Bali’s hotel occupancy rebounded last year, rising more than 4% following a challenging 2015. But at what cost?
According to the latest report from C9 Hotelworks and Horwath HTL, this rising occupancy was driven by increasing tourist arrivals, a slowdown of new hotel openings and, most tellingly, a further slashing of rates.
With international arrivals to Bali surging to record levels in 2016, the hotel analysts at C9 and Horwath have warned of a “mass market shift” that is threatening to further erode rates.
Mainland China is now the island’s second largest market in terms of international arrivals, and the country is predicted to overtake Australia in 2017 to become the dominant inbound market. This was further enhanced in the latter part of 2016 due to the Thai’s government’s crackdown on so-called “zero-dollar tours” from the mainland. Bali has benefited, if that is the right word, from the resulting shift in the low-value package tour business.
The result is two undesirable trends in the Balinese tourism sector: lower average spend and shorter length-of-stay. A 2016 survey by the Bank of Indonesia found that the typical Chinese tourist spends just a quarter of that spent by a typical European or Australian tourist. Meanwhile, the average length-of-stay in Bali in the nine months to September 2016 fell to 3.11 days – down from 3.20 days in the same period in 2015.
And for the hotel sector, it has also resulted in falling average daily rates (ADR) and revenue per available room (revPAR). Nusa Dua, Benoa, Kuta, Legian and Seminyak saw the most significant ADR declines, sometimes up to 6%.
ADR is expected to come under further pressure in the coming years; between 2017 and 2020 Bali’s pipeline of new hotels is dominated by three-star properties, which represent about 38% of total new supply and more than 5,600 rooms.
With regards the Chinese influx however, the report concedes that the Indonesian government’s focus on mainland China “makes sense… because it is only a short- to medium-haul catchment from Indonesia with increasing direct flights and a massive population, giving it the greatest potential for rapid-fire growth”.
“It is essential however, to foster other markets simultaneously to balance quantity and quality of foreign arrivals. The Thai experience is one to learn from, having aggressively targeted arrivals growth over the last Thailand government and tourism promotion has now shifted focus to increasing the yield per tourist,” the report adds.
Bali is expected to welcome as many as six million international visitors in 2017, approximately 40% of the nationwide Indonesian total. Of these, up to 2.4m are likely to be from Greater China.
