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Hotel Rooms as Cancerous Cells

Uncontrolled Overbuilding of New Hotels in Bali Crippling Islandís Tourism Earning Capacity

(12/24/2012) The Jakarta Post quotes the chairman of the Indonesian Tourism Business Association (GIPI), Ngurah Wijaya, as blaming the escalating price war among Bali accommodation providers on overbuilding of new hotel projects facilitated by lax control by regional administration in issuing new business licenses.

The growing trend for property investment in the form of new hotel investment in Bali has resulted in oversupply that feeds the current extremes in price competition. According to Wijaya: “This shifting trend has worsened hotel price wars. Many property companies build new hotels, then they offer a cheap promotional tariffs to attract tourists.”

Wijaya say that lax rules and the propensity of regional official to ignore the laws of supply and demand in issuing new permits has created a hotel industry in Bali that no longer focuses on hospitality and service, but more on price.”

Wijaya cites further woes, saying the largely unregulated building spree in which building codes are largely ignored has changed the face of Bali, disrupting the island’s spatial and environmental condition.

The chairman of the Bali chapter of the Indonesian Association of Hotels and Restaurants (PHRI), Tjokorda Artha Ardana Sukawati (Cok Ace) is sounding the same warning, saying the overbuilding in Bali needs attention to avoid unhealthy business cooperation.

Cok Ace is calling for a consultative role for PHRI in the granting of new accommodation permits in Bali.

Research conducted by Knight Frank predicts Bali will have 10.466 new hotel rooms by 2014 resulting from 60 new hotel projects. Nearly 40% of these new rooms are expected to come on line by the end of 2012.

According to the same report, 52.8% of the new rooms are in the four-star category with 23.9 % in the five-star category and the remaining 23.3% in the three-star range.

The most popular area for new hotel investments is in Kuta with 3,358 new rooms under construction. Nusa Dua will soon welcome 924 new rooms, 72% of which are in five-star hotels.

Meanwhile, new rooms in the Seminyak (691), Sanur (1,025) and Legian (671) areas will be dominated by four-star hotels.

Related Link

[Indonesia Hotel Investment Conference]