Twenty-five years ago, Lombok was thought to be the next up-and-coming destination. Beautiful beaches and a new airport combined were a recipe for success. However, it wasn’t until over two decades later that the airport was completed and Lombok was back on the tourist map. The new international airport is the key to giving the rest of the world the opportunity to enjoy the beauty of Lombok.
Lombok looks set to enter into a boom of hotel development. Investors and developers from Indonesia, Europe, Singapore, Malaysia, Hong Kong and Thailand have all been progressively more active in chasing opportunities in the last two years.
The last two years has seen major changes on the island of Lombok, and though it remains to be somewhat untouched, it is these changes that has attracted the attention of investors both local and international. Encouraging the increasing tourism market is the arrival of the new international airport and the subsequent growth in foreign arrivals, which is estimated to have increased over 140% from 2012 to 2013. This growth in arrivals shows the market support for the new routes.
The strong numbers that have been accommodated by top-tiered hotels and resorts has backed up the strength of the new international airport. The top-tiered resorts that have been opened or expanded during the last two years, in particular the Sudamala and Qunci Villa resorts on Mangsit beach, has fast been absorbed by the market. Both of these resorts have been attaining occupancies close to or above the market averages in recent years. In addition to this, the three Gili Islands have had stellar years. One reason for this is the growth in fast craft ferries that can deliver tourists from Bali.
All of these factors in addition to the availability of vacant land along some of Asia’s most beautiful beaches just 30 minutes from the new international airport, low land prices and Lombok’s ability to act as a stopover for islands to the east have contributed to Lombok’s growth. As well as this, Bali’s transformation into an urban resort has forced tropical island–seeking holidaymakers to look elsewhere.
A look at supply/demand factors
Hotel room supply has increased over recent years, reaching 2,400 rooms in 2012. The greatest increase has been seen in 3-star hotels, which make up 42% of the current supply; 4-star hotels represent 47% and the remainder is made up of 5-star hotels. There are also 500 rooms that are spread between 1- or 2-star hotels.
Another way of looking at the demand in Lombok is to examine the increase in international arrivals. Arrivals for 2013 exceeded 41,000, increasing from 17,032 in 2012, and arrivals for 2014 were estimated at 70,000.
Visitor arrivals checking into star-rated hotels grew at a compound average growth rate (CAGR) of 15% from 2007–2012 for domestic travellers and 23% for international visitors. In 2012 domestic arrivals reached 369,000 with stays averaging three days, and international arrivals reached 116,000, the average stay lasting four days.
Up until the end of 2012, the only international carrier flying into Lombok was Silk Air, which explains Singapore’s position as the top feeder market in 2012. Europeans and arrivals from Malaysia were the other majority markets. New flights from Kuala Lumpur, Perth and Singapore added in 2012 and 2013 have led to a shift in the key markets throughout 2014.
West Nusa Tenggara has reported an increase in occupancy from 2011–2013 with a total market-wide increase from 50% to approximately 55%. In addition to this, TSI reviewed a sample of nine hotels across Lombok (655 rooms). In this sample, seven hotels were from the Senggigi area, one from Gili Trawangan and one inKuta, and in the last quarter of 2013 this sample achieved a collective occupancy of 73% at an average rate of 1,000,433 rupiah.
Stephanie Servin, chairman of the Lombok Hotels Association (LHA), has estimated that all LHA hotels achieved occupancies in the low to mid 70’s in 2014. TSI predicts that the sample of upper-tier properties it studied will surpass the occupancy levels of the LHA properties, even though there are lesser numbers. This demonstrates the popularity of upscale resorts in Lombok and shows the potential for growth in this portion of the market.
In the hotel supply, international brands (and strong domestic brands) account for less than 15%. The current brands (Starwood, Accor, Tugu and Oberoi) will be joined by Archipelago hotels, which has a reported five projects planned. This is just the start as other international brands are set to enter the market with high-end hotels and resorts in the next wave of development.
Parallels with other emerging destinations
Comparisons are often drawn between Bali and Phuket, and now the development of Lombok is being likened to that of Phuket’s neighbour, Krabi. Krabi and Lombok have both had the challenge of developing in the shadow of a major tourist destination, and there are more shared challenges, some of which are airport facilities and linking transport systems.
In 1999 Krabi had its first airport replaced, and this signalled the rapid development of hotels. This was similar to what occurred 20 years ago in Lombok in eagerness for the new airport. In both cases this development was premature with an imbalance in hotel supply and demand, which led to moves to improve the airport in both cases. Construction on the airport to increase capacity in Krabi grew from 102,823 arrivals in 2002 to 653,519 in the first 11 months of 2013. Similarly, Lombok’s international airport, which commenced operation in 2011, saw an increase in arrivals from 579,705 in 2009 to 896,348 in 2012. However, it is not just the increase in arrivals that is important but the increase in international arrivals, as this is what impacts the tourism market; both destinations have observed increases in this area.
The growth in tourism in Lombok can also be likened to that of Bali. The evolution of Bali’s tourism industry is easily documented through the number of foreign arrivals: 152,364 in 1982, 490,729 in 1990, 1.5million in 2000 and over 3.2million in 2013. In 1970 Kuta (Bali) consisted of just two hotels, and a decade later there were 100 hotels and 27 restaurants. It is thought that Kuta (Lombok) will undergo a similar transformation.
Another example is the growth of Boracay and its two airports, Caticland and Kalibo. Arrivals at the domestic airport Caticlan have experienced little growth in the number of arrivals since 2008. However, the international airport Kalibo is famous for being the fastest-growing airport in the Philippines – it posted a CAGR of 24.7% from 2008–2012.
These comparisons explain how the growth of international arrival numbers has allowed Bali, Krabi and Boracay to continue to develop and become major international tourist hotspots. The new airport in Lombok has the potential to carry Lombok’s development. In addition, the location of the airport is likely to cause a shift in the tourist centre from the northwest to south Lombok. Better access to Lombok’s beautiful southern beaches allows Lombok the ability to offer a variety of environments to tourists.
The next phase in Lombok’s evolution involves the development of tourist attractions and support infrastructure, varying from healthcare facilities to wedding planners. Lombok already has two golf courses in the north and northwestern parts of the island, with a third proposed for the south. In comparison to this, Krabi has two golf courses, Bali has five and Boracay has one. Another significant feature of destinations that facilitate mass tourism is the presence of amusement parks, such as water parks. In Bali there is Kuta Green Park, Waterbom Bali and Circus Waterpark to name a few; examples in Krabi are Krabi Town Amusement and Tree Top Adventure Park and in Boracay there is Cool Waves Ranch. In Lombok, a number of investors are reviewing various types of tourism-related business. During the next two to three years new development will be focused in the northwest of Lombok, as there are already existing hotels, businesses and restaurants in this area. However, it is predicted that by 2018 we will see new developments in south Lombok.
The northwestern parts of Lombok will also see the construction and redevelopment of many hotels and resorts, most due to open in 2015. These projects will be targeted to upscale demand, which is what the area has become known for. It should be noted that the majority of these projects are being developed with international investors, showing the interest in this area. It is also predicted that the Gili Islands off northwest Lombok will also experience a growth in the hotel industry and the redevelopment and repositioning of existing hotels.
In conclusion, the research conducted by TSI shows that in ten years the southern parts of Lombok will surpass northwestern Lombok in regards to the number of new deluxe and luxury hotel rooms. If the development of areas such as Senggigi, Mangsit and Gili Meno remains controlled, they have a bright future ahead of them. Meanwhile in the south, land banking has allowed for the assembly of large areas of land that will accommodate the rapid development of south Lombok. There is a consistent pool of investors from Jakarta, Singapore, Hong Kong and other international locations that are forming plans to develop multi-property resorts and auxiliary businesses in the south. Substantial development is not just expected for Lombok’s southern beaches but also the islands that lie off these beaches, which is largely due to significant investor activity in this area. Finally, TSI has predicted that from their research, hotel room supply in Lombok will at a minimum double its current levels by 2022.