China is quickly outpacing Australia as Bali’s top source market

Bali’s tourism industry is undergoing a mass market shift, but such fluxes have come at the cost of tourist spending power sought by hoteliers, according to a joint report by hospitality consultancies Horwath HTL and C9 Hotelworks.

With Chinese tourist arrivals rising 43 percent year-on-year to 1 million in 2016, China is now behind Australia as the Indonesian island’s biggest source market. The economic benefits of increased tourism from China have made for diminishing returns, however.

The typical Chinese tourist spends less than the typical tourist from Europe or Australia. “One Australian tourist spends the same per day as 4 Chinese tourists,” the researchers stated.

Moreover, Chinese visitors tend to leave Bali faster than their European and Australian counterparts. The average length of stay in the island stood at 3.11 days in September, compared with 3.20 days a year earlier.

The influx of Chinese tourists has nonetheless rallied interest for Balinese real estate across all segments. “Recent destination exposure of Bali towards Chinese tourists through media channels and direct traffic has increased interest for all real estate segments,” the report stated.

The midscale segment is set to be one of the biggest winners from this flux. The segment enjoyed a rise in sales of multiple units per transaction last year. In the luxury segment, meanwhile, single property purchases are on the upswing.

The Indonesian tax amnesty program has, however, added an “element of confusion” to the market for foreign property buyers, many of whom acquire assets through a nominee structure. Foreign ownership laws, revised last year to begin granting non-native residents the “right of use” (hak pakai) to Bali homes of certain prices, have also not gained widespread acceptance.

In the quest for higher sales volume amid soft economic conditions, Bali property developers resorted to softening price points last year. Villas appear to be the hardest-hit, with the average built-up sales price hovering only at USD4,314 per square metre last year — a 13 percent year-on-year drop.

Hotel condominiums (condotels) and serviced apartments were slightly better at an average price of USD4,446 per square metre, but this constituted a 6 percent year-on-year drop. Some developers are dropping guaranteed yields to diminish unit prices. Others are leaning toward products in the luxury segment, demand for which is expected to be less susceptible to an economic downturn.

“We forecast greater traction for condominium/apartment projects as opposed to villas due to their lower ultimate pricing point,” the researchers stated. “Because condominium/apartment developments have lower capital values and are easy for hotel operators to generate income from hotel operations, the structure is more suitable for investment purposes.”

Source: http://www.property-report.com/more-chinese-tourists-are-coming-to-bali-but-are-they-spending-enough/