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High time to look beyond Bali for tourism opportunities
While Bali has long been groomed as Indonesiaâs resort tourism poster boy, its B-list relegated destinations also deserve some recognition, especially before Baliâs charm peters out as a result of the unsustainable strain on its resources
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hile Bali has long been groomed as Indonesia's resort tourism poster boy, its B-list relegated destinations also deserve some recognition, especially before Bali's charm peters out as a result of the unsustainable strain on its resources.
Bill Barnett, founder and managing director of C9 Hotelworks, a leading hospitality consulting firm, contends that Indonesia's prospects of becoming a major tourism hub hinge on a commitment to building these budding destinations from the bottom up ' otherwise demand generators may be insufficient to tempt overseas-educated Indonesians to return home even if dual citizenship legislation is passed.
During a recent visit to Jakarta, the American, who has 28 years of hospitality experience in Southeast Asia, presented his ideas concerning investment and development prospects for tourism destinations beyond Bali at the Second Annual Indonesia Real Estate Conference.
Small trumps luxurious
Demand is rife for Bali beachfront properties worth over US$2 million, with well-off Indonesian buyers accounting for 80 percent of sales. Many book these hybrid condos-with-hotel-facilities at launch on a guaranteed return after three to four years.
However, says Barnett, when the guarantees expire, resale price does not usually match what the guarantees promised due to adjusted demand; which he believes may eventually bode 'blood on the ground'.
''¦ What happens is we have a lot of these units, they shift over to the actual returns and there is a resell market created. And the resell market then competes with the new sale market so it kind of undermines supply and demand. So that is potentially a very big danger for Bali,' says Barnett, referencing a trend wherein the resale of properties in a market replete with new developments creates an oversupply, which drives resale prices down.
Nonetheless, property prices in Jakarta skyrocketed 38 percent in 2012, representing the world's highest surge, with Bali close behind.
For the most part, investors are securing comfort zones by purchasing vacant land with no forthcoming plans for development.
In a similar vein, buyers of condo hotels are forgoing hefty plots for entry-level, one-bedroom units, and luxury villas now stay on the market for three to four months.
'There's so much speculation in south Bali, where it's so much easier not to develop and to simply flip land,' Barnett says of a phenomenon intrinsic to price bubbles, wherein confidence and prices soar, engendering unsustainable levels of demand before the bubble finally implodes, sending prices back down.
There is more than Bali
Property and tourism development in Bali has been disproportionately concentrated in visitor hotbeds such as Kuta and Seminyak, creating chasms in land prices between southern Bali and the islands outlying its northeastern radius such as Lombok and the Nusa and Gili islands. 'In Seminyak, [land] can [cost] up to $2000-2,500 per square meter.
'In other locations, $500-1000 per square meter. Then you go to the outlying areas of greater Bali and Lombok and you're talking $50-100 per square meter,' says Barnett. 'There's a finite amount of land in south Bali so I guess people who want to make rational investments will go further. We see companies like MNC (Media Nusantara Citra) [buying] land in Lombok.'
Barnett believes Lombok's extensive area (4,725 square kilometers), undeveloped highlands and vastly cheaper land prices represent a 'yellow brick road' on the property development front. 'I think the one thing we see is there's a lot of land on the market. We're not seeing any big, notable transactions. For us, Lombok is not a matter of if it can happen; it's a matter of when.'
The good, the bad and the ugly
For a destination such as Lombok, demand generators ' biodiversity, forest lands ' are inherent, says Barnett; however their appeal is blighted by limited access to water supply, transportation and road networks, which Barnett highlights as 'basic' demand generators.
'We always say 'You can't stay there if you can't get there' ['¦] Transportation is so critical to good hotel projects,' says Barnett.
Bangkok's SkyTrain is a case in point of how infrastructure can distribute demand, curtailing over-reliance on one destination, as in Bali's case. '[The SkyTrain] moved tourism from the river and around the Siloam area to Sikkim Bay because people can get on the SkyTrain and go from mall to mall.'
Sumba and Sumbawa, meanwhile, are not equipped with these fundamental conduits to tourism.
'They don't really have urban centers, they don't have a town; they don't have a road network or infrastructure. Those destinations don't really make a lot of sense,' says Barnett, although he adds that investors' interest remains piqued by the lure of land banking on these islands where land prices are expected to take off in the near future.
Barnett referenced the need for 'international-standard' tourism attractions in a city like Jakarta, such as the Legoland and Universal Studios theme parks that have helped fuel tourism in Malaysia and Singapore, respectively.
'Asia's two least expensive gateway capitals for five-star hotels are Jakarta and Bangkok. They're substantially cheaper than Hong Kong, Singapore and even cheaper than Manila and Kuala Lumpur. So in some ways it's a value destination but you have to add value so that people want to come for short stays,' says Barnett.
Piecemeal branding
Barnett proposes a segmented approach to marketing and branding as a way to spotlight demand generators for the world's largest archipelago, comprising an estimated 18,000 islands with more than 500 ethnic groups.
'I think you have to break it into certain pieces because again you have certain destinations,' he says. An umbrella brand such as 'Amazing Thailand and 'Incredible India' is insufficiently encompassing ' neither can it gloss over regions that are lacking basic infrastructure and tourist attractions, of which Jakarta is one, says Barnett.
'There are not many activities [in Jakarta] aside from shopping. You don't have big demand generators. Again we look at places like Flores or Lombok, these are good opportunities where people can have a more authentic experience. And, you know, that's defining things.'
Barnett prescribes direct marketing in target countries, such as the Maldives' recent marketing tour in China (24 percent of tourist arrivals in the Maldives in the first half of 2013 were from China) by its tourism minister, which featured tour operator and media events in five major Chinese cities. In his speeches the minister highlighted the importance of the Chinese market to the Maldives and the investment opportunities in the tourism sector.
'You have to establish that brand in those countries where they're emerging and people have visuals of what that experience is ' through social media, through advertising, through promotions in specific markets. Not on a global scale. There's no shotgun; you have to be very specific,' says Barnett.
Bill Barnett
