Indonesia Tourism Report Q2 2009

Tourism Arrivals Figures Still Strong In 2008, tourist arrivals to Indonesia increased by 13.2%, to 6.23mn. This was just shy of our forecast of 6.35mn arrivals for the year and reflects the deteriorating economic backdrop seen over the latter half of the year. However, the performance has still marked a solid year for Indonesian tourism, in the face of many challenges, including the global economic crisis and travel advisories warning against travel to the archipelago. To some extent, Indonesia may have benefited from tourists switching holidays away from troubled Thailand, where anti-government protests closed the country’s main international airport during November 2008. Tourism receipts for the year have been estimated at US$7.5bn by Tourism Minister Tourism and Culture Minister Jero Wacik.

But 2009 Will Be Challenging Despite Indonesia’s resilience in 2008, it is hard to see how the country will escape from the ongoing economic crisis gripping developed world markets. As such, although Indonesia might still fare better than its competitors, due to its image as a ‘low-cost’ travel destination, we still think it prudent to make some downward revisions to our previous forecasts for tourist arrivals in 2009 and beyond. Moreover, the country has both parliamentary and presidential elections during the current year, which may raise the spectre of social unrest. We now believe that a slight fall in tourist arrival numbers is the best-case scenario for 2009, with 2010 proving essentially flat. Beyond this point however, we see scope for a rapid rebound in the industry as demand returns.

Garuda Pilot Sentenced In April 2009, the pilot of the Garuda Indonesia Boeing 737 which crashed at Yogyakarta Airport in March 2007, killing 21 people, was found guilty of criminal negligence and jailed for two years. Marwoto Komar ignored some 15 cockpit warnings not to land his plane as he tried to land at twice the safe speed.

Reaction from families of the five Australian victims has been critical, with many saying that a two-year sentence was too lenient. Indeed, prosecutors had been seeking a longer four-year term. Certainly, the trial has done much to remind foreign travellers that air travel in Indonesia remains less safe than elsewhere in the region.

Temporary Ban On Hotel Construction On Bali An April 2009 report on the Tourism Indonesia website stated that the Balinese provincial administration has issued a temporary ban on the construction of new hotels and villas. According to the report, the decision was taken after a three-day development planning meeting and is intended to protect the ecosystem of the island. The chairman of the Balinese branch of the Association of Indonesian Hotels and Restaurants (PHRI), Tjokorda Oka Artha Ardana Sukawati, welcomed the decision and said that his organisation had been recommending a ban on new builds, particularly of large hotels, for some time.

Difficult Operating Environment For Tourism Companies The current global economic slowdown is providing a challenging backdrop for companies operating within the Indonesian tourism industry at present. Hotel occupancy rates across the archipelago are falling and airlines are having to deal with slumping demand.

A recent report in The Jakarta Post underlined the seriousness of the current situation, quoting Harry Waluyo, director of the culture and tourism ministry's Data and Network Centre, as saying that the domestic tourism industry could lose 20% of its workforce (some 4.41mn people).

As such, the report will continue to monitor the situation in Singapore to see if any further changes to our tourism forecasts prove necessary.