Urban resorts on the rise in Bali

Urban resorts on the rise in Bali

"Beach urbanization" has taken a hold across the island, with much of the southern coast seeing urban-type accommodation development and bigger projects by international brands in the pipeline.

"Just like Phuket, Thailand, Bali is an urban resort area. It will 'travel' to where others have gone before, from Waikiki to Spain and beyond," Bill Barnett, managing director of C9 Hotelworks, said during the recent Indonesia Hotel Investment Conference 2014.

"Asia is crowded and Bali is slap bang in the middle of where half of the world's population calls home. Indonesia itself has one of the highest urbanization trends in the world," he said.

According to Barnett, skyrocketing land price and a lack of quality-development sites on the island is pushing Bali inwards and creating a more urbanized resort market, with properties going "vertical".

He predicted that south part of the island would continue to see more and more development.

"Development has started to expand to Tabanan, heading to the southwest part of the island, but this will need improved infrastructure. Hopefully, this will spur the construction of a ring road. The public sector has to catch up to private sector development," he said.

Organized by Bali Hotels Association (BHA) and Horwath HTL as the co-host, the Indonesia Hotel Investment Conference featured leaders from the accommodation investment sector sharing insights and predictions on the dynamic tourism sector.

Barnett further said that the island had seen an oversupply of accommodation, which led to more fierce competition among hotels. "Hotel rooms must be filled at any cost, so this creates rate pressure on the entire market."

In spite of the oversupply of accommodation in Bali, investors keep coming are not put off.

"This situation is no different to Thailand, Malaysia or the Philippines, where the government has not imposed a master plan on hotels, and the private sector is guiding tourism policy. Without government control, companies keep building."

"The island is nearing an oversupply [of rooms]. It will reach equilibrium, but it will take time," he said.

Not only seeing the development of luxury resorts, there is also a growing number of city hotels in non-prime areas, for example Jl. Sunset Road.

"The proliferation of these types of hotels, which have limited appeal to quality tourists, only means price competition, they do not enhance Bali as a destination," he added.

Jesper Palmqvist, STR Global's director for Asia Pacific, presented the Indonesia Hotel Performance Update.

During the last three years, the occupancy rate in Bali has fluctuated. Year-to-date occupancy in April this year hovered around 64 per cent and the average rate stood at Rp 1,476,000.

"This is interesting. Seasonality remains stronger but also supply affects occupancy. An increase in Chinese tourists and other source markets has helped to keep things positive," he said.

Matthew Gabby, Horwath HTL's Director for Asia Pacific, discussed "Rethinking Bali's Tourism Development Model".

In his presentation, he mentioned four main issues that investors needed to pay attention to: infrastructure - quick and long-term fixes; sustainability - businesses heading along "the path to a greener future"; new location for investment; and new market segmentation - how to target new guests with tailored products.

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