Infrastructure Development Indonesia: Hotel Construction to Grow in 2016
In line with rising tourism in Indonesia, the value of hotel construction in Southeast Asia's largest economy is expected to grow 16 percent to IDR 21 trillion (approx. USD $1.6 billion) in 2016. Most of the new projects - roughly 21 percent - are located in the Greater Jakarta area. Besides tapping the tourism potential, hotel developers also want to tap the business potential, meaning that due to expected accelerated economic growth in 2016, there will arrive more foreign businessmen in Indonesia to attend meetings and other activities, particularly as the ASEAN Economic Community comes online.
BCI Asia, which labels itself "the leading provider of business-to-business sales leads for projects within the building and construction market in Asia" on its website, expects hotel construction in Indonesia to accelerate more profoundly after 2016, provided that the political situation remains stable and the government continues to enhance infrastructure development across the nation. Agus Dinar, BCI Asia's Country Head for Indonesia, said he expects hotel construction growth to touch the level of 20 percent in 2017.
Although coming from a low base, the number of foreign visitor arrivals into Indonesia has grown rapidly over the past couple of years. Last year Indonesia welcomed a total of 9.4 million foreign tourists, up 7.3 percent from the preceding year. In 2015, the figure is expected to grow to nearly 10 million. However, compared to Singapore and Malaysia, Indonesia still seriously lags behind in terms of foreign visitor numbers. As Indonesia has plenty to offer to tourists, it means that there is still plenty room for growth in the country's tourism industry. Indonesian President Joko Widodo has set the ambitious target (perhaps overambitious target) of welcoming 20 million foreign tourists by 2020. But even if this target is not achieved, foreign visitor arrivals are bound to grow (as the government puts more effort in promotional campaigns abroad) and thus there is the need to construct more hotels (and other tourism-related infrastructure).
Foreign Tourist Arrivals in Indonesia, 2007-2015:
| 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | |
| Foreign Tourists (in millions) |
5.51 | 6.23 | 6.32 | 7.00 | 7.65 | 8.04 | 8.80 | 9.44 | 10.0¹ |
¹ indicates government target
Source: Statistics Indonesia (BPS)
With economic growth expected to rebound in 2016, and the implementation of the ASEAN Economic Community (AEC), which is designed to encourage trade and attract investment across the region, at the end of this year, it is also expected that demand for meetings, conferences and exhibition facilities will rise accordingly.
According to BCI Asia, the Greater Jakarta region will absorb about one-fifth (or IDR 4.4 trillion) of total estimated hotel construction in 2016. Examples of projects are the Harris Hotel in Tangerang (200 rooms), Vivo Sentul in Bogor (150 rooms), Grand Dhika City Hotel in Bekasi (143 rooms), and the Boulevard Centre in Tangerang (200 rooms).
After the Greater Jakarta area, East Java and the island of Bali are expected to attract most investment in the hotel construction sector in 2016.