Budget hotels may buck property trend

Benget Besalicto Tnb. , THE JAKARTA POST, JAKARTA | Thu, 02/12/2009 11:24 AM  

Slowing up: Three towers are under construction in Central Jakarta. Weaker demand and high interest rates are slowing down growth in the property sector this year, delaying start-up dates for planned building sites. (JP/Ricky Yudhistira)

Contrary to the slowing growth of the property industry as a whole, the budget hotels market is predicted to increase by 30 percent this year. 

That is because travellers will turn from the up market hotels to the mid market ones to cut costs during the economic crisis, said Djodi Trisusanto, a property analyst, who specializes in the hotel sector, with Jones Lang Lasalle Hotels. 

He said Wednesday that there have been a number of hotel groups starting to catch up with the rising demand for budget hotels.

“The Holiday Inn, for example, has set up Holiday Inn Express. Even the budget aircraft operator Air Asia has turned to the rising market by establishing the Tune Hotel in Malaysia. A number of Indonesian hotel groups have also set up  budget hotels.

“Among them, is Formula One. The other one is the Santika Hotel Group, which will set up Amaris hotels in several towns of Indonesia,” said Djodi, who is also the vice president of Jones Lang Lasalle.

He said that Air Asia and the Santika Hotel group will also join together to build budget hotels in Bali. 

“Both of them have bought landsites for hotel construction in Bali,” he noted.

According to him, the economic crisis has forced companies to cut their costs, including their traveling costs, causing them to turn to two or three star hotels instead of five star hotels as they did previously.

“During the last few months the five star hotels have seen their occupancy rate dropping by around 15 percent. 

“As the global economic crisis starts to bite into the Indonesian economy, I expect (these rates) to decrease significantly this year,’ he said on the sideline of a media briefing on the 2009 property outlook.

Despite the economic crisis, the companies will still need to travel for their businesses. But they will do so using two or three star hotels instead of five star hotels. 

“It happens not only in Indonesia. It’s been growing in China, countries of Europe, and America,” he noted.

“Frequency of business traveling will not be affected significantly as firms still need it for their businesses. But they will use budget hotels instead of luxury ones. Some flight companies have even increased the frequencies of flight schedules. Cathay Pacific, for example, has increased its flight frequency to Bali,” he added.

Meanwhile, Anton Sitorus, another analyst at the consultant company, predicted that overall, the growth in the property market would slow this year, with signs of a slow down already  detected in the  final quarter of last year.

The economy is predicted this year to grow by 4.7 percent, slower than  the 6.2 percent estimated for 2008.

“Due to the global economic crisis, the property market is facing slower business activities, and weaker demand, in addition to the still high interest rates. As a result, developers have had to cancel a number of property projects this year,” he said.

But he noted that the cancelled ones were those being planned, not the ones already under construction.

“For example, the ones planned to start in February this year will be rescheduled to later this year or even next year.

“But as far as we know there are no projects under construction which will be cancelled or rescheduled,” Anton said.

He said that with the economy slowing down and interest rates increasing, most people will tend to put their money into banks, instead of buying property.