Rooms Hotels

Accor hotel group doubles down on Indonesia as center of its Southeast Asian growth

Dec 10, 2012 12:51 am

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Accor has built its business by focusing on its low-and mid-price brands in non-marquee destinations. Matching this strategy with the growth of Indonesia’s middle class and Southeast Asia’s booming low-cost carriers is a winning combination.

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Irwandy Mazwir  / Flickr.com

Hotel Ibis Arcadia in Jakarta, Indonesia. Irwandy Mazwir / Flickr.com


Accor SA, Europe’s biggest hotel operator, plans to locate half of its new Southeast Asia properties in Indonesia to take advantage of the country’s growing economy and expanding middle class.

The Paris-based company plans to increase the number of its hotels in the region to more than 200, from 132, Robert Murray, chief operating officer for Accor’s northeast and Southeast Asian operations, said in a telephone interview. The group’s hotels in Indonesia, which include 16 Novotels and 11 Mercures, will increase to 94 from 55 now, he said.

“Indonesia is China without the public relations,” Murray said from Bangkok on Dec. 7. “The middle class keeps growing and Indonesians are traveling more and more.”

Hotel and airline operators are seeking to take advantage of a swelling population in the nation whose growth has outperformed every major economy except China this year. More than two-thirds of Accor’s business in Indonesia comes from domestic travelers, driving demand for its mid-tier brands in secondary or smaller cities in the country, Murray said.

Accor will add 20 hotels in Bandung, Makassar, Serpong, Samarinda and 12 other smaller cities, mostly through its lower- priced Ibis and mid-scale Mercure and Novotel brands, he said. It will also add 11 properties in the capital, Jakarta, and eight on the island resort of Bali, he said. The group will consider buying properties, taking on management contracts and franchises, he said.

Jakarta, Bali

“Traditionally, Jakarta and Bali were the primary Indonesia stories,” Murray said. “But the secondary cities, that’s where the domestic demand is growing and that’s where the hotels are being built.”

Indonesia’s economic growth will average 6.4 percent from 2013 to 2017, equal to that recorded in the two decades before the 1997 Asian financial crisis, the Organization for Economic Cooperation and Development said in a report in November. The nation’s economy may expand 6.6 percent next year, Vice Finance Minister Anny Ratnawati said in an interview on Nov. 7.

Indonesian President Susilo Bambang Yudhoyono is increasing spending on roads, seaports and airports as he woos investments to spur Southeast Asia’s largest economy. Growth held above 6 percent for an eighth quarter in the three months through September, a report showed last month.

Growth in the country’s tourism market is also spurring airlines to expand. Indonesian carrier PT Lion Mentari Airlines is considering purchasing additional aircraft from Airbus SAS and Boeing Co. as it adds flights in a region where air travel is expected to grow more than 6.4 percent annually through 2031.

Budget Airlines

“The influx of low-cost carriers in Southeast Asia has contributed to a fair bit of domestic and intraregional travel and that’s led to a lot of growth in hotel demand in Indonesia,” Jonas Ogren, Asia director at STR Global, which provides research for the hotel industry, said in a telephone interview. “Indonesia is definitely one of the hot markets that a lot of groups are looking at.”

Indonesia has the third-highest number of hotel developments in the planning or construction stages, after China and India, Ogren said. The country, which added more than 7,000 rooms in the 12 months to Oct. 31, has almost 28,000 more rooms in the pipeline, he said.

At the same time, gains in the president’s economic development efforts have been undermined by corruption scandals and delays caused by land disputes.

Indonesian Logistics

The country placed 59th out of 155 economies in the World Bank’s Logistics Performance Index for 2012, lagging behind Singapore, Japan, Taiwan, South Korea, China, Malaysia, Thailand, India, the Philippines and Vietnam. The index measures the perceptions of international freight forwarders doing business with Indonesia.

More than a decade after the Asian financial crisis forced Indonesia to seek an International Monetary Fund bailout, Fitch Ratings and Moody’s Investors Service have raised their ratings on the nation’s debt to investment grade.

The number of hotels in the Asia-Pacific region will grow by about 410,040 rooms in the next three to five years, according to the website of the World Hotel and Resort Development Congress. Southeast Asia will account for about 18 percent, and Indonesia will have the biggest share at 5 percent.

Southeast Asia’s “growth is exploding,” Murray said.

Editor: Linus Chua, Tony Jordan. To contact the reporter on this story: Nichola Saminather in Sydney at nsaminather1@bloomberg.net. To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net.

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