Hidden in plain sight: Indonesia’s tourism gems

By webadmin on 11:11 am Jul 23, 2012
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Suryo Bambang Sulisto

The one-minute spot opens with a shot of a mountain top piercing the clouds during the break of daylight and ends with the president of the Republic of Indonesia inviting the viewer to join Indonesia’s “journey of opportunity and progress.”

The voice-over narration suggests the possibilities will be exciting and rewarding as Indonesia builds on “a new era, a decade of democracy and transformation” and that it is “a nation whose time has come.”

The advertisement, known for its tagline “Remarkable Indonesia,” airs on international airwaves and serves to announce that Indonesia is back on the global stage. Prior to its broadcast, other manifestations of a broader national marketing campaign had begun to surface in various cities, from London to New York City. Their common thread is the message that, after snapping back from the fallout of the 1997-98 regional crisis, Indonesia is open to the international business community.

This message has resonated well with foreign investors. At the start of the year, Indonesia’s stock market had a 12-month forward price-earnings (PE) ratio of 12.7, compared to China at 8.5, India 11.8, Malaysia 13.8 and Thailand 13.1. Indonesia’s PE ratio is close to 1.4 times the 10-year average, while for the capital markets in those other countries it remains below their historical averages. Even as Indonesia’s market capitalization as a percentage of GDP continues to expand, foreign investors still account for around 35% of daily trading volume.

In the real sector, foreign direct investment (FDI) has reached record highs. During the first quarter of 2012, FDI increased 32.8% year-on-year, representing another milestone. In 2011, it stood at over $17 billion, with a growing share going into the labor-absorbing industry and services sectors. With the designation of investment grade by Fitch Ratings followed by Moody’s less than six months ago, FDI inflow is forecasted to accelerate given the reduction in the cost of capital.

Although foreign capital has picked up dramatically, partly as a consequence of Indonesia’s increased international exposure, the number of foreign tourists to the archipelago has not paralleled that growth. The government is targeting eight million foreign arrivals this year, up from 7.7 million in 2011. In contrast, Malaysia, Thailand and Singapore respectively had over 22, 15 and 10 million foreign arrivals that year. Despite being Southeast Asia’s largest economy, Indonesia appears to be losing out with regard to international tourism.
Beyond Bali

Despite having over 17,500 islands from which to choose, foreign tourists visiting Indonesia seem heavily predisposed to one province: Bali.  Dubbed the Island of Gods, Bali is host to approximately 40% of all foreign arrivals. The next largest share arrives at Jakarta’s Soekarno-Hatta airport, with a steep decline in foreign tourists entering through international gateways in Bandung and Batam in Riau Islands. Indonesia’s international tourism market therefore is characterized by Bali and Jakarta as its two dominant poles.

The beauty of Bali is world-renowned. Most recently it was featured in a Hollywood blockbuster film, Eat, Pray, Love, featuring industry A-list actor Julia Roberts and Indonesia’s legendary thespian Christine Hakim. It was recognized as the world’s best island by Travel and Leisure in 2010. This Hindu-majority island accounts for 15% of national hotel capacity and 21% of national hotel income. When a homegrown Islamist terrorist group executed a string of bombings in 2002 and 2005, killing nearly 200 foreign nationals, the tourism-dependent local economy was hit hard for several years.

Nevertheless, while foreign tourists used to spend up to three weeks in Bali, lazing around in exotic getaways, today they only stay on average three days. This drop-off in duration is seen in other destinations, where foreign tourists who used to spend up to two weeks in Indonesia now only stay a week. This downtrend is worrying given that the number of tourists visiting Indonesia’s premiere foreign tourist destination still compares poorly relative to other destinations in the region. At 2.5 million foreign arrivals per year, Bali falls far behind Thailand’s Phuket at 6 million and is on par with Malaysia’s Langkawi.

To succeed in the international tourism market, Indonesia must compensate for the lower number of foreign tourists by encouraging longer trip duration or higher spending if it still wants to depend largely on Bali, and to a lesser extent Jakarta, for its tourism revenue.
In 2010 Indonesia received $7.6 billion from foreign tourists but the composition of the revenue was dominated by lower-spending ASEAN tourists rather than spendthrift Westerners. ASEAN tourists from Singapore and Malaysia spend, respectively, an average of $602.80 and $684.80 per visit. By contrast, Western tourists from Australia and Norway shell out, respectively, an average of $1,447.40 and $2,132.80 per visit.

Judging from the fantastic growth of Chinese tourists in Bali, rising from 2,000 in 2001 to 200,000 in 2009 for a compound annual growth rate of 79%, gains in incremental revenue from foreign tourist arrivals will be slow in coming. These value-oriented tourists spend an average of $923.30 per visit. That suggests Indonesia must expand its menu of options for foreign tourists.

With thousands of islands, vast stretches of coastline and a large population representing a mélange of ethnicities, cultures and languages, Indonesia has many destinations to offer. It has dense jungles and rugged mountain ranges, including active volcanoes. It has the world’s most bio-diverse marine ecosystem and eight UNESCO World Heritage sites compared to Malaysia’s three, Thailand’s five and Singapore’s nil. Clearly, there is no reason that it should be known internationally for two places only.

Indonesia has been, for some time, developing 15 tourist destinations, including Lake Toba in North Sumatra, Toraja in South Sulawesi, Batam and Bintan islands in Sumatra, Bunaken in North Sulawesi, Lombok in West Nusa Tenggara (NTB), Komodo Island in East Nusa Tenggara (NTT), Yogyakarta, the Mentawai islands in West Sumatra, Raja Ampat in West Papua, and Wakatobi in Southeast Sulawesi. And that is only a start ― Indonesia has many other obvious and fascinating tourism gems.

For instance, outside Komodo Island, foreign tourists can visit Sumba in NTT to watch pasola, a sport similar to polo but in which players instead throw lembing, a traditional light spear. Also on Sumba they can catch the pajura ritual, a boxing match organized by villages. Rounds are held on the beach under the moonlight, usually from midnight until dawn.

If foreign surfers are finding Bali’s beaches somewhat crowded, they can hop over to Rote Island in NTT, famous for pristine beaches and high waves. In these virgin parts of Indonesia, a potential market for breathtaking eco-tourism, particularly the marine-based variety, could fetch a premium, especially from those higher-spending Western tourists.

Even Jakarta can be optimized to attract a greater number of foreign tourists. Today around 55% of foreign arrivals in Jakarta come for business, but only 10% said they explicitly come for meetings, incentives, conferences and exhibitions (MICE). This is an important segment to develop because MICE tourists typically spend about four to five times more than leisure tourists per day throughout the course of their stay.

As Jakarta sees more hotels, serviced apartments and restaurants opening, the world’s twelfth most populous city is becoming a more hospitable stop for business travelers.
Road to discovery

There are clearly many places to visit in Indonesia, for many different reasons. Promoting the country’s tourism appeal should not be a difficult or imaginative sell, particularly when Indonesia is ranked 39 out of 139 countries for cultural heritage on the World Economic Forum Tourism Competitiveness Index.

But perhaps the sluggish pace at which Indonesia is reinvigorating the tourism industry is a blessing in disguise. Contrary to what advertising executives would like you to think, not all publicity is good publicity.

Outside Bali, Indonesians are not well-trained for the hospitality industry. Inadequate infrastructure puts a damper on what would be an otherwise pleasant tourist experience. The lack of appreciation, preservation and conservation among the local populace also takes some shine off Indonesia’s overlooked tourism gems.

If foreign tourists venture to see Indonesia’s attractions aside from its two dominant poles, they could spend a full day en route and after they arrive, they usually would find unkempt sites and put up with dreadful services. It would be better for Indonesia to target moderate foreign tourist growth as it fixes these issues. Disappointment could lead to misperceptions that in turn invite wider adverse effects.   

To address these issues, the Indonesian Chamber of Industry and Commerce (Kadin) proposes establishing vocational schools singularly focused on teaching world-class hospitality standards – that special touch mastered by the Balinese to welcome foreign tourists and make them feel right at home. Infrastructure build-out also is a crucial component in fostering the connectivity that would reduce the inconvenience of exploring the natural offerings of a diverse but vast archipelago.

When efforts on these two fronts gather momentum and begin to bear fruit, Indonesia then could remove its gloves and compete for the share of the international tourism market that is currently going to Malaysia, Singapore and Thailand. Meanwhile, it would be wise to take pause from lofty declarations. Although Indonesia’s economic picture is positive, only when a nation becomes a magnet for people from around the world is it a signal that its time has indeed come.