suited to serve as the world’s most popular halal tourism destination. The country is home to some 222m Muslims – around 87% of its total population – making it the largest Islamic nation on earth by a large margin. More than 600,000 mosques are spread around Indonesia. Equally, the ease with which the country has incorporated different kinds of religious expression into national society stands it in good stead to welcome and host Muslims from around the world. These attributes – combined with Indonesia’s balmy climate, dramatic and varied landscapes, affordability and accessible location at the heart of South-east Asia – have made for an alluring draw for Muslim tourists.

STATE-LED EFFORTS: The MoT has played a key facilitating role in developing Indonesia’s halal tourism industry in recent years. In 2012 it announced a formal strategy for developing the halal segment, which involved implementing hotel classification requirements and setting preliminary growth targets for Muslim arrivals. In 2013 the government continued this effort by designating 12 Muslim-friendly destinations, including Aceh, West Sumatra, Lampung, Jakarta, West Java, Central Java, Yogyakarta, East Java, South Sulawesi and Lombok, among others. Potential investors interested in supporting the halal segment were encouraged to look at these areas in particular. In 2016 the MoT renewed this effort, announcing a new list of 10 regions to focus on, which included many of the same locations from the 2013 list, including the Java sites, West Sumatra and Aceh. This latest effort to drive growth in halal tourism included dedicated promotion expenditure of $29m and involved setting ambitious goals for growth in the segment. Indeed, the MoT has set a target of attracting 5m Muslim tourists by 2019.

MUSLIM VISITORS: While recent data about all Muslim travellers to Indonesia was unavailable at the time of going to press, the number of tourists travelling to the nation from MENA countries in 2016 was around 214,000, up from 182,000 in 2015, according to data from the MoT. These two figures alone demonstrate that the segment is growing rapidly. With this in mind, the state forecasts that around 350,000 visitors from Middle Eastern countries will arrive in Indonesia in 2017.

FAR AFIELD: Attracting visitors from MENA countries is a major area of focus for the government and other halal tourism players in Indonesia. However, to date the region accounts for a relatively small percentage of total incoming tourist arrivals. This trend holds across South-east Asia. According to MoT statistics, in 2015 visitors from the US were the single-largest spenders in the Asia-Pacific region, spending $231.6bn in total. In Indonesia the tourism sector as a whole accounted for just 4% of GDP in 2015. The state is working to drive this figure up to around 8% by 2019, according to Indonesia Investments, a unit of Dutch private investment company Van der Schaar Investments.

The data from the MoT shows slightly different figures. According to the ministry, in 2014 the sector already accounted for some 9.3% of Indonesia’s GDP, up from 9.2% the previous year. In 2015 the MoT recorded 10.4m international visitor arrivals, up from 9.4m in 2014 and 8.8m in 2013. Some 2.2m of international arrivals in 2015 were recorded by the MoT as Muslims, equal to just over 21% of total arrivals. Muslim arrivals have posted more rapid growth than tourists as a whole in recent years. Indeed, during the period 2013-15, overall international tourist arrivals to Indonesia grew at an average annual rate of around 10%, according to MoT data, while international Muslim tourist arrivals increased at an average annual rate of 15.5%. The nation’s strong performance at the recent World Halal Travel Awards is expected to drive ongoing expansion in this market for the foreseeable future.

KEY DESTINATIONS: One of the most decorated Indonesian sites at the 2016 awards ceremony was Aceh, located at the northern tip of the island of Sumatra, which won the accolades of “world’s best halal cultural destination” and the “world’s best airport for halal travellers”, Sultan Iskandar Muda International Airport. Designated in 2013 as a key halal tourism site, Aceh is already home to a wide range of halal hotels, restaurants, spas, shopping centres and tourism operators, with Aceh’s leadership in the process of expanding upon the region’s existing halal facilities. Plans currently in development include building up new sub-regional areas, including Banda Aceh, Lake Laut Tawar, Sabang and Aceh Besar. The regional tourism agency is also working to improve access to training and other resources for the industry, including tourism business certification for tour planners and guides.

Another major winner in Abu Dhabi in 2016 was Lombok, a volcanic island situated east of Bali, which took the awards for the “world’s best halal honeymoon destination”, “world’s best halal beach resort” and “world’s best halal tourism website”. Major attractions on the island include Mount Rinjani, an active volcano, and the diverse local population and culture which, alongside a significant number of Muslims, also includes adherents to Wetu Telu, a mixture of Islamic, Hindu and animist religious practices. Lombok’s recent awards success has prompted efforts from the local halal segment to clean up beaches, participate in tourism trade shows in new regions and update its tourism infrastructure.