Jakarta: Hotel

Demand

International visitor arrivals to Jakarta grew 2.8% y-o-y to 1.3 million as at YTD July 2014. The slower growth was due to the presidential elections which took place earlier in the year. The largest source market, Malaysia, recorded a significant 9.2% y-o-y growth due to its close proximity and the facilitation of low cost carrier flight connectivity between four Malaysian cities and Jakarta. The development of Shari’ah tourism has also supported the increase in tourists from Middle Eastern countries, with Saudi Arabia registering a 43.4% y-o-y increase.

The increase in flight connectivity between Jakarta and major gateway cities will continue to boost visitation. Garuda Indonesia recently introduced direct flights five times weekly between Jakarta and Amsterdam in May 2014, with the same flight expanding its connection to London in September 2014, providing greater accessibility for European travellers to Jakarta and beyond.

Supply

In 3Q14, five new hotel developments were completed, adding 1,068 rooms to the hotel stock. Mostly targeting the economy and midscale segments, these include the 297-room Holiday Inn Express Jakarta Pluit Citigate, the 145-room Swiss-Belinn Airport Jakarta, the 253-room ibis Styles Jakarta Airport, the 210-room ibis Styles Mangga Dua Square and the 163-room Hotel Mercure Jakarta Sabang. As at 3Q14, Jakarta’s accommodation market comprised approximately 32,745 rooms. Hotels in the pipeline for the rest of 2014 are also predominantly in the economy and midscale segments. There are no new upscale and luxury hotels opening this year.

Asset Performance

As at YTD August 2014, occupancy declined by 1.3 percentage points to 62.8% while Average Daily Rates (ADR) fell 2.7% y-o-y to USD 181. The decline in ADR in US Dollar terms can be attributed to the depreciation of the Indonesian Rupiah. Comparatively, ADR showed a significant improvement of 14.4% to IDR 2.1 million resulting in Revenue per Available Room (RevPAR) growth of 12% to IDR 1.3 million. In terms of moving annual average, RevPAR levels have been relatively stable, achieving levels above USD 110 in the past twelve months.

12-Month Outlook

Although Jakarta and Indonesia as a whole experienced a volatile period in 1H14 with the presidential elections and a significant depreciation of the Indonesian Rupiah, the economic situation has since improved and a cautious optimism has returned to the country. The outlook for the domestic economy is relatively positive with structural and economic reforms in place.

As the capital city, Jakarta should benefit strongly from the growth in both domestic and international visitor arrivals. The boost in infrastructure investment and airport expansion also bode well for Jakarta to handle the anticipated growth in tourism and corporate travel demand. Therefore, hotel trading performance in Jakarta is likely to remain stable in light of the entry of economy and midscale hotels in 2014.

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