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Bali Supply Surges Ahead

Category: , Posted:23 Aug 2008 | 12:00 pm

In the not so distant past the Bali brand name was all that was glitter and gold in tropical Asian destinations. A mere whisper of the magical phase evoked images of swaying palm trees, exotic voyages and was revered in the same way as Hawaii, Tahiti or even Rio as a place on nearly everyone's must-see in-a-lifetime list.
Then came the Asian currency crises; the fall of longtime strongman Soeharto, ethnic riots, volcanoes and bombs, all of which took their toll on tourism and commerce. Time has passed and Bali – in a similar way to Phuket's handling of its own crises such as the tsunami and plane crash – has erased much of the damage to its reputation and appeal to visitors.
For market comparables, Phuket has experienced a medium-term growth spurt over the past 10 years, and now sees its hotel inventory close to the 40,000-hotel-room mark with over 600 properties. Bali, by comparison, has over 20,000 hotel rooms with close to 200 properties. Based on tourist arrivals, Phuket in 2007 surpassed the 5 million mark, while Bali came in at just above 3.5 million. Average annualized market-wide occupancy for hotels traded roughly at the same band width of 65-68%. Fundamentally though, Bali is unlike Phuket, as there remains a large number of non-tracked tourism establishments in Bali, particularly individual luxury villas and smaller pool-villa estates that command premium room rates and trade premium rates compared to standard hotels.
Geographically Bali has seen movement over the years in much the same way as has been seen in Phuket. From the early tourist bungalows in Kuta and Sanur – one to the master planned destination resorts of Nusa Dua (Bali's version of Laguna Phuket) – onto the upmarket Jimbaran Bay.

Today, premium developments like the ultra-luxury Bvlgari resort have chosen the Bukid area due to the availability of larger tracts of land there. There is also a push to other parts of the island for emerging projects. Land, as always, is a significant part of the overall development scenario. With many of these projects now being mixed-use developments or hotels with either investment units or residential villa estates, sheer size matters; hence a shift in new products offered within these micro markets.
Driving around Bali after being in Phuket – or any other popular Asian destination, such as Koh Samui, Langkawi – is like deja vu. Sprawling billboards and construction sites are everywhere. International hotel brands, real-estate marketing firms and service companies attached to the industry are also sprouting up everywhere. Limited infrastructure is hard pressed to keep up with growing electrical loads, roadways are choked and garbage is piled by the roadside. Sounds all too familiar, eh?
Going down for a sunset cocktail at the legendary entertainment venue Ku De Ta proves to be an eye opener with faces you'd not often see there.As Phuket relies heavily on its easy door-to-door access and markets with Hong Kong and Singapore, Bali plays host to a larger European and North American contingent. The Seminyak and Legian districts are more like Spain's Ibiza than say Surin or Bangtao, which are more slanted towards a continental cosmopolitan crowd.
Talk to hotel or property developers though, and the first words that roll off their tongues are, "Phuket is our model". Phuket is revered because of its success in establishing high- and medium-end properties, sales numbers, and for pioneering mixed-use (hotel and residential) products.
What is surprising though is the lack of operating synergies between the two markets, especially in key-growth areas, such as villa management and rentals. This is pegged to change shortly though. Larger firms are now talking about creating offices here, and they acknowledge aiming to attract the same type of tourists and customers that travel to both destinations. If anything, the villa and non-traditional condo hotel market here is poised to become a key segment of the mainstream accommodation supply line very soon.
With the similarities between Thais and Balinese, I have always liked Bali. The edge between the two is certainly in quality of infrastructure. Phuket has international schools and a solid hospitality industry, marina and golf-leisure facilities, and of course, remarkable world glass cuisine. Its well worth taking a trip down to Bali to experience what our distant neighbor is doing as competition heats up amidst worries on shrinking worldwide growth. From the look of things, Bali is doing a lot of things right and in its own unique style.

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