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A total of 17,500 islands of which only 1/3 inhabited or over 11,000 uninhabited. A dream image come true for many Westerners.

Indonesia does indeed have a lot to offer to foreign visitors but the hospitality industry is far from mature. Despite some recovery in the past few years the industry can potentially still double. Using Thailand as a benchmark country some comparison :

Country

No. visitors  1996

No. visitors 2004

Revenue bln  1996

Revenue bln 2004

Indonesia

5.5 mln

4.5 mln

5.25

3.75

Thailand

6.0 mln

12.0 mln

5.0

7.80


The average spend per person has shown a decrease in Euro's but in actual local currency this is not so. The decrease in average Euro spending is due to the exchange rate increase of the Euro vs. the US$ of approximately 21%.

Indonesia's prime tourist destination is of course Bali. Of the 4.5 million foreign visitors in 2004 1.5 million had Bali as its immediate port of entry into Indonesia. The island of Bali serves as a very accurate yardstick of how the tourism industry in Indonesia in total will develop but also how the economy in general will perform as well as the level of international confidence in the country as a whole.



The 9/11 attack on the USA and the following wars in Afghanistan and Iraq have created a deep mistrust in the West towards Muslim societies in general. The Bali bombing of 2002 and Jakarta bombings of 2003 and 2004 have given Indonesia a bad image internationally and the September 2005 Bali bombing will underscore this again. Although Indonesia is a free, liberal and democratic society, as a so-called Muslim country it is considered by "Western" people as one and the same as countries in the Middle East.

Direct Total Foreign Arrivals - Bali :

2000

2001

2002

2003

2004

2005*

1,412,849

1,356,774

1,285,855

993,029

1,458,309

686,249


*1st 6 months

The 9/11 attack in 2001 did not really diminish foreign direct arrivals on Bali. The 2002 Bali nightclub bombing had a much deeper impact.

Direct Foreign Arrivals - Bali / Country of Origin :

Country

2000

2001

2002

2003

2004

2005*

USA

79,462

68,359

50,007

35,937

50,517

28,129

Australia

231,739

238,857

183,561

139,018

267,520

130,874

Japan

362,270

296,282

301,380

185,751

326,397

153,690

S. Korea

13,739

35,634

41,036

46,365

80,273

44,834

Taiwan

157,608

154,575

168,756

170,533

183,624

59,044

China

-

1,898

4,232

7,524

21,651

6,782


In 2003 Bali had lost 50% of its Australian clients due to the 2002 nightclub bombing but they returned in force in 2004 and the 1st half of 2005. The September 2005 Bali bombing appeared to have a lesser panic effect than in 2002 but will undoubtedly have a negative effect on future bookings. Boracay and Cebu in the Philippines as well as Koh Samui and Phuket in Thailand will certainly benefit from changed bookings.

The USA arrivals show no sign of recovery but an interesting new market appears to be South Korea. The YoY growth since 2000 is impressive and South Koreans are less risk averse as their Japanese and USA counterparts. The strong increase in Chinese arrivals seems to have halted for 2005.

Average length of stay is another factor that could be improved. The average length of stay of foreign visitors in Thailand is approximately 8 days. For Indonesia this is less than 4 days with some locations e.g. Bali the exception.

Average Length of Stay Foreign Visitors - Classified Hotels :

Area

1999

2000

2001

2002

2003

Indonesia Total

3.12

3.26

3.31

3.09

2.99

Bali

4.39

4.14

4.35

4.14

4.01


Average Length of Stay Foreign Visitors - Non Classified Hotels :

Area

1999

2000

2001

2002

2003

Indonesia Total

3.54

3.44

3.60

3.83

3.71

Bali

4.29

3.97

4.00

4.34

3.82


Visitors in the budget category spent on average 24% more time in the country than higher income travelers.

With an average hotel occupancy of less than 50% since the beginning of 2005 not only more but also longer staying guests are important targets.

Indonesia as a country is so very diverse and has foreign visitors so much to offer. More than 17,000 tropical islands meander across the equator offering a world of different cultures, languages, experiences. The Indonesian hospitality industry is still underdeveloped and its potential remains significant.

Due to the special situation of Indonesia and the sensitive nature of reporting about the country it could benefit from a more specific promotion campaign towards special groups rather than targeting the general tour market and upmarket travelers. These 2 categories are very risk averse, easily influenced by sensationalist reporting and negative travel warnings and show in general very little loyalty towards the countries visited : repeat visits are rare.

Targeting the so-called FIT (Free Individual Traveler) market segment could be more effective.

1) International business traveler :
- Less receptive towards negative international reporting and
  negative travel warnings
- Will travel in case potential benefits are apparent
- Often on company expense i.e. more inclined to select higher value
  venues and higher spending pattern

2) Budget/Backpack traveler :
- Less receptive towards negative reporting and negative travel
  warnings
- Careful with budget but much longer than average stay in the
  country
- Very open to local cultures
- Very receptive to opportunities to gain indepth knowledge and
  experience inside the country
- Will often fulfill "ambassador" function of the country towards friends
  and family when returned home
- Will often return and therefore represent repeat business
- Will often return when older with more spending power

3) Lifestyle Groups :
- Higher than average educated
- Higher than average income
- In case living together mostly double incomes
- In most cases no dependents
- Personal safety and absence of harassment is important
- Fulfill a trendsetters function
- Linked to strong network

4) Sport enthusiasts :
- Golfers for Bali, Bintang etc
- Diving in Manado
- Sailing through the archipelago

There are of course numerous possibilities and Indonesia has the potential to cater to all requirements.


Source tables: BPS Statistics Indonesia
http://www.bps.go.id