JAKARTA (TheInsiderStories) – As the home of more than 17,000 islands, Indonesia faces a lack of adequate infrastructure to facilitate access to tourism destinations. Exceptional tourism infrastructure on Bali and Jakarta (except for the grave traffic congestion) is simply not enough, as most other regions suffer from inadequate infrastructure, particularly in the eastern part of Indonesia, where there is a shortage of airports, seaports, roads and hotels.
The lack of inter and intra island connectivity means that a number of targets set by government–including 20 million foreign visitors and Rp275 trillion revenue by 2020–looks impractical. Still, Indonesia is included in the top 20 fastest-growing travel destinations in the world, welcoming nearly 10 million tourists last year, which signifies a national growth rate of 24 percent, four times the average South East Asian rate of six percent.
Increasing numbers of foreign visitor arrivals, combined with 5 percent GDP, has led to a growing demand for hotels, condominium hotels (which combine features of apartments and hotels), as well as conference and exhibition venues. Bali and Jakarta have already seen a large influx of investment in recent years, leading to excessive supply.
The compound annual growth rate (CAGR) of Investment in tourism during 2012-2016 reached 17.8 percent (US$732 million in 2016), but captured only 2.2 percent of total investment during the period, according to data from the Investment Coordinating Board. Thus, there is still plenty of room for investors who want to build hotels, water processing facilities, micro power plants or other supporting infrastructure.
‘The Government needs to gear up investment by the private sector in supporting infrastructure. We already set 10 priority national tourism destinations and provided basic infrastructure, including roads, sea-ports, etc. We also support other aspects, helping destinations and committed local governors promote by themselves, by creating more events so they can expose themselves more fully,’ Esthy Reko Astuti, Deputy of National Tourism Development at Ministry of Tourism, told TheInsiderStories.
According to her, the Ministry of Finance has already allocated a Rp620 billion promotional budget for next year, including money for a market analysis, strategic planning as well as media advertising (mostly in pre-events) for 10 priority national tourism destinations and 10 branding national tourism destinations.
The 10 priority national tourism destinations are Lake Toba (North Sumatra), Kepulauan Seribu and Kota Tua (Jakarta), Borobudur (Central Java), Labuan Bajo (East Nusa Tenggara), Bromo-Tengger-Mt. Semeru (East Java), Wakatobi (Southeast Sulawesi) and four special economic tourism zones: Tanjung Lesung (Banten), Morotai (North Maluku), Tanjung Kelayang (Bangka Belitung), and Mandalika (West Nusa Tenggara).
Hariyadi Sukamdani, Chairman of the Indonesian Hotel Association (APHRI) echoes government needs for better-trained human resources to support the tourism industry. He illustrated that his employer, Sahid hotel group, has developed the Sahid Hospitality School to develop their resources internally and to create a distinctive character for Sahid Group which represents the best of Indonesian hospitality.
Having said that, the government has been more active in promoting the country, while Indonesia has a lot of catching up to do compared to its neighbors. Infrastructure is improving in terms of airports and more frequent flights, both of which are helping to support higher tourism numbers.
‘On the promotions side, I think the government needs to be more targeted in its approach and more strategic. From the industry side, I think we need to anticipate more precisely. We develop hotels with other facilities such as shopping malls as we have done previously in Bali and so this is an option for international markets,’ he said.
Sukamdani also stressed that he was very open to potential partners and investors to join in, because there is plenty of room in Indonesia’s tourism industry and there exists an abundance of new opportunities. The investment costs for labor and building materials are highly competitive in Indonesia. In addition, land prices for new projects in many key locations are very competitive.
‘We believe that the residential sector for foreign property ownership is very promising, as changing regulations are enabling foreign investors to purchase properties in major cities such as Jakarta, and as such there is a lot of potential there. For working with new partners we would like to combine our expertise and experience in hospitality as well as our capital and network with theirs, to create new and innovative projects,’ he added.
Domestic Tourist Hype
Astuti added that the market for domestic tourism is also promising and should be given attention. Last year, domestic (local) tourist numbers reached 264 million and this is expected to increase to 270 million this year. To date (January-July 2017), domestic tourists have reached 180 million.
Domestic tourist like the uniqueness of each destination and diverse product selection. For example West Java, Bandung, Batam, Bintan, Jogjakarta, Solo for its well-known culture. While for the east part of Indonesia like Labuan Bajo and Raja Ampat, it is well-known for its natural paradise.
‘Growth of domestic tourism tends to emphasize the special interest aspect: they want to discover new destinations and this is happening and being massively discussed through the social media. When someone posts their picture of a new destination it immediately goes viral. Thus, we should approach them in a more sophisticated way and adapt the promotional timeline into the right moment, especially over the long weekend, where domestic tourists spend their time,’ she said.
The Government is also cooperating with the aviation industry to attract more tourists, including Garuda Indonesia, Air Asia and Lion Air through discount ticket sales as well as ‘Lets Holidaying’ packages to boost tourism especially in the low season like February and March. ‘We want to cooperate with more aviation firms, including Sriwijaya and NAM air, to bring more tourists to the Eastern part of Indonesia, bearing in mind an affordable tariff,’ she said.
With increasing tourism destination access and infrastructure including sea-ports, upgraded-ports and ships like CN explorer, the government expects domestic tourists will become more developed, like in the United States of America, regarding both countries have diverse regional characteristics and adequate access.
Writing by Yosi Winosa, Email: email@example.com