Bali – The View From The Ground

I was recently in Bali and had an up close view of the hotel and property scene on the island.

This year’s surge in visitor arrivals is continuing and while the Chinese are the second largest international source of business, inroads are being made in a number of other markets.

Speaking to some of the villa rental groups, two geographic sources that are gaining momentum are India and the Middle East.

What is perhaps a bit surprising is that garden or enclosed villas often the choice of the latter group.

That said, one long-term operator of multiple villa estates said that looking at this years figures, while occupancy is up, rates are under stress and once you add in Bali’s hyper-inflationary operating costs of labor and utilities, his bottom line is actually shrinking despite gains on the top line.

Hotel owners and property managers are feeling the crunch in a similar way as Phuket, where occupancy has been accelerating revenue and a knock on effect for RevPAR but the profit line is diminishing.

One more important factor is the growing impact of OTA’s. While bookings are rising, the cost is equally being driven up and profits diminishing.

On the hotel side, after seeing a soaring pipeline the past few years, there was an economic impact from the decline of global energy prices on the Indonesian economy.

 This manifested itself in a number of projects being put on hold, but there is a renewed push in many developments.

Notables I saw was the soon to open Movenpick Jimbaran, which has an attached retail and food cluster that is already buzzing.

Other notables  is the InterContinental in Berawa, Mandarin Oriental in Pandawa, Six Senses Uluwatu and coming up fast is the massive New World Resort Pecatu.

While tourism is roaring ahead, I can see similar traits to Phuket as micro location become a key trading factor due to increasing traffic.

And there is also the issue of hotel owners seeing smaller profit lines, while hotel management companies introduce an endless flow of new brands.

Growth is not adding up to profit in many cases and something will have to give in the longer term to sustain quality accommodation and a healthy marketplace.