Jakarta: Hotel

Demand

In 2013, international visitor arrivals recorded 9.1% growth from 2012, achieving 2.2 million for the year (meeting the 8% to 10% increase targeted by the Tourist and Culture Office of Jakarta). Malaysia, Mainland China and Japan remained the top three source markets to Jakarta in 2013, and accounted for 35% of total international visitor arrivals to the capital city. This indicates that corporate demand in the market remains strong as Jakarta is primarily a corporate destination. In January 2014, international visitor arrivals were recorded at 190,000, a 16.2% y-o-y improvement.

Supply

In 1Q14, major openings include two international hotels in the economy sector namely the 101-room Holiday Inn Express Jakarta Thamrin and the 156-room Best Western Grand Palace Kemayoran. This is the first Holiday Inn Express to open in Jakarta and the second to open in Indonesia. This reflects InterContinental Hotel Group’s focus on the Indonesian market with a pipeline of more than 12 Holiday Inn Express hotels opening in the next few years including four more in Jakarta. The Best Western Grand Palace Kemayoran is the fourth Best Western Hotel to open in the city.

Asset Performance

As at YTD February 2014, occupancy recorded a 2.9% increase to 63.4% and Average Daily Rates (ADR) registered a 3.6% y-o-y decline to USD 183 primarily due to the depreciation of the Rupiah. In contrast, ADR and Revenue per Available Room (RevPAR) on a local currency basis were recorded at IDR 2.2 million and IDR 1.4 million respectively, reflecting a y-o-y growth of 17.8% and 23.4%. This is indicative of strong demand and can also be attributed to limited supply additions in the upscale hotel market in 2013. Similarly, midscale hotels recorded increases in occupancy and ADR but overall growth of 13% in RevPAR on a Rupiah basis was lower than that of the upscale hotel market as most of new supply in 2013 was in the midscale and economy segments. In terms of moving annual average, upscale hotel RevPAR levels remained stable, achieving levels above USD 110 over the past six months.

12-Month Outlook

Bank Indonesia (BI) has recently downgraded Indonesia’s economic growth in 2014. Domestic and international tourism demand may moderate as a result, however BI forecasts that investments are likely to grow over 2H14 following the legislative and presidential elections in April and July 2014 respectively. Given the depreciation of the Rupiah, ADR levels of both upscale and midscale hotels are expected to continue to rise on a local currency basis.

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