Henry Hendrawan, CFO, Traveloka: Interview

Interview: Henry Hendrawan

What are some of the key trends you observe among domestic and international tourists?

HENRY HENDRAWAN: Indonesian tourism seems to have benefitted from the government’s infrastructure programme in terms of increased domestic demand. For example, during the Christmas and New Year holidays in 2018, we observed exceptionally strong demand for accommodation in second- and third-tier cities, as well as in areas surrounding the new Trans-Java toll road, such as Cirebon, Semarang and Surakarta. We also observed an above-average number of passengers at airports in eastern Indonesia, where infrastructure has been upgraded considerably. Overall, inbound demand has been strong, but we also see potential for improvement in areas that have suffered from natural disasters. For instance, inbound demand stalled in Lombok. The private sector could ameliorate this situation by collaborating with the government to raise awareness that the infrastructure in these areas has been repaired.

How can local booking platforms capitalise on source markets where they lack brand recognition?

HENDRAWAN: We are looking to capitalise on inbound demand both domestically and across South-east Asia. Indonesian travel booking platforms already collaborate closely with platforms abroad, and share their inventories. Notably, China has become a pivotal source market across South-east Asia. Connectivity from China is improving, with more than 250 direct flights to Thailand, 100 to Vietnam and 60 to Indonesia.

Intra-regional tourism is also picking up quickly. Indonesia saw a significant increase in Vietnamese inbound tourism, and connectivity from Vietnam to the region is also improving. Most South-east Asian countries are growing in terms of GDP per capita and have middle classes that prefer spending money on experiences, rather than on fixed assets. Hence, leisure demand has been trending upward and is advancing at a much faster pace than the GDP growth of emerging markets.

What role do booking platforms play in raising global awareness of domestic destinations?

HENDRAWAN: Booking platforms such as Traveloka are playing an increasingly important role. A passenger five years ago would just use an online platform to book a flight. Nowadays, people look at platforms as a source of inspiration, a place to discover information and to read other people’s reviews.

Customers spend a lot of time researching before making decisions. For instance, destinations like Raja Ampat offer a range of activities that booking platforms highlight to promote the government’s 10 New Balis programme. The majority of these destinations have seen above-average growth, though some destinations could certainly benefit from better connectivity.

Connectivity options are still limited, and further investment is required to facilitate them in the years to come. Increased connectivity has its downsides, however: destinations including Chiang Mai in Thailand and various locations in Boracay have been overwhelmed by the vast influx of tourists, as many of them lack the supporting infrastructure for waste disposal. Further investments are thus required to strengthen the local authorities so that tourism remains sustainable.

How might Chinese demand shape tourism in 2019?

HENDRAWAN: In the region, Thailand benefits in particular from its proximity to China. Thailand has a natural advantage, and the connectivity from China to Thailand is better than that between China and Japan or South Korea in terms of direct flights. Thailand has done a great job of providing accommodation options for Chinese customers. However, online booking platforms do not target Chinese customers per se. Instead, Indonesian booking platforms collaborate with Chinese platforms to share inventories. At the same time, we will see an increase in usage once digital money alternatives are provided. Moreover, payment channels used for small-value transactions are rapidly gaining traction.