Weak Demand Stalls Recovery of Indonesia’s Hotel and Restaurant Industry

KOMPAS.com – Weak consumer demand during the coronavirus pandemic has placed a heavy burden on Indonesia’s hotel and restaurant industry.

To make matters worse, the recovery of Indonesia’s hotel and restaurant industry relies on consumer demand and operational efficiency.

Maulana Yusran, Secretary-General of the Indonesian Association of Hotels & Restaurants, said the wide-ranging concerns about hotel and restaurant businesses in Indonesia as the coronavirus pandemic continue.

Challenges for hotels

Hotels in Indonesia are struggling to raise their profit which depends on several factors affecting daily sales, Maulana said.

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These include daily room sales, occupancy rate, and sales of food and beverages from events and meetings.

“What we see with hotel profits is that increased occupancy rate is not in line with the average room rates.”

In the new normal, the room rates of hotels in Indonesia have become significantly cheaper as seen during the long holiday weekend in October.

“Normally, for a three-day long weekend, the price is based on the published rate. For example, during the last long holiday weekend in Bali, the price of a hotel room should be Rp 1,500,000 ($103) per night. Instead, by paying only Rp 700,000 - Rp 800,000 ($48-$55) per night, an individual can stay at a five-star hotel in Indonesia.”

The rising occupancy rate does not guarantee an increase in the profit for hotels in Indonesia, she added.

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Another burden that the hotel industry in Indonesia must shoulder is the increasing work-from-home lifestyle arising from the coronavirus pandemic that has damaged the earnings from Meeting, Incentive, Conference, and Exhibition (MICE) events.

Due to the adjustments in work arrangements in the new normal, Indonesia’s hotel industry has had near-zero demand for MICE events.

Challenges for restaurants