ID HOTELIER - How responsive has the number of domestic guest nights in star-rated hotels been to changes in Indonesia's real GDP? This is determined by "demand elasticity", defined as the % change in the total number of domestic guest-nights staying in star-rated hotels for a 1% change in real GDP.
As a major economic determinant of star-rated hotel demand, the growth in real GDP had an uneven impact on the performance of star-rated hotels across Indonesia since 2005.
Since 2012, a 1% increase in real GDP resulted in an average 5.5% increase in the number of domestic guest nights in star-rated hotel accommodations. It ranged from a high of 10.3% in the case of Riau Province to a low of 3.8% in West Sulawesi.
While real GDP is a strong predictor of hotel demand trends, we routinely evaluate the ability of about 10 economic indicators to predict hotel demand within and across the provinces of Indonesia. As the domestic market grows, the relative importance of the predictors is likely to change along with the indicators used to project fluctuations in the hotel economic cycle.
Indonesia’s economy is expected to grow by 5.4% in 2022 and by 5.0% in 2023, according to a recent report by the Asian Development Bank (ADB). Inflation, which is projected to be almost 6% through June 2023 may curtail the growth in domestic guest nights in 2023.
Ross Woods is a seasoned hotel investment advisor with over 30 years of global experience in hotel asset management, portfolio management, and hotel advisory services. Known for his collaborative-based consulting style that integrates a high level of strategic and analytical expertise, his “smarts” are sought by clients to solve complex issues, make better decisions and realize the highest risk-adjusted investment returns. His clients include banks, private investors, REITs and hotel management companies in the United States, South East Asia, Australasia, Europe, and Dubai.