Indonesia’s business travel market was worth almost US$15 million in 2016, according to BCD analysis of Tourism Economics data. International travel accounted for more than three-quarters of spending. Business travel spending is projected to grow by 13% in 2017. Growth should remain at that level through 2021, as stronger spending by outbound travelers offsets reduced spending on domestic trips.
- Indonesia’s economy has huge potential due to natural resources reserves, a large and inexpensive workforce and an emerging tourism industry.
- International investors have shied away from Indonesia because of the government’s restrictions on foreign investment in certain sectors—an attempt to protect local industries. But recent policy changes have opened more markets to outside investment, improving the climate.
- Strong private sector investment, government spending and a pickup in exports are forecast to yield economic growth of 5% in 2017.
- The government’s infrastructure investment will help support 5.3% estimated growth in 2018. It could be higher if lower borrowing costs boost consumer spending.
- International air travel averaged 8.4% annual growth between 2011 and 2016. It’s forecast to grow 6% annually, on average, through 2021.
- Arrivals accounted for three-quarters of the 39 million international journeys in 2016. Singapore is the most important inbound market, followed by Malaysia, China and Australia.
- Indonesia’s largest airline is Lion Group, comprising low-cost carrier Lion Air, full-service Batik Air and regional Wings Air. Its success and competition from other low-cost carriers like Indonesia AirAsia and Nam Air have caused a domestic fares war. The competition threatens flag carrier Garuda Indonesia.
- Garuda is adding long-haul routes and expanding its own low-cost carrier, Citilink.
- Domestic travelers accounted for two-thirds of Indonesia’s 54 million hotel room nights in 2016.
- Demand is predicted to grow 4.5% per year through 2021, with international travel increasing an average of 6%.
- Local chain Archipelago International and international brand AccorHotels lead the market. Archipelago focuses on limited service properties. AccorHotels covers all service levels but relies heavily on independent hotels “selected by AccorHotel,” a strategy it will soon discontinue.
- Indonesian chains operate full-service hotels, often in locations yet to be developed by global chains. Local hoteliers also are investing heavily in economy accommodation.
- Hotel rates are expected to rise no more than 2% in 2017 and 2018, according to the latest Industry Forecast by Advito and BCD Travel.
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