Is now the right time to invest in Indonesian tourism? Strategy to prepare Indonesia's tourism sector

Jakarta, 12 November 2021 - The COVID-19 pandemic is the biggest challenge faced by Indonesian tourism business owners and operators. The number of foreign tourists entering the country in 2020 was only about 25% of the number of tourists in 2019. The decline in hotel occupancy in Indonesia in 2020 also sharply decreased in bookings from domestic and international guests, where in January-February, occupancy was still at 49.17% and 49.22%, respectively. However, in March it became 32.24%, and worsened when entering the month of April, which was 12.67%. The existence of large-scale social restrictions and the closure of access in and out of Indonesia, caused a decrease in government revenue in the tourism sector by Rp20.7 billion.

However, along with the continued decline in daily COVID-19 confirmed cases and with the vaccination programme in all provinces in Indonesia, optimism for business recovery has begun to grow.

As stated by Sandiaga Uno, Minister of Tourism and Creative Economy at the PwC Indonesia webinar - Is now the right time to invest in Indonesian tourism? - said, “We are entering the new era of tourism in Indonesia, where the tourism business map is also influenced by changes in market demand and tastes such as sustainable tourism. We have started offering more personalised, customised and localised tourism, focusing more on the quality over quantity. To reach that stage, we must improve the quality of human resources, business resilience, and continue to promote local products in those areas.”

The Government's various efforts in dealing with the COVID-19 pandemic and encouraging national economic growth have begun to show results. However, further joint efforts between the public and private sector are needed to speed up the revival of the tourism industry. Having said this, now may be a good time to invest in the industry in order to ride the wave of the recovery.

Julian Smith, ESG, Government & Infrastructure Advisor of PwC Indonesia said, “There is more the Government can do, such as coordinating the efforts of airports, airlines, hotels and public agencies to offer a smooth and safe experience to people wanting to book a holiday in Indonesia, and to communicate this to the overseas market, building on the recent success of the vaccination and public safety (PPKM) measures.”

Irfan Setiaputra, President & CEO of PT Garuda Indonesia (Persero) Tbk, commented “In order to achieve tourism sustainability, the acceleration of the tourism sectors must be supported with measurable efforts in handling the pandemic. As an entity engaged in the transportation industry where the business fundamental is mobilisation, we certainly believe that sustained efforts in pandemic handling and focus on restoring the tourism industry are crucial aspects in ensuring the readiness of national tourism ecosystem revival – with solid end-to-end collaboration amongst all industry players. In the end, we’ve seen good measures in handling the pandemic will have a multiplier effect in all economic sectors including tourism, which relies on community mobility to recover.”

As stated by Jean Hélière, Chairman of the Bali Hotels Associations, “It’s been a very difficult time for all of us indeed but we are very optimistic about the new measures to reopen the tourism sector. We have seen an increasing request for MICE (Meetings, Incentives, Conferences and Exhibitions) especially from the local market. Also, there are more and more international tourists visiting Bali, which shows their confidence in our security and safety measures. In terms of sustainability, Bali has been ahead of other hotels in Indonesia, we have a plastic free policy, and we now put more focus on water assessment/distribution. At the same time, efforts have been made to raise awareness on food sustainability to support local suppliers.”

Budi Tirtawisata, CEO of Panorama Group emphasised by saying, “From my point of view, the tourism industry is showing signs of recovery. Many local restrictions in Indonesia have started to ease slowly and market confidence has increased along with the success of the vaccination programme. Many countries have reopened their borders. So, we expect the tourism industry will start to recover in mid 2022 with cautious steps while we continue to educate the market on health and safety measures.”

Nathalia Wilson, South East Asia and Korea Development Director of IHG Hotels & Resorts, explains on the asset, “Tourism is one of the economic drivers to focus in Indonesia because of its significant foreign exchange revenue and employment contribution. We have seen a growing number of domestic new investors from family businesses, companies or high net-worth individuals acquiring hotels as legacy assets or diversification. Furthermore, the change of stakeholders in the market comes from the consolidation of government hotel assets under BUMN and strategic partnership being formed by local operators and regional capital. Investment in tourism is a long term strategy and for Indonesia to increase its competitiveness, infrastructure development is critical to tourism growth. Indonesia has such a diverse tourism environment to offer investors and a large, productive population which is fundamental as demand generators. Although I think this is the right time to invest in the tourism sector, some of the key issues such as the availability of equity options, debt financing, and managing valuation/price expectation gaps still need to be addressed.”

Hendri Hendrawan, Infrastructure and Tourism Director of PwC Indonesia, closed by saying “The tourism industry needs to take into consideration the following aspects if they want to invest now in Indonesian tourism such as diversification, improving resilience by right-sizing, capitalising on recent consumer trends, and moving towards sustainable tourism. Sustainability in the tourism sector is becoming more important because more investors have requirements related to ESG (Environment, Social, and Governance) so the industry needs to invest in sustainability-related aspects. The tourism industry can also explore potential revenue from the carbon off-set scheme as an additional source of income”.