Preparing for a Price War

(6/3/2012)

The increasingly competitive pricing practices of hotels in Bali is foreshadowing a coming price war, with many hotels begining to largely ignore their published tariffs.

Quoted by Bisnis.com, Ulatun Nyunda, general manager of the Umalas Hotel & Residence, said on Tuesday, May 29, 2012: “You can say that tariffs have been established in this business (hotel accommodation), but that only applies in five star hotels. The rest of the hotels just use the market price because of the high level of competition.”

Ulatan projects that by 2013 an open price war will be in full swing between Bali hotels because of the many new properties constantly coming on line. He contends this situation will only be made worse by the new condotels and apartments being introduced to the marketplace.

Ulatan added: “The hotel business in Bali resembles a puzzle. In one area (Badung regency) the occupancy is high, but next year there’s no guarantee that this occupancy level can be retained because one five star hotel with hundreds of rooms will soon be opened.”

Reflecting on his own position, the hotelier bemoaned: “Right now with 84 rooms we are able to hold steady with an occupancy of 70%, but this threatened to decrease next year. What’s more, there is also the added threat that hotels occupancies may decline because the enjoyment of a Bali holiday is being compromised by traffic jams,” 

Increasingly Congested Traffic

He went on to explain that Bali’s traffic situation means tourists find themselves caught in traffic from the minute they leave Bali’s airport.

According to Ngurah Wijaya, the chairman of the Bali Chapter of the Indonesian Tourism Association (GIPI), who also serves as the chairman of the tourism promotion group Bali Village, the current traffic conditions in Bali also threatens the future of the island’s tourism.

“Tourism has a high multiplier effect and the competitive edge (of Bali) can decline if the tourists’overall enjoyment is disrupted,” Wijaya explained.

Addressing the increasingly competitive situation among Bali hotels, Wijaya said that tourist operators had long warned the Badung regency to control the issuance of permits for hotels and condotels.

“New permits should only be issued when the average occupancy rate of hotels reaches 80%,” he said.

He also blamed the very short period of stay in Bali on the over-development in the tourism sector, lamenting that in earlier decades the average length of stay was between 10 days and 2 weeks.