BALI, 21 February 2017: In the wake of a very challenging 2015, Bali’s average hotel occupancy increased 4% in 2016 bringing a shot of fresh air and hope, but at what cost?
The solid occupancy increases across all categories (excluding luxury) were driven by increasing foreign direct arrivals, a slowing in new hotel openings and a further slashing of rates.
Bali’s domestic market in 2016 was up 12% y-o-y to around 7.1 million and foreign arrivals also up 6% y-o-y to 4 million bringing the total to over 11 million for the first time.
Mainland China is now the second largest source market in terms of international arrivals.
In 2017, the mass Chinese market should overtake the legacy Australian segment for the first time. This is partly due to Thailand’s government decision to ban zero-dollar tour junkets, late last year. Bali benefited from a re-direct of some of that low-yield business.
Two critical factors that are a knock-on effect from the dynamic shift are first a lower spend per visitor. A 2016 survey by the Bank of Indonesia highlights that the typical Chinese tourist spends around one quarter of that spent by a typical European or Australian tourist. With the proportion of Chinese tourists increasing the economic benefits of each new tourist is reducing.
Secondly is the shorter length of stay. The average length of stay in Bali YTD September 2016 fell to 3.11 days, down from 3.20 days y-o-y. The sub-market suffering the greatest was Denpasar, dropping from 4.53 to 2.73 days YTD September 2016. This is a double-whammy for hotels, with lower yield per tourist and a shorter length of stay.
Taking a forward view of tourism to Bali, the report concludes that with the government focus on increasing visitor arrivals it arguably makes sense to aggressively campaign to mainland China because it is only a short to medium-haul catchment from Indonesia with increasing direct flights and a massive population giving it the greatest potential for rapid-fire growth.
It is essential however to foster other markets simultaneously to balance quantity and quality of foreign arrivals. Bali can learn from the Thai experience. Having aggressively targeted arrivals growth over the last decade Thailand is now shifting its focus to increasing yield per tourist.
To download and read the full report – http://www.c9hotelworks.com/downloads/bali-hotel-branded-residences-2017-02.pdf.
(Source; C9 Hotelworks)