Trouble ahead for Indonesia’s tourism industry

TravelMole guest comment by Parita Chitakasem, Asia account manager for travel and tourism at Euromonitor International.

Indonesia is set to face big problems in its domestic tourism industry following the EU ban on Indonesian carriers.

It is another of many setbacks which the industry has been subject to, including SARS, the tsunami, two Bali bombings (2002 and 2005), and the earthquake in Yoyakarta in June 2006.

Until now, Indonesia’s overall tourism industry was showing encouraging signs of growth. According to Euromonitor International, total arrivals in the first five months of 2007 exceeded 1.7 million people, an encouraging 12% increase on the previous year. The recent ban will set Indonesia back several steps once again in its drive to restore tourism.

Domestic tourism to see the biggest strain

Whilst the EU ban does not directly affect the country’s first entry points of Bali and Jakarta, as these routes are served by international carriers only, any destinations beyond this will bear the biggest loss in number of visitors. The islands of Sulawesi, Sumatera, Lombok and East and West Nusa Tenggara are expected to see visitor arrivals plummet by up to 40%, as they rely heavily on tour packages using local carriers which will no longer be covered by insurance companies for travellers from the EU.

The ban also comes during the peak holiday season, imposing maximum damage. The summer season usually brings many Europeans to resort island, Bali, and then on tours beyond Bali.

Revenues of some outbound travel agents based in key source markets such as the UK, Germany, France and Netherlands will also be hampered over the next few months. Euromonitor International forecasts that TUI Germany, or Kuoni in the Netherlands which offer such packages may face up to 70% cancellations as a result of the EU ban.

It is a big loss of confidence for Indonesia’s tourism, which is well aware of the negative image its air disasters had on its airline industry just prior to the EU safety ban. There is also the risk of other markets beyond the EU following suit and also deciding to ban Indonesian airlines, which would spread the damage even further and wipe out any prospects of short-term recovery.

Local agents proactive in minimising damage

Some local travel agents have been fast to respond in order to prevent a more severe downturn in demand. Local player, Panorama Leisure Group, which relies heavily on the Dutch market, has put together information on Indonesia’s efforts to improve safety standards in an attempt to persuade its Dutch travel partners to convince insurance companies to cover their travellers flying Garuda.

IATA has expanded its Partnership for Safety programme to include Indonesia, which is expected to help assure travellers and the trade of improvements to safety standards.

However, the efforts to rebuild the market’s tourism over the past couple of years have been put back yet again because of this ban, and have slowed down what would have been a steady phase of recovery for a market so reliant on tourism but beset by problems .

For more information on Euromonitor International’s Travel and Tourism research please visit the company’s website at www.euromonitor.com/Travel_And_Tourism