Best Western expands in Indonesia, where investment is growing

Indonesia's port city of Surabaya has its first Best Western hotel, with the opening of the the Best Western Papilio Hotel. The hotel is located 20 minutes from Juanda International Airport, close to popular attractions such as the Suroboyo Carnival Night Market and the MAS Mosque.
Ron Pohl, Best Western International’s SVP of brand management, said: “As Indonesia’s second largest city, Surabaya was the logical next step for BWI’s Indonesian expansion.”
With this opening, BWI now has a portfolio of 15 hotels across eight destinations in Indonesia.

Hotel investment in Indonesia as a whole is picking up of late, with international tourism and a growing middle class driving the announcement of new deals in the archipelago nation.

On August 21, Trump Hotels Collection became the newest entrant into the Indonesian hotel industry. The US-based company signed a deal with the Indonesian investment group PT Media Nusantara Citra (MNC) under which it will manage a six-star luxury resort and residential project planned for the island of Bali. The partnership with MNC will be Trump’s first hotel venture in Asia.

MNC Group CEO Hary Tanoesoedibjo said the two partners would develop “the largest and most integrated lifestyle resort in Bali.” Neither company provided financial details or a timetable for the development.

Trump and MNC’s venture is not the only one aiming for the top-end market in Bali. Marriott International, Ian Schrager and Carpenter & Company are also planning on bringing their recently launched EDITION brand to Bali in 2019.

Homegrown travel company Panorama Sentrawisata has its sights set on the mid-range hotel market. Panorama is partnering with Carlson Rezidor and is planning an aggressive expansion that will serve more than Bali and the capital city of Jakarta. The partnership will cover 20 new hotels that will open before 2020 and will be managed by Carlson Rezidor.

In 2014, a total of 9.3 million tourists visited Indonesia, with domestic trips exceeding 250 million. The Indonesian Ministry of tourism is aiming to attract 20 million international arrivals and raising domestic trips to 275 million by 2019.

According to STR Global data, in 2014 Indonesia’s RevPAR was up 4.3 percent, driven by a 6.9-percent rise in average daily rates. Occupancy in Jakarta was down 6.5 percent last year, while Bali enjoyed a 7.5 percent increase.

Michael Chin, executive vice president of Westmont Hospitality Greater China said that international investors may find Indonesian hotel investment regulations challenging.

“One of the key investment issues for hotel investment in Indonesia is that the foreign entity is not be able to take a majority stake in hotel assets in Indonesia and will have to utilize a dummy local party to hold the majority stake,” Chin said.

Challenges aside, there is significant potential for growth of Indonesia’s inbound market in the coming years, he added. One of the biggest opportunities is the Chinese market, which had previously had to deal with onerous visa procedures.

“Chinese tourists’ easy visa upon arrival will facilitate better access and continue to enhance hotel performance as it has since last year,” he said.