Indonesia: Bali’s tourism turning point

Indonesia’s premier tourism resort, Bali, is clicking back into gear after the global downturn slowed recovery from damaging terror attacks. In 2010, authorities are confident that increasing visitor numbers will bring greater revenues and sustainable development to the region.

In August 2010, the Jakarta Post reported that Australian tourist numbers to Bali had increased by 50% for the first seven months of the year compared to the same period of last year. This is good news for the island resort given the importance of the Australian market to the region’s tourism industry.

This news comes on the back of impressive half-year results for Bali. According to the Central Statistics Agency, 1.17m people visited Bali in the first six months of 2010, up from 1.07m in the first half of 2009, representing an increase of 9.52%. Tourism numbers from Singapore, Taiwan, the UK and the Netherlands have all increased, suggesting that the island is not only getting over the 18-month hiatus caused by the slowdown in the global economy but also the stigma from terrorist bombings in 2002 and 2005.

Indeed, Bali has developed a stellar international reputation. In August 2010, the island picked up the title of “The Best Leisure Destination in Asia Pacific”, bestowed upon it by the readers of Business Traveller Magazine, published in Hong Kong, to go along with the title of “Best Island in the World”, which the US magazine Travel and Leisure named Bali for nine consecutive years between 2001 and 2009.

The New York Times best-selling novel Eat, Pray, Love, by Elizabeth Gilbert, was also recently made into a movie by the same name and was one of Hollywood’s major summer releases. Starring Julia Roberts, the film was largely filmed in Bali, which is only likely to enhance its reputation as an island paradise further.

Given the below-par showing of the Indonesian tourism industry in 2009, this is welcome news. While tourist numbers on the archipelago were slightly up last year, the revenue generated by the industry was down by 14.6%. The average expenditure per person per visit fell from $1,179 in 2008 to $996 in 2009. Furthermore, with the average length of stay falling, the hospitality industry in the country was undoubtedly bruised.

As tourism accounts for approximately 30% of gross regional domestic product in Bali, the half-year figures will have many in the region breathing a sigh of relief. According to the ASEAN Hotel Review by STR Global, Bali’s hospitality industry recorded the highest occupancy rates of any region in Indonesia, hitting 71% for the first six months of the year, an increase of 7.8% on the first half of 2009. The island’s hotels also saw revenue per available room increase by 19.3% and the average daily rate increase by 10.7% to $121, the highest in the country.

Given the competitive nature of the hospitality industry on the island, it was desperate for a successful 2010. The region already has more than 50,000 hotel rooms, and this is only likely to increase over the coming years. According to a report by Colliers International in mid-2009, the island has at least 10 new hotel resorts planned for the years 2009 to 2012, the majority of which are targeting the higher end of the market. This will bring even greater competition to the five-star segment, which already accounts for 48% of Bali’s hotel room supply, according to Colliers.

Bali’s hotel building boom seems to reflect the wider Indonesian market, which has 53 hotels in the pipeline, the second highest in the region behind Thailand. While such investment should signal a flourishing tourism industry and growing tourism receipts for the government’s coffers, there remain some notes of caution.

Indeed, the government is keen to ensure that such success does not come at a price, especially for the highly-rated natural paradise of Bali. Ida Bagus Ngurah Wijaya, the chairman of the Bali Tourism Board, told the Jakarta Post that if conditions of rapid building and poor infrastructure persist, Bali will become known as a budget destination, a reputation that the authorities have painstakingly avoided up until now.

While the sight of tourists flooding back to Indonesia’s headline island should signal good news for the regional economy, the government is still striving to ensure that Bali’s reputation does not become tarnished by overdevelopment and that a high volume of visitors does not diminish the high returns of tourism receipts.