Jakarta: Hotel

Demand

International visitor arrivals to Jakarta via the Soekarno-Hatta International Airport (SHIA) continued to register growth, up 9.5% y-o-y to 1.9 million visitors as at YTD October 2013. International arrivals to the city, primarily corporate travellers, have continued to record increases despite uncertainties due to the impending elections in 2014 which might have an impact on business activities. Domestic passenger traffic to and from Jakarta showed a marginal 2.7% y-o-y increase to 16.6 million passengers as at YTD October 2013. As compared to previous years which recorded double digit growth rates in domestic passengers, growth in domestic visitation has slowed down considerably in 2013.

Supply

In 4Q13, there were four new hotel openings which contributed 619 rooms to hotel inventory. Hotel openings were dominated by domestic and independent operators. The only international branded hotel which opened was the 170-room Mercure Serpong Alam Sutera. NEO Hotels opened two new properties in Tendean and Mangga Dua. NEO Hotels is a new brand introduced by Archipelego International (previously known as Aston International) in 2013, which operates hotels under various brands including Grand Aston, Aston, Quest, favehotels, NEO and Kamuela.

In 2013, 2,228 rooms opened in Jakarta, recording an 8.1% y-o-y growth in inventory to 29,865 rooms. In 2014, an estimated 3,553 rooms are in the pipeline and scheduled to complete, with the majority of the new supply in the midscale and economy segments.

Asset Performance

As at YTD November 2013, occupancy recorded a 0.2 percentage point decline to 67.1% and Average Daily Rates (ADR) registered a 10.4% y-o-y growth to USD 164, resulting in a 10.1% y-o-y increase in Revenue per Available Room (RevPAR) to USD 110. Due to limited additions to upscale hotel inventory and strong domestic demand in 2013, the upscale hotel sector has performed well. The upscale hotel market achieved its highest ADR as at November 2013 while occupancy levels remained stable during this period. However, midscale hotels recorded marginal declines in occupancy and ADR as most of the hotels which opened in 2013 were in the midscale and economy segments thereby increasing the competitive environment.

12-Month Outlook

As Jakarta is primarily a corporate destination, international visitor arrivals to the capital city of Indonesia are influenced by the overall business environment and global economy. In view of the next legislative and presidential elections which will be held in April 2014 and mid-2014 respectively, investors might postpone current investment plans to wait for further developments. While the upcoming supply is likely to feature primarily midscale and economy hotels, new international brands such as Raffles, Doubletree by Hilton and JW Marriott are scheduled to open in 2014 which might put some rate pressure on existing luxury and upscale hotels.

Note: Jakarta Hotels refers to Jakarta’s Upscale hotel market.