C9 Hotelworks & Horwath HTL Release Bali Report
What's next for Bali: creativity and resilience required. The Bali Hotel and Branded Residences Update, released today by leading consulting groups C9 Hotelworks and Horwath HTL, highlights that Indonesia's domestic market continues to be the driving force behind Bali's tourism fortunes albeit at a slowing pace. On the flipside new hotel rooms are opening at a faster pace requiring developers and hoteliers to become increasingly creative to safeguard profitability.
Since 2008, domestic arrivals have more than doubled to the island while foreign arrivals have increased by less than 50%. An additional
0.5 million passengers arrived at Ngurah Rai airport in 2012, 80% of which were Indonesian. This represented a slowing of YOY increases to only 6%, down from around 20% annually since 2008.
One key knock on effect of the growing purchasing power of Indonesian's is reflected in the massive hospitality led residential market which is highly leveraged by domestic buyers from Jakarta and Surabaya. A heavy concentration of branded condominium hotel projects have induced real estate buyers who place a high value on usage of the product as well.
Indonesian buyers represent over 80% of the Bali's property transaction market but there are warning signs that sales pace is shrinking and the looming issue that once guaranteed returns roll off that investors may see yields shrink.
YTD June 2013, room night supply on the Island of Gods has further increased stifling performance. Figures to hand indicate that market-wide occupancy is down a few percentage points but to date hoteliers have remained steadfast on rate.
Commenting on the apparent supply and demand imbalance, continual annual increases of around 20% are unsustainable in Bali with total arrivals now approaching 9 million. Looking ahead to 2014, Bali should see further solid increases in arrivals from established and emerging markets, but the demand pace is likely to be outstripped by further large increases in supply. It is important now to remain strong on rates and tailor new supply to fill market gaps rather than using a scatter gun approach to development.
While the closely connected real estate market has continued to see market volume, one key segment to keep track of are the luxury hotel villas with brands such as Rosewood, Raffles, Fairmont and Jumeirah that are coming to market backed by strong Indonesian developers like Ciputra. Will these multi-million dollar properties be able to induce foreign buyers to Bali?
As for what's next for Bali? With a successful APEC done and dusted the island is now tasked with maintaining performance amidst slowing GDP growth, federal elections, a weakened currency and an increasingly urbanized tourism sector.
To download the report <link>http://www.c9hotelworks.com/downloads/bali-hotel-branded-residences-2013-11.pdf*CLICK</link>.