A distressed global travel and tourism landscape has so far failed to disrupt new hotel openings planned for Indonesia this year, although hotel developers in the country have adopted a wait-and-see stance for new projects.
Ferry Salanto, senior associate director of Colliers International Indonesia, told TTG Asia that no hotel projects have been put on hold since the outbreak struck early this year, and Aloft Seminyak has opened as planned in Bali.
Demonstrating tenacity, Artotel Group’s COO Eduard Rudolf Pangkerego revealed that “all projects will stick to plan”, even as most of Artotel’s partners were consolidating internally to ride out the Covid-19 pandemic.
That said, Eduard acknowledged that delays in construction due to restricted movements and activities as well as closure of businesses as part of health and safety measures will impact project work. Out of six to eight projects this year, Artotel Group hopes to be able to complete at least four by the end of 2020.
Similarly, Santika Indonesia Hotels & Resorts continues to maintain a target of 10 hotel signings and three to five openings this year, with another eight hotels that are slated for operations in 2021 and 2022.
Christy Megawati, business development manager with Horwath HTL, reasoned that ongoing hotel projects are able to continue because financing was secured before the Covid-19 crisis. Developments that are seeking financing now may need to be reassessed.
But with Indonesia’s “strong fundamentals of tourism”, established by a “heavy domestic component” along with a weakened Rupiah that makes the destination attractive to foreigners looking to stretch their dollar, investors will likely find Indonesian hotel projects attractive still, she opined.
What the country has in her favour, according to Armand Steinmeyer, director of business development and investment, Tauzia Hotels, is a hotel sector that is very responsive to market changes. He believes that Indonesia’s continued efforts to welcome foreign investment will pay dividends over time.
“The key message for most investors is that the current crisis has a short- to medium-term impact on business, and real estate is inherently a long-term business,” he remarked. – Tiara Maharani
Japan is seeing strong growth in hotel development at press time, thanks to stable demand from domestic travellers and a continued uptick in international arrivals. Inbound tourism is a core component of the government’s long-term economic growth and regional revitalisation plans, and this brings confidence to the market.
In 2019, there was strong appetite from domestic and overseas investors to increase their hotel footprint. According to financial services firm JLL Japan, hotel operators nationwide expanded the number of chains while real estate companies and developers increased development due to attractive yield targets.
“The availability of strong financing in Japan, at almost zero interest, has firmly supported hotel development activities,” said company spokesperson Megumi Terakado.
Most recent developments are limited-service hotels held under a long-term lease agreement with the operator, thereby reducing risk. These hotels are particularly attractive to small and mid-size developers due to “easier feasibility of cash flow, the rarity of cohesive land in Japan to develop full-service hotels, and the size of investment required,” she explained.
Rapid hotel development is seen in Tokyo, Osaka and Kyoto, where hotel occupancy is 30 to 40 per cent higher than overall Japan’s at 20 per cent, according to JLL.
Meanwhile, rural areas in Japan have been experiencing a boom in resort, boutique and lifestyle hotel developments. These new properties dangle unique experiences to lure travellers.
However, a 2019 report by Mizuho Research Institute warned that price competition is intensifying in the boutique hotel category, where supply is starting to outstrip demand. – Kathryn Wortley