Exploring Bali’s Tourism and Hospitality Landscape 

Boasting of pristine beaches, verdant forests, and a rich cultural heritage, Bali is Indonesia’s leading tourism destination. The growth of tourism on the island began in the early 1920s, marked by the Dutch East Indies company’s development of the Inna Bali Hotel Denpasar, the first international-standard resort. This, coupled with targeted marketing to European audiences, positioned Bali as a luxurious and exotic escape, fostering the nascent tourism sector. Following World War II, Indonesia’s first president, Soekarno, prioritized Bali’s development for tourism and allied activities. His vision materialized in the construction of the Grand Inna Bali Beach Resort, one of the first five-star hotels in the region and, later, the Ngurah Rai International Airport. These strategic investments significantly accelerated Bali’s transformation into a thriving tourism hub. In recent years, tourism and allied activities (both direct and indirect services) have contributed nearly 70% of the province’s Gross Domestic Product (GDP). Bali has been named as a top travel destination by TripAdvisor, Travel + Leisure Magazine and DestinAsian. This article focuses on the hospitality and tourism sector in the region with a particular emphasis on the trendlines for the sector over the past five years (2019-2023).

Seasonality

Bali’s tropical climate, with distinct wet (November-April) and dry (May-October) seasons, significantly impacts tourist arrivals. The unpredictable wet season, characterized by heavy storms and downpours, tends to make the travel erratic. Therefore, these months tend to be a slower period for the market. Conversely, the dry season attracts visitors seeking warm temperatures, ample sunshine, and lower humidity. The peak tourist season is from June to August, leveraging the pleasant weather, and from mid-November to mid-January, capitalizing on the vacation period and holiday travel.

Average Length of Stay (ALOS)

Notably, the average length of stay has decreased compared to pre-pandemic times (2.9 days in 2019 to 2.5 days in 2023). However, visit durations have become more consistent (standard deviation of 0.27 in 2019 compared to 0.06 in 2023), indicating less variation in tourist stay patterns. Drilling deeper, segments like M.I.C.E. (meetings, incentives, conventions, and exhibitions) have the shortest length of stay (1.5 to 2.0 nights) followed by wedding guests (2.0 to 3.0 nights) followed by leisure travellers who tend to stay for 2.5 nights or longer. Moreover, domestic tourists tend to have a shorter average length of stay compared to international tourists.

Tourist Arrivals

The market has shown a steady recovery; however, the tourist footfall, particularly the foreign tourist footfall, is lagging behind 2019 levels (84% of foreign tourists compared to 2019). Overall, the region boasts a healthy ratio of international tourists, constituting nearly 40% of total arrivals.

Key source markets include Australia, India, China, the United Kingdom (UK), and the United States of America (USA). The top five markets together represent close to 50% of the international tourist arrivals into the region. Interestingly, Australia and India have seen a considerable increase in their footfall compared to 2019; however, the Chinese market has yet to revert to pre-COVID levels.

Economic Contribution

With tourism being an important sector of the local economy, the accommodation and food service sector continues to be an important source of revenue contributing 20-25% of the total GDRP (~US$1 billion). However, the sector has been lagging behind 2019 numbers.

Key Demand Areas

With such varied geography, Bali has multiple micro-markets which cater to different types of traveller preferences:

• Nusa Dua, Ungasan, Uluwatu, and Jimbaran: These areas stand out as luxury destinations, renowned for their opulent cliff-top and beachfront resorts featuring private villas, wellness facilities, and gourmet dining options. Moreover, the large format M.I.C.E. hotels and resorts are located in these areas, especially in Nusa Dua.
• Tanjung Benoa: This area has seen strong growth on the back of its beachfront locations, proximity to water sports activities, and affordable accommodation options. In particular, this region has captivated the spillover demand from Nusa Dua.
• Ubud: Often hailed as Bali’s cultural epicentre, this region specializes in luxury and boutique hotels and eco-retreats nestled within rice terraces and rainforests. The major offerings include visits to temples like Besakih and Tirta Empul, traditional dance performances like Legong and Kecak, and opportunities to gain experience in Balinese crafts like woodcarving and batik making.
• Kuta, Legian, and Seminyak: They are family-friendly hubs, offering lodgings with convenient access to shopping, dining, and vibrant nightlife. Malls like Beachwalk Shopping Center and Discovery Shopping Mall provide retail therapy, while a plethora of restaurants and beach clubs cater to diverse palates. Moreover, this area is home to the Waterbom Bali waterpark.
• Canggu: Canggu has emerged as a haven for surfers, with its proximity to renowned breaks like Echo Beach and Berawa Beach. Boutique surf camps and guesthouses provide affordable accommodations, along with trendy cafes and beachfront bars.
• Sanur: Sanur provides a range of budget-friendly accommodations, including guesthouses, and hostels for the price-sensitive traveler. Warungs (local eateries) serve up affordable Indonesian fare, while the Sanur night market offers a taste of local life. Sanur also serves as a convenient gateway to nearby island escapes like Nusa Penida, known for its manta ray sightings and dramatic cliff formations, and the Gili Islands, a tranquil archipelago known for its snorkelling, and diving opportunities.

Marketwide Performance of Branded Hotels

Studying the performance of branded hotels will reveal a tough period during 2020 and 2021 due to global travel restrictions. This led to a sharp drop in the average rate in 2020 and 2021. Like many markets, the region started witnessing recovery during 2022 and experienced a return to pre-pandemic levels in 2023. Overall, the market has seen a sizable growth in the average rate and hence, in the RevPAR as well.

This growth has been even stronger for upper upscale and luxury hotels, due to steeper hikes in their average rates.

Drilling down to the micro-market level performance, most sub-markets in Bali have seen their performance cross the pre-pandemic benchmarks. Notably, the occupancy in Nusa Dua/Jimbaran/Uluwatu/Ungasan is lagging behind 2019 figures; however, the average rates have grown considerably higher (due to their large base of upper upscale/luxury hotels) which has allowed their RevPAR to surpass the pre-pandemic metrics.

Proposed Supply

Our research indicates that approximately 3,500 new hotel keys are expected to be developed over the next 4-5 years, with a significant portion of openings concentrated in 2024 and 2025. This surge in development activity reflects the strong market performance and the eagerness of promoters to capitalize on the current momentum. It is important to note that hospitality projects tend to experience delays beyond their expected timelines. Upscale to luxury positioned hotels dominate the proposed supply, accounting for over 60% of the total. This aligns with the existing market mix. Within specific micro-markets, Jimbaran, Uluwatu, and Ubud continue to see significant developer interest. Notably, Canggu has emerged as a rapidly growing micro-market, attracting considerable development interest.

Market Outlook

Bali’s tourism industry has made a strong comeback, with occupancy levels nearly reaching pre-pandemic levels. The market is likely to witness stability in their occupancy levels with a marginal uptick. Hotel room rates are likely to rise further, with 10-15% growth already recorded during the first four months of 2024 (in US dollar terms). Some additional factors likely to impact the tourism sector include the recently introduced tourist tax (US$15/IDR 150,000) and the change in central government later this year. That being said, the overall outlook for Bali’s hospitality and tourism sector remains bullish for 2024.