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Tourist arrivals into Indonesia for the first 10 months of 2011 continued to show strong growth, in line with BMIs forecasts. Total arrivals for January-October came to 6,270,244, up by 8.47% year-on-year (y-o-y), according to figures from the central statistics agency, Badan Pusat Statistik (BPS). On current trends, this would indicate full-year arrivals of around 7.52mn, slightly below BMIs estimate of 7.63mn. However, we choose to maintain our estimate, especially as the final two months of the year have historically been strong ones for Indonesian tourism arrivals. For 2011, we therefore maintain our target of nearly 9% growth in tourist arrivals.

Looking at the most recent available monthly arrivals data, Singapore remained the main source market for tourists in October 2011, providing 95,787 arrivals over the month, an increase of 10% y-o-y. Other key markets were Australia (84,449 tourists; up by 18.4% y-o-y), Malaysia (83,401; up 13.2%), China (43,305; up 11.2%), Japan (35,007; up 6.6%) and South Korea (25,507; up 1.95%).

The government remains committed to supporting the tourism industry, with Minister of Tourism Mari Elka Pangestu, appointed in October 2011, reaffirming the target of 8mn international tourist arrivals for 2012 at a tourism conference in Jakarta. BMI shares the governments optimism, though, after two very strong years of growth in 2010 and 2011, our core forecast is for Indonesia to consolidate recent gains with a slightly more measured rate of tourist arrival growth, to reach just under 7.9mn tourists by the end of 2012 and a total of 8.72mn tourists by the end of 2015.

Encouragingly for the sector, the government is taking steps to diversify away from traditional source markets in Europe, which are suffering economic difficulties. The Ministry of Tourism is reportedly looking to refocus its marketing efforts to Australia, the Association of Southeast Asian Nations (ASEAN) region, China, India, Russia and the Middle East.

BMI remains optimistic about the outlook for Indonesias tourism industry, which has weathered the recent years of global economic slowdown and the concomitant drop in tourism demand much better than some of its global peers.

Lombok Airport Opens

On October 1 2011, the new international airport at Lombok opened, replacing the old Selaparang Airport. The new airport, which reportedly cost US$108mn to build and was subject to many delays during construction, will be able to handle wide-bodied aircraft such as the Boeing 767 and Airbus A330, so it is expected to boost tourism flows to Lombok, which the Indonesian authorities are trying to develop as an alternative destination to neighbouring Bali.

Speaking at the opening of the airport, West Nusa Tenggara governor Zainul Majdi said he hopes Malaysian low-cost carrier AirAsia will soon offer flights to Lombok, with the airline reportedly looking to start services to Lombok in 2012. The only foreign airline flying to Lombok is Singapores Silk Air.

Bird flu Still A Threat

Although BMI is still upbeat about the outlook for Indonesian tourism over the forecast period to 2015, one threat to our forecasts remains any recurrence of a bird flu epidemic across the archipelago. In October 2011 there were three deaths, with a mother and her two children dying as a result of contracting the H5N1 virus in Bangli, Bali province. To help the country deal with the disease, the World Health Organization (WHO) set up two isolation rooms, one in Tangerang and another in Jakarta, to help treat patients. Eight more facilities are due to be set up across Indonesia funded by the EU.

The danger posed by epidemics such as a recurrence of bird flu remains an intangible factor when generating our core forecast scenario for Indonesian tourism. Although it is to be hoped that the most recent outbreak has been contained, it does show that the risks from bird flu remain real and that tourists need to take sensible precautions when travelling in infected areas.