There’s a lot of potential, but what are the risks and opportunities
in Kalimantan as the nation elects a new president?
As Indonesia holds its breath for the final election
results, with presidential candidate Prabowo Subianto's victory on the
horizon, the nation's economic forecast shines bright with an 8% growth
projection (according to Prabowo, at least!).
Amid the seasonal downpours and floods in Jakarta, investors
are casting their eyes toward the promising prospects of Indonesia's new
capital in Kalimantan.
With a per capita GDP of 238 million Indonesian rupiah, East Kalimantan ranks second in the nation, trailing only Jakarta. This economic and demographic expansion presents a fertile ground for hotel development.
Pierre Marechal
Let's explore the investment opportunities and challenges
this nascent market offers for hotel investors.
Opportunities
Untapped hotel market. Kalimantan's new capital area is a
blank slate ripe for hotel development. With a mere 950 rooms in the pipeline,
the market is wide open for investment. The current room inventory mix is a
balanced blend of independent brands, upper upscale chains, and upscale chains.
This is a stark contrast to Jakarta, which boasts an inventory of 65,325 rooms,
with an additional 7,668 in the pipeline. The government's preference for
independent and economy/midscale hotels in Jakarta suggests similar
opportunities may arise in Kalimantan.
Economic and population growth. Already the second-largest
contributor to Indonesia's GDP, Kalimantan's population is poised for
significant growth, expected to reach up to 2 million by 2045. With a per
capita GDP of 238 million Indonesian rupiah, East Kalimantan ranks second in
the nation, trailing only Jakarta. This economic and demographic expansion
presents a fertile ground for hotel development.
Risks
Airlift capacity. A major hurdle in developing Kalimantan's
hotel market is its limited airlift capacity. The region's terminal can handle
only 435,000 passengers annually, a fraction of Jakarta's airport capacity, the
largest in Southeast Asia. Expanding airlift capacity in Kalimantan will demand
substantial investment and is crucial for the hospitality industry's success in
the new capital.
Lack of MICE facilities. The absence of MICE (Meetings,
Incentives, Conferences, and Exhibitions) facilities in Kalimantan poses a
challenge for hosting conferences and events. In contrast, Jakarta is home to
12 convention hotels with an average of 440 rooms each, totaling 5,265 rooms.
The capital's total meeting space spans 1.8 million square feet, with 39%
belonging to independent chains, followed by 25% in luxury chains and 13% in
upper midscale chains.
While Bali remains the preferred destination for MICE
events, Jakarta continues to be a strong contender as the current capital city,
offering robust infrastructure and a diverse range of facilities for business
and leisure travelers alike. And there is no reason why Kalimantan can’t groom
its own MICE sector.
In conclusion, Kalimantan offers a unique opportunity for
hotel investors to enter a market with significant growth potential. However,
navigating challenges such as airlift capacity and the lack of MICE facilities
is essential to fully capitalize on this emerging market. As Indonesia's new
capital takes shape, the world's eyes, especially those of astute investors,
are watching closely.
Pierre Marechal is vice president, Strategic Advisory and
Asset Management, JLL Hotels & Hospitality Group, Singapore
The views and opinions expressed in this column do not
necessarily reflect the opinions of Hotel Investment Today or Northstar Travel
Group and its affiliated companies.