Fuel hike may lead to increased hotel rates in Bali

BALI - The rise in fuel prices is likely to trigger increased hotel room rates at a time when room supply remains greater than demand in Bali, the island's tourism industry has predicted.

The fuel price hike had badly affected operational costs forcing hotel managements to also increase room rates, said AA Ngurah Adhi Ardhana, secretary of Denpasar Branch of Association of Indonesian Hotel and Restaurant (PHRI).

"The rising operational costs must be met by a rise in room rates. The problem is demand for hotel rooms has seen a downward trend because of the low season and an unsatisfactory growth rate in foreign tourist arrivals," Ngurah said.

The growth in foreign tourist arrivals in Bali between 2012 and the first half of 2013 was a mere 4 to 5 per cent, as compared to 13.26 per cent in 2009; 11.80 per cent in 2010; 10.57 in 2011.

The growth rate fell to 4.91 per cent in 2012 and climbed slowly to 5 per cent in January-June 2013.

At the same time, the amount of hotel and tourist accommodation is skyrocketing with massive ongoing development of new star-hotels, budget hotels and villas as well as other types of accommodation.

Data from the Bali Tourism Agency showed there were 161 star-rated hotels with 20,753 rooms; 1,026 non-starred hotels with 20,199 rooms and 1,016 home stays with 4,478 rooms.

Meanwhile the construction of new hotels and tourist accommodation continues at a very fast pace.

"Old hotels have to compete hard with the new ones as they are promoting discount rates to lure visitors to their establishments," Ngurah said.

Tourism, according to PHRI's Bali chairman Tjokorda "Cok Ace" Oka Artha Ardhana Sukawati, would be one of the hardest hit industries following the national policy on increased fuel prices.

PHRI, he said, had forecast increases of between 10 and 15 per cent in food and beverage prices in the island's restaurants.

As to hotel room rates, Cok Ace said, increases would not come into effect for the next six to seven months.

"Travel agencies have already signed long-term contracts [around six to 12 months] with their overseas counterparts including fixed hotel rates. We cannot increase the rates as it would breach the existing contracts," explained Cok Ace.

He went further, saying that the average occupancy rate in Bali was 58 per cent to 60 per cent for star hotels and 40 per cent for non-star hotels.

Cok Ace was expecting the government to pay attention to the development of tourism, the backbone of Bali's economy. Bali, he said, generated one third of the national tourism revenue every year.

"The policy of fuel price hikes must be followed by increases in promotional budgets and activities to support tourism," urged Cok Ace, who is also chairman of the Bali Tourism Promotion Board.

However, currently promotional funding was being slashed and promotion activities were being reduced, he complained.

"One of the solutions to boosting tourism is to step up tourism promotion to increase the number of tourist arrivals, which will in turn increase demand for hotel rooms," said Cok Ace.

Ketut Ardhana, chairman of the Association of Indonesian Travel and Tour Agencies (ASITA), reminded all members to commit to abiding by their contracts.

"The fuel price policy will cut at least 15 per cent of our revenue. Travel and tour agencies are closely related to the transportation and accommodation of tourists," Ardhana said.

He said that ASITA members would find it difficult to immediately revise or to adjust fees for transportation and guide services as well as rates of rooms as they were tied to signed contracts.