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Jones Lang LaSalle Hotels Reports

Bali – 2 years after the Kuta bombing

As we mark the second anniversary of the Bali bombings, Jones Lang LaSalle Hotels reports that a strong rebound in Asian and Australian visitors…

As we mark the second anniversary of the Bali bombings, Jones Lang LaSalle Hotels reports that a strong rebound in Asian and Australian visitors has enabled Bali to recover from the tourism decline experienced post October 2002.

There is no denying that Bali`s tourism market was adversely affected by the Bali bombing in October 2002 and the ensuing travel advisories. However, recovery commenced in October 2003 and accelerated in 2004, said Mr Scott Hetherington, Managing Director, Jones Lang LaSalle Hotels, Asia. For the eight months to August 2004, arrivals have increased by a massive 55.9% compared to the corresponding period of the previous year. This is in a climate still constrained by travel advisories from key markets.

Over the past ten years, short haul and lower yielding Asian tourists have almost entirely driven growth in tourism, while the higher yielding European market`s share has reduced, more recently as a result of ongoing travel advisories and reduced air capacity.

As testament to the strong bond between Balinese people and Australians, this market has experienced the most dramatic turnaround, with arrivals increasing by 120.7% during the eight months to August 2004.

The growth in tourism has driven an upturn in hotel trading, said Mr Hetherington. Significant occupancy increases have resulted in revenue per available room (RevPAR) growing by 58.1% (4 star) to 86.1% (3 star) over the eight months to August 2004.

In contrast to expectations, solid domestic demand has ensured that most hotels in Bali, including new projects, have achieved positive gross and net operating profit in 2004. Consequently, fears of hotels being forced to close have not been realised. Instead, many hotel owners took advantage of the weak trading environment of 2003 and re-branded or renovated their properties, which will have positive flow-on to rates over the medium term, said Mr Hetherington.

Investors, particularly from Indonesia, remain keen to acquire hotels in Bali. Jones Lang LaSalle Hotels sold the 22 room Begawan Giri estate to a regional investor earlier this year. However, further transaction activity is constrained by a lack of product. Investors are also interested in development sites and during 2004, we witnessed sales of major sites in Sawangan and Seminyak, said Mr Hetherington. Investors are attracted by the opportunity to develop and on-sell strata-titled or condo hotels and villas on these sites.

Baring unforeseen circumstances, we believe that the pace of recovery in Bali will be faster than expected, particularly after the lifting of travel advisories from major European countries and the US. The recent peaceful staging of the first direct presidential election in Indonesia should further boost consumer confidence in Indonesia and Bali.

Domestic tourists and travellers from the growth markets of Korea, Taiwan and ASEAN countries will provide a solid demand base in the short term, with occupancy growth aided by increased flight capacity and the introduction of budget airlines to service these markets. We should then see rate growth when the higher yielding markets return over the medium term. An improvement in product quality will assist this growth, he concluded.

Revenue per Available Room by Accommodation Type – Bali

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