Will Indonesia’s Olympics Bid Ever Have a Tourism Upside?

Indonesia is bidding to host the 2032 Olympics, a move that raises the question whether it should given the financial and logistical burden it will wreak on the developing nation versus a goal of lifting tourism.

Japan, which is preparing for the Tokyo Olympics and Paralympics next year, faces a price tag of at least $25 billion to host the Games — nearly four times its original 2013 estimate. Hosting the Games in 2016 cost Brazil around $20 billion.

Indonesia’s bid was officially submitted this week to the International Olympic Committee in Lausanne by its ambassador to Switzerland, Muliaman D Hadad, according to state news agency Ankara.

The ambassador was quoted as saying the committee “has acknowledged Indonesia’s capabilities during the Asian Games and Asian Para Games of 2018.”

“We feel that is a strong foundation,” he said.

The event, held in Jakarta and Palembang, saw more than 17,000 athletes and officials from 45 Asian countries and was deemed as successful overall.

“But the Olympics is a different ball game,” said Laurent Kuenzle, CEO of Asian Trails Group.

TOURISM BAIT

The event is often used by the host country as a torch to light up tourist arrivals, aside from being a source of pride and honor. Japan, for instance, has set a target of 40 million arrivals for 2020, from 31 million last year.

“For me, is it worth it from a macroeconomic standpoint, with so many billions of dollars needed? Clearly the country leadership feels it is, at least to throw the hat in the ring. It’s a competitive field there for 2032 with probably more [bids] to follow,” said Jesper Palmqvist, STR’s area director Asia-Pacific.

Reuters news agency suggested that Indonesia could face stiff competition from India and a joint bid by north and South Korea. Other reports said Australia and Russia have expressed interest.

Palmqvist added that STR has done studies on the Olympics from the 1990s onwards and findings show the event does drive demand. However, demand growth varies by host country, with so many factors in question, for example, has the destination expanded the product enough?

“For Indonesia, stimulating hotel supply is only a small piece of the action required,” said Palmqvist. “General infrastructure is the bigger fish. For instance, can they have public transport solved by 2032?”

Indonesia’s traffic infrastructure is “already collapsing at the moment,” said Stephan Roemer, CEO of Swiss tour operator Tourasia and Diethelm Travel Group. Although Diethelm is not active in Indonesia, Tourasia sends tourists to the archipelago.

“Indonesia lacks the infrastructure to cater to big volumes. Consider the huge investments needed for that alone. On top of this, the installations and infrastructures needed for the Games, which in many cases likely cannot be reused afterwards.”

“I doubt whether the Olympics would end as a good business case for Indonesia,” said Roemer.

In all fairness, Indonesia has made some headway in easing the notorious traffic gridlock in Jakarta, according to Gonzalo Maceda, vice president development of Melia Hotels International based in Jakarta. The chain operates eight properties in Indonesia.

“It is still a problem to move around in Jakarta but the situation is improving after the completion of several flyovers and underpasses. We expect it to improve further when the Mass Rapid Transit and Light Rail Train lines are completed, along with the potential implementation of an Electronic Road Pricing system, which is still under study,” he said.

While the bid does not state where Indonesia proposed to host the event, industry players said Jakarta, Palembang, Yogyakarta and Bandung are the possible cities.

PLENTY OF TIME?

Maceda believes Indonesia has plenty of time to prepare for the event, saying the success of the Asian Games and Para Games last year as a reason to be confident it can pull off a good show.

Amit Saberwal, CEO & founder of budget accommodation RedDoorz, for which Indonesia is the key market, agrees.

“Indonesia is one of the most vibrant economies in this region. The 18th Asian Games gave them the exposure to handle a mega sports event and led to them building the infrastructure required to host an event of this magnitude.

“Indonesia is believed to have one of the fastest growing mobile Internet populations. Their ability to move upwards as a digital economy has been a reason for their success. We believe their bid for a global sporting event will put a lot of focus on this region and the country as a whole.”

But the International Olympic Committee will select the winning candidate in 2025. That would only give Indonesia seven years to prepare.

Asked what Indonesia must do first if it wins, Melia’s Maceda said, “Start with having a good plan for infrastructure, accommodation and sport facilities, keeping in mind not only the time when the event will be held, but also the long-term use of the facilities.

“It’s also important to accelerate the Olympic athletes program, to improve the level on local athletes on mostly every sport.”

Last year saw some of Melia’s properties in Indonesia enjoying the “best historical performance,” said Maceda. “Challenges such as oversupply in some destinations have been well managed by the current government, which gives a lot of importance to the tourism sector.

“I would say infrastructure is one of the main challenges of the country in general, even if we have seen a lot of progress in these last years,” he said.

While the Olympics may be the catalyst Indonesia needs to crank up its infrastructure, “The question is, can they afford it?” said Kuenzle.

Added Roemer, “In principle any country in this world can be made ready to host Olympic Games. It is a matter how much investment the country can afford to provide the required infrastructure.”

The archipelago is also prone to natural disasters, which set back its financials, not to mention arrivals. “If it had not been for volcanic outbreaks, earthquakes and tsunamis, we would have had a very good year for Indonesia last year,” said Kuenzle.

If Indonesia wins, it will be the first time Southeast Asia will host the Games. In Asia, only North Asian countries Japan, China and South Korea have hosted the Olympics.