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Bumpy takeoff for aviation, tourism sectors this year
This year, monthly domestic and international arrivals at 5 main airports in Indonesia, namely Polonia, Soekarno-Hatta, Juanda, Ngurah Rai and Hasanudin, outpaced their 2020 and 2021 figures, Statistics Indonesia (BPS) data showed.
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hile the country’s tourism and aviation industries were expected to book strong recoveries this year as borders reopened and pandemic restrictions were eased, worsening macroeconomic conditions impeded progress and pushed back the expected date of a full recovery.
This year, monthly domestic and international arrivals at 5 main airports in Indonesia, namely Polonia, Soekarno-Hatta, Juanda, Ngurah Rai and Hasanudin, outpaced their 2020 and 2021 figures, Statistics Indonesia (BPS) data showed.
Similarly, the year’s monthly foreign tourist visits and monthly hotel occupancy rates surpassed the past two years.
Businesses have credited relaxations in mobility restrictions and travel requirements amid drop in COVID-19 cases, which have been accompanied by a return of travelers to the country.
Hotels and restaurants also received a significant boost from the resumption of meetings, incentives, conferences and exhibitions (MICE) held by government agencies, which accounted for 40 percent of their revenue.
Despite the gains this year, pre-pandemic revenue levels remained out of reach for tourism, with BPS data showing all indicators far below 2019 figures.
“To achieve a full recovery, we still have a long way to go. The market has yet to return to normal,” Maulana ‘Alan’ Yusran, secretary general of the Indonesian Hotels and Restaurants Associations (PHRI), said on Dec. 14.
Read also: First ‘normal’ year-end holiday since pandemic: A windfall for tourism
One hinderance to the recovery was the high price of airline tickets, triggered by a mismatch between rapidly increasing demand and curtailed supply alongside a surge in fuel costs driven by high crude oil prices.
High inflation triggered by soaring food and fuel prices also hit travelers’ purses, forcing some to forgo vacations and focus on primary needs.
Hotel and restaurant owners also felt the pinch from high inflation as it raised their operational costs and squeezed their margins.
The airline industry faced significant additional burdens as it coped with higher costs for aircraft leasing, fuel, spare parts and maintenance, which had all become costlier due to supply chain disruptions and the weakening of the rupiah against the United States dollar.
“The recent fuel surcharge policy made by the government did not help much. We have not been able to balance our operational expenses. If we have any margin, it will be very thin,” Bayu Sutanto, secretary general of the Indonesia National Air Carrier Association (INACA), said on Dec. 14.
Experts and tourism industry players urged the government to try its hardest to maintain domestic purchasing power and keep inflation low over the course of the next year and beyond to aid the recovery of the tourism and aviation industries.
They said the tourism recovery was largely fueled by domestic travelers and that international visitors had remained low compared to pre-pandemic figures.
Read also: Airlines look to bright future but high costs stand in their way
Bicky Bhangu, president of the Southeast Asian, Pacific and South Korean division of Rolls-Royce, said the airline recovery in Southeast Asia, especially Indonesia, would depend on the reopening of China, which has only recently relaxed portions of its zero-COVID policy.
“Without China, there's a certain margin for revenue that's just lost because there are no flights in and out. So that's the biggest hit we are seeing in terms of the geographical lens and recovery,” Bicky told The Jakarta Post on Oct. 18.
China was in the top three contributors to foreign visitors to Indonesia before the pandemic, competing with Malaysia, Singapore and Australia, according to BPS data.
Bracing for more challenges
Airlines and hotels are bracing for a possible recession and heightened global uncertainty triggered by the prolonged war in Ukraine and higher interest rates, which they expect may affect demand next year, especially from international travelers.
Nonetheless, hotels and airlines believe the recovery will continue next year.
The PHRI projects hotel occupancy will grow by around 8 percent next year, about as strong as this year, and hopes the average hotel occupancy rate will reach at least 53 percent next year, just below 2019’s figure of 55 percent.
Meanwhile, INACA projects domestic travel will return to pre-pandemic levels by 2024, but for international flights, it might require another year.
National flag carrier Garuda Indonesia CEO Irfan Setiaputra said on Dec. 5 that the airline would stick to its business plan, claiming the company was sure its target would remain attainable despite upcoming challenges.
He said high fuel and spare parts prices would indeed have an impact on Garuda’s business but that he felt this could be offset by increased revenue.
However, Haris Eko Faruddin, air transport and tourism analyst at state-owned lender Bank Mandiri, said on Dec. 6 that a possible global recession would be one of the key risks for the industry next year.
“Many predict we can return to pre-pandemic levels in 2024, but with a looming global recession in 2023, it is possible tourism and airlines will attain their full recovery much later, in 2025,” Haris told the Post.
Haris said both airlines and tourism players could look to domestic customers to compensate for the slow return of international travel.
