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April 8, 2015

Bali’s hospitality sector is booming, tourism is rising and Bali’s future success seems assured

In many ways, Bali is the holiday destination that has it all. Feted for its immense beauty and deep-rooted Hindu/Animist culture, the little island near the geographical heart of the Indonesian archipelago attracts a steady flowing stream of visitors looking to sample its heady ambrosia. From thrill-seeking surfers in hunt of the perfect break and nightlife enthusiast enticed by the island’s many beach clubs and bars to more cerebral types in quest of stimulation for the body and mind in bohemian hubs such as Ubud, Indonesia’s premier tourist draw satisfies all sorts.

“There are few destinations that can cater quite so capably for such a wide range of demographics,” agrees Djodi Trisusanto, Chief Representative for Hotel Development in Indonesia for Marriott International. “Those who like nightlife, beaches and shopping can opt for Kuta, Legian and Seminyak. Nusa Dua is better for families due to its host of kid-friendly resorts. Ubud is a cultural destination with some fantastic resorts while the rest of island offers everything from river rafting to hiking. Quite simply, there’s something for everyone.”

There’s certainly no denying the variety of experiences that Bali can offer. Historically much of the development has been focused on South Bali. This part of the island is home to the buzzing beach enclaves of Seminyak, Legian and Kuta as well as quieter, higher-end destinations such as Sanur and Nusa Dua. Further north, the town of Ubud is recognized as the spiritual home of Balinese culture.

Yet, outside these main tourist areas, the island remains largely untouched, with fantastic scenery, excellent beaches and cultural attractions to spare. This extra scope for development and investment opportunities means that saturation point outside South Bali remains a long way off.

Given its wide-ranging appeal it is no surprise that the so-called “Island of the Gods” continues to witness extraordinary growth in popularity. In 2014, international visitors arriving via the island’s Ngurah Rai airport rose to 3.73 million, an increase of 15% from the previous year. With Indonesian visitor numbers up 12% to a total of 6.05 million in 2014, it is clear that Bali’s magnetic qualities are as compelling to a domestic audience as they are to those from abroad.

Indonesia’s tourism authorities have ambitious plans to grow the country’s international visitor numbers to 20 million by 2020 from a current figure of approximately 9 million. And experts believe that Bali – the undisputed jewel in the nation’s tourism crown – will be key to realizing these aspirations.

“Although Indonesia can still be considered an emerging economy, many investors now consider Bali hotel real estate to be an established investment,” states Adam Bury, Vice President – Investment Sales Asia at JLL Hotels & Hospitality Group. “An apt comparison would be Phuket in Thailand, which also has a well-established brand, developed infrastructure and an impressive portfolio of properties from ultra-luxurious to more affordable options.”

“Bali is rightly seen as very solid bet,” continues Bury. “Rules for investment are relatively transparent compared to other countries in the region and the Indonesian government is highly supportive of further growth.”

Bali’s infrastructure has improved significantly in recent years with major achievements including the refurbishment of the international airport and the construction of the Bali Mandara toll road, linking Kuta with Nusa Dua. However, with visitor numbers set to boom, the completion of even further new infrastructure projects is seen as being key to Bali’s continued success.

Construction of a new international airport in the north of the island has been green-lighted by the authorities. Approval has also been granted for the improvement of roads linking South Bali and the capital Denpasar to East, West and North Bali – a move seen as the most essential requirement to harnessing the untapped potential for development in the remoter areas of the island.

“The Indonesian government has a good record for putting its money where its mouth is as far as developing infrastructure in Bali is concerned,” comments Dan Miller, Head of the Bali Office for JLL. “It stepped in to expand the airport and build new roads ahead of the APEC conference in Bali in 2013 and if tourist numbers continue to rise at the current rate, further improvements will have to be made.”

“One of the ways in which we can see Bali evolving is as a base for a multi-destination holiday in this part of Indonesia. Visitors would arrive and depart from Bali as a principal gateway to explore Indonesia, and use it as a jumping off point to neighboring islands such as Java, Lombok, Sumba, Flores, and Raja Ampat. The idea is to market the areas within a 1-2 hour flight time as “Greater Bali”. If that tactic is to be a success, there needs to be significant improvements in the marine tourism and transportation segments, which is also receiving substantial support from the current administration. Accessibility to the myriad of islands and diversity which Indonesia has to offer will be its ultimate driver for success in sustainable tourism growth.”

Yet while infrastructural challenges such as road access and occasional water and electricity shortages remain, Bali’s future success seems assured.

This is also reflected by a host of new air routes linking the island to Mainland China and the Middle East. Meanwhile, as of January 2015, visa free entry is now granted to nationals from Japan, South Korea, Mainland China and Russia, a sign of the government’s desire to grow new markets beyond Bali’s traditional base of Australian tourists, who constituted 25% of international arrivals in 2014.

“Bali is maturing as a destination and the hotel market is maturing also,” adds Miller. “Previously there was not a whole lot of trading, but now property owners are considering selling at reasonable market values. Ally this with the variety on offer and Bali’s dynamism as a destination and it is clear there is plenty of scope for further growth.”

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