Oky Ceelen, Director and Co Founder, Jugo Consultancy
President Joko “Jokowi” Widodo has set ambitious targets for the
tourism and hospitality sectors in Indonesia by 2019. While his
goals could be achieved within his stated timeframe, and capital has
been mobilized to develop one crucial area for success, there must
be a holistic approach to developing the sector and ensuring these
targets are reached. Thus far the discussions have centered on
financing infrastructure development projects to attract foreign
visitors – the so-called “provide them Wi-Fi roads, and airports”
approach. There is a much more nuanced aspect to developing this
sector, crucial to attaining the government’s goals, and one that is
lacking structure and funding. So far, Indonesia has, or is
developing, two of the three legs for creating a stable, sustainable
tourism and hospitality sector.
20 million foreign visitors per year are expected to reach Indonesia
by 2019. Last year Indonesia just crossed the 10 million visitors
mark and is projected to surpass it once again this year.
Furthermore, it is projected that the tourism and hospitality sector
is to account for 15.9% of GDP in the same timeframe; currently it
provides 9.3% of GDP. It is anticipated that by doubling the number
of foreign visitors, the foreign currency reserve will also double from
its current level of USD10 billion per year. Given all of the above
goals, it is safe to assume that the government is seeking to attract
“high-spending” foreign visitors who are willing to shell out their
hard-earned money in Indonesia – not the budget travelers,
backpackers or surfers. There is another interesting aspect to these
goals as President Jokowi has called for the creation of 10 new
“Bali-esque” tourist destinations from all across the archipelago and
each with a different level of experience in providing top-rate
tourism services. But, what are the key components to a successful
tourism development program to attract the high-spenders that
have flocked to destinations like Bali, and how can Indonesia ensure
that they will achieve it in such a short timeframe? And what can
the government do to ensure that these visitors will become “good
ambassadors” in spreading the word to others about travelling to
Indonesia, let alone become repeat visitors themselves?
Let’s start with the three fundamental pillars of a successful tourism
sector, which attracts the high-spending foreign visitor. It consists
of three components: attraction, infrastructure, and service.
Attraction is what brings someone to the country; it can be natural
vistas, culture, or man-made phenomena. Without the attraction
component there is no chance of attracting visitors, no one has
successfully marketed visiting the most boring place on Earth.
Fortunately Indonesia has been blessed with all three subsets of
attraction; from beautiful volcanoes and beaches to a rich, historical
culture with friendly people to amazing man-made structures like
Borobudur. Indeed, the World Bank has listed Indonesia as having
one of the highest potentials in the world for attracting foreign
visitors. However, attracting visitors, especially the high-spenders,
is not enough on its own to ensure a successful tourism and
hospitality sector.
The current focus of the government is to develop the second
component, infrastructure. It has been reported that the Ministry of
Tourism was given the green light to use part of the RP89 trillion
(USD 6.8 billion) budget from the Ministry for Development of
Disadvantaged Regions and Transmigration to provide RP1 billion
per annum for pilot programs to build infrastructure in villages for
tourism development. Additionally, private investment has
reportedly surged to USD 1 billion in 2015, a 45% increase from the
previous year. The government of Indonesia is also under
discussion with the World Bank to secure a USD 200 million loan for
this goal; although an unspecified amount has been mentioned to
be used for capacity building initiatives. Again, this is an important
aspect of achieving the government’s goals, but it is not enough to
ensure it will happen.
The third pillar absolutely required too, if the government is to
succeed in its goals, centers on the level of service provided to
high-spending tourists. Particularly considering that U.S. and
European visitors must travel between 16-35 hours just to reach
their tourist attraction, they expect a high level of service once they
arrive. Attracting these two groups of high-spending foreign visitors
is vital for the government’s objectives. Even if infrastructure is
found to be inadequate, a high-level of service can overcome these
issues and promote tourism once they return and share experiences
with co-workers, friends, and family – or even with a wider
audience on websites such as Travelocity or TripAdvisor. Hospitality
can overcome a deficit in infrastructure, but not the other way
around; most travelers are willing to tolerate minor infrastructure
deficiencies but expect excellent service in return. However, the
development of this third pillar has been left out of the discussion
on how Indonesia will go about delivering on pledges to develop its tourism and hospitality sector.
The government can provide a structure, complete with a funding
mechanism, to promote capacity building initiatives that will match
high-spending visitors’ expectations. It needs to go hand-in-hand
with infrastructure development initiatives, so that all three
components are ready to attract and serve visitors at the same time.
Furthermore, this needs to include the public and private sectors.
The government should require investors to support human capital
development in the hospitality sector, especially in areas where
there is not a significant historical linkage to hospitality service. This
not only benefits the hoteliers for drawing on a skilled group for
employment, but it also helps promote the supporting actors of
tourism: the local tour guides, restaurateurs, craftsman, and other
service providers.
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