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Summary: Latest Tourism Arrivals Figures

Indonesia has seen a strong start to 2008 tourist arrival figures. The number of tourists visiting the archipelago during the first quarter increased by 15.68% year on year (y-o-y), to 1,405,456. This increase is very much in line with BMI’s own expectations of a 15% annual rise, so we see no reason to modify our forecasts this quarter. Bali continues to be the engine driving the wider Indonesian tourism industry, with the island welcoming some 197,700 tourists in February alone, an increase of almost 30%.

Adam Air Grounded

In a further blow for Indonesia’s embattled airline industry, the government decided in March 2008 to revoke Adam Air’s operating licence. The decision follows a spate of fatal accidents in 2007 and another incident in March 2008, when an Adam Air plane overshot the runway on Batam Island. Although no people were killed in this latest incident, it was enough to spur the government into action, especially as a recent quarterly safety evaluation carried out by the ministry found the airline had ‘violations that could put passengers’ safety at risk’. The decision means that Adam Air is now grounded until it is evaluated again in June 2008. If no improvements are found, the airline will have its air operator certificate permanently removed and the airline will be effectively closed down. The airline was already suffering from financial turmoil, with the Batam crash prompting the private consortium led by PT Bhakti Investama to offload its 50% stake in the airline. At the same time, the airline’s president, Adam Adutya Suherman, suggested to local media that the airline was no longer able to insure its fleet of aircraft, as it could not meet a deadline for payments on its insurance policies. This follows reports the airline had already defaulted on some of its lease payments for aircraft. BMI believes that the grounding of Adam Air is a welcome sign that the Indonesian authorities are now cracking down on the bad practices and lax attitudes to safety that have marred the industry in recent years. However, the closure of the airline will have a deletrious impact on capacity within the domestic industry. Adam Air had flown 6mn passengers in 2007, so the industry may not now not be able to serve so many passengers this year.

Visit Indonesia 2008 Campaign Launched

In late December 2007, the government officially launched Visit Indonesia 2008. The aims of this US$15mn domestic and international marketing campaign are to attract some 7mn foreign tourists to Indonesia and generate some US$6.4bn in foreign tourism receipts. There will also be over 100 international events and cultural festivals held around the archipelago to raise Indonesia’s international profile. The campaign marks the first time since 1991 that the government has held an international Visit Indonesia marketing campaign. The last campaign was not particularly successful, but this was carried out during a time of global economic slowdown. This year’s launch also got off to an inauspicious start when it was revealed that the tourism ministry’s English slogan ‘Celebrating 100 years of nation’s awakening’ was incorrect and had to be changed to ‘100 years of national awakening’. This gaffe forced Garuda Indonesia to repaint 10 planes that had already been tagged with the slogan. Although we welcome the launch of this tourism marketing campaign as a way of bringing tourists back to the country, BMI does not believe that the 7mn target can be reached, as this would represent a massive 27% increase y-o-y. We believe that our long-held target of 6.35mn visitors for 2008 can be reached, provided of course the security situation does not deteriorate. This would still represent strong annual growth of over 15%.

Indonesia Losing Tourism Competitiveness

The World Economic Forum recently released its second annual World Tourism Competitiveness Index. Indonesia has fallen 20 places from last year, to now be ranked at 80 out of 130 countries surveyed. The 2008 report placed particular emphasis on the issue of ‘balancing economic development and environmental stability’. The WEF’s analysis tallies very much with BMI’s own views on the country. In the WEF’s analysis, Indonesia scores highly in areas such as price competitiveness and national prioritisation of travel and tourism. However, weaknesses included underdeveloped tourism infrastructure and other issues related to
tourist safety and security.

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