BMI's Tourism report for Indonesia examines a range of market indicators and expected trends in the country's quickly expanding tourism sector. Indonesia offers investors an enormous potential domestic market, and its location in the midst of burgeoning Asia Pacific economies sees the country well placed to take advantage of the expected growth in regional travel.
Regional growth in travel, particularly from the Asia Pacific powerhouse China, will be reflected in the positive growth in inbound travel to Indonesia. We are forecasting annual growth of around 4%, leading to an annual arrivals figure of 9.88mn in 2017. The growth in travel by Indonesia's neighbours is expected to offset any decline in travel from Western markets, should they see a renewed economic slowdown. As well as growth in inbound travel, we also expect to see solid increases in outbound travel, as Indonesia's domestic economy continues to show good signs of growth. As such, we expect outbound travel to surpass 12mn in 2017, but this is just a fraction of the enormous potential market.
Infrastructure in Indonesia will need significant investment in order to keep up with rising demand. Much of the country's transport network is in need of expansion and modernisation, and will certainly benefit from the US$43bn of infrastructure investment announced by the government in April 2012 across air, rail and road transport. The improvement of the country's transport network will enable the expansion of tourism to more rural areas, as well as providing a more positive investment environment for the leading global hotel groups.
Indonesia certainly has a lot to offer potential visitors, who are attracted by the country's vast range of picturesque beaches, and of course the extremely popular island of Bali. However, there is a lingering potential for terrorist attacks, and any decline in political stability is likely to affect the tourism industry.
Despite ongoing security concerns, many of the top global hotel chains are expanding in the country, with major groups Accor and Starwood Hotels and Resorts planning to open several new hotels. Domestic brands also continue to expand, reflecting the growth potential of the tourism market.
- Expansion in the number of hotels will result in strong growth in the amount of accommodation available, with the number of hotel rooms increasing from 148,280 in 2013 to 160,710 in 2017.
- Outbound travel is expected to increase by between 7% and 8% a year throughout the forecast period, with smaller but still strong growth expected in inbound arrivals. By 2017, we expect arrivals to reach 9.9mn and departures to reach 12.1mn.
- BMI has given Indonesia an overall Tourism Industry Risk/Reward Rating of 41.68 this quarter, placing it in 19th place out of 21 countries in the Asia Pacific region, reflecting concerns relating to infrastructure underdevelopment and potential security threats.
- Key events in 2013 included the Asia Pacific Economic Cooperation summit, the Annual Sea Worms Festival in Lombok, and a variety of religious and cultural festivals.