The domestic market continues to be the driving force behind Bali’s tourism fortunes, albeit at a slowing pace, a new report shows. The Bali Hotel and Branded Residences Update, released recently by leading consulting groups Horwath HTL and C9 Hotelworks, highlights the knock on effect of the growing purchasing power of Indonesians is reflected in the massive hospitality-led residential market, which is highly leveraged by domestic buyers from Jakarta, Bandung and Surabaya.
Bill Barnett, C9 Hotelworks managing director, said Thursday that Indonesian buyers represented over 80 percent of Bali’s property transaction market, but there were warning signs that the sales pace was shrinking. “Domestic investors are absolutely the most dominant. We’re seeing some foreign investors, but domestic investors continue to drive Bali, from Jakarta, Bandung and Surabaya. Bandung is a key player, we see a lot of money coming in from there,” he told Bali Daily.
In addition to strong players in the property market, there are also a lot of new developers. “They want to have a new hotel, because they think it’s a good recurring yield,” Barnett said. “They feel that it’s a good place to put money in the future, as tourism is quite sustainable.” However, the dark side is “land price is reaching a ceiling where it’s quite difficult for developers to make a successful project”, he added. Despite the high price of land in Bali, people were still interested in building properties on the island because they saw positive market sentiment.
“Although there’s so much speculation and trading up of land, there’s still onward demand and transaction of properties for hotels, with new domestic buyers coming in, as they want to leverage themselves into other markets, and see Bali as a good buy.” The report also highlighted that new hotel rooms were opening at a faster pace, requiring developers and hoteliers to become increasingly creative to safeguard profitability. The year-to-date figure in June this year showed that room night supply on the Island of the Gods had further increased, stifling performance.
Figures indicate that market-wide occupancy was down a few percentage points, but to date hoteliers had remained steadfast on rates. Commenting on the apparent supply and demand imbalance, Horwath HTL’s Matt Gebbie said, “Continual annual increases of around 20 percent are not sustainable in Bali, with total arrivals now approaching 9 million.” Quoting data from the Central Statistics Agency, the report stated that domestic arrivals topped 6 million for the first time, up 7 percent year-on-year, with foreign arrivals just under 3 million, up 4 percent year-on-year.
The proportion of international to domestic arrivals continued its five year decline, down to just over 30 percent. Domestic tourist arrivals have more than doubled in four years, paralleling five years of solid growth in domestic consumption and rising commodity prices, the combination of which has kept Indonesia’s economy strong despite flagging foreign economies.
“Looking ahead to 2014, Bali should see further solid increases in arrivals from established and emerging markets, but the demand pace is likely to be outstripped by further large increases in supply. It is important now to remain strong on rates and tailor new supply to fill market gaps rather than using a scatter gun approach to development,” Gebbie said. While the closely connected real estate market has continued to see market volume, Barnett commented, “One key segment to keep track of are the luxury hotel villas with brands such as Rosewood, Raffles, Fairmont and Jumeirah that are coming to market backed by strong Indonesian developers like Ciputra.
Will these multimillion dollar properties be able to induce foreign buyers to Bali?” With a successful APEC done, the island was now tasked with maintaining performance amid slowing GDP growth, weakened currency and an increasingly urbanized tourism sector, the report noted.
source : bali daily