APPD Market Report Article
JakartaDecember 1, 2021
Domestic demand remains the key driver due to border closures
- International demand remained subdued due to continued border closures, and has further moderated following the recent COVID-19 wave. International visitors totalled around 65,758 as of YTD August 2021, representing a 82.1% y-o-y decline. On a positive note, rising vaccination rates both in the region and Indonesia may accelerate reopening plans, which will provide a major boost to hotel demand.
- Domestic tourism remains the existing key demand driver for luxury hotels, albeit overall demand remains below historical levels due to the lack of international corporate visitors. Domestic tourism was impacted by the recent wave, but should pick up again as COVID-19 mobility restrictions continue to ease across the country.
One luxury hotel opening in 3Q21
- Hotel openings remain limited so far in 2021 with just three openings totalling 502 rooms. The only opening in 3Q21 was the 223-room Langham Jakarta located in SCBD. Several planned openings for the year have either been shelved to a later date or postponed indefinitely amid construction delays and muted demand due to border closures.
- Six lodging properties offering around 1,100 rooms are slated to open for the rest of 2021, a substantial increase from 2020 due to a spillover of delayed openings from last year. Serviced apartments will account for almost three quarters of the upcoming room supply, all of which will be managed by Ascott under various brands include Ascott, Somerset and Citadines.
RevPAR recovery driven by occupancy rebound and low base effects
- Revenue per available room (RevPAR) rose by 30.8% y-o-y as of YTD September 2021, reflecting a continued recovery trend that began in June. Occupancy increased by 13.8 ppts to 41%, which more than offset the 13.6%-y-o-y decline in average daily rate (ADR) to IDR 1.6 million. Growth, however, is also attributed to low base effects caused by the lockdown last year where RevPAR fell to record lows.
- Luxury RevPAR reached a 12-month high in June 2021, but fell in the subsequent two months as domestic visitation slumped following the nationwide lockdown implemented during the recent COVID-19 wave. Nonetheless, the m-o-m RevPAR increase in September suggests that trading performance is set to improve as restrictions continue to ease, fuelling the resumption in domestic demand.
Outlook: Pace of RevPAR recovery contingent on reopening
- Barring any unforeseen circumstances, further easing of domestic travel restrictions should provide a boost to RevPAR recovery in the near term. However, recovery is anticipated to remain limited until international borders reopen given the hotel sector’s reliance on international corporate guests.
- On a positive note, the Indonesian president recently called for the implementation of the ASEAN travel corridor arrangement framework to facilitate the resumption of essential travel in the region, reflecting the country’s willingness to open up. Indonesia will also gradually reopen parts of the country where full COVID-19 vaccination of two doses exceeds 70 per cent.