Travel And Tourism in Indonesia

Global economic crisis hurts expenditure

2009 was a tougher year for travel and tourism in Indonesia as tourism expenditure shrank,
following the robust performance in 2008. While domestic and outbound tourism flow were still
healthy as Indonesia was relatively less affected by the global economic recession, inbound tourism
flow only showed marginal growth due to the difficult economic conditions experienced in many
countries. Despite the still positive tourism flow on the whole in 2009, most of the tourists cut down
on their spending. This translated to reduced expenditure on the whole.
Visit Indonesia Year 2009 still considered a success
After the success of Visit Indonesia Year 2008 due to the strong growth of inbound tourism flow, the
Indonesian government decided to extend the program another year and declared 2009 as another
Visit Indonesia Year. For 2009, the focus of the programme was on the cultural diversity of
Indonesia. Despite the drop in tourism expenditure, the government still considered Visit Indonesia
Year 2009 to be quite successful so that it will be extended further into 2010. In fact, the decision to
have another Visit Indonesia Year in 2010 was announced in 2010, where the inbound tourism flow
was still showing good promise before the lacklustre situation in November and December.
Nonetheless, Visit Indonesia Year 2010 is expected to be more successful after the challenging times
of 2009.
‘Culinary tourism’ a growing trend among domestic tourists
Domestic tourism in Indonesia is very important, contributing a much higher proportion to tourism
expenditure compared to incoming tourism expenditure. With a wide variety of tourist destinations
for domestic tourists, new trends and themes keep coming up every year. Towards 2009, a specific
theme to emerge has been that of ‘culinary tourism’. While visiting different parts of the country, it
becomes increasingly important on the to-do list of the domestic tourists to explore the various local
dishes beyond just the standard meals. In addition, with this growing interest in the different
cuisines of other regions in Indonesia, there are increasingly more consumer foodservice outlets
opening in the big cities offering very specific cuisines of certain regions, beyond the more popular
regional dishes. This trend towards culinary tourism has contributed positively to the expenditure for
domestic tourists.
Recovery expected from 2010 onwards
After the unexpected decline in tourism expenditure in 2010 and the inbound tourism flow falling
short of the government target, better prospects are anticipated from 2010 onwards. As various key
countries are already out of the recession going into 2010, the Indonesian government is expecting
that the inbound tourism flow will also recover. Combined with continued good growth of domestic
tourism, the performance of the travel and tourism industry in Indonesia over the forecast period is
expected to be strong.

Consumer Foodservice in Indonesia

Consumer foodservice sees slow down in growth during 2009
The Indonesian consumer foodservice industry saw a slowdown in performance during 2009 in terms
of outlet expansion, transactions and value growth due to the unfavourable economic conditions.
Given their weakening purchasing power, consumers continued to limit spending on non-essential
items, including eating-out. Many households switched to home-cooked food in order to save money.
The majority of consumer foodservice operators were also very conservative regarding making
investments to expand, as they wanted to see how the global economic situation developed. The
lower inflation rate in 2009 than in 2008 also reduced the need to increase the price of consumer
foodservice items so steeply. This led to decelerating current value growth of consumer foodservice
in 2009 than in the previous year.
Foodservice players use social networking to drive sales
In 2009, many foodservice operators in the country created Facebook pages or Twitter accounts to
develop a devoted customer following. Chained brands such as Es Teler 77, Starbucks and J Co
Donuts & Coffee as well as independent brands such as Heavenly Blush and Iniko Toys Café all have
Facebook pages, with a significant number of members or fans. Social networking is becoming very
popular among foodservice operators as a way to update consumers about the brand and create a
meaningful connection with consumers in the hope of driving sales and increasing loyalty. This is
considered a relatively inexpensive marketing strategy that can generate substantial exposure.
Leading operators focus outlet expansion on second-tier cities
Over the review period, the leading chained operators focused outlet expansion on the first-tier
cities. This led to increasing demand for good locations and the skyrocketing of rentals in these big
cities. Towards 2009, consumer foodservice operators switched their expansion of outlets to the
second-tier cities, where the investment costs are lower and there are fewer competitors. Players
recognise the huge untapped potential in these smaller cities and they aim to provide more access
points to consumers and drive value growth by increasing their presence in these cities. The
operators included KFC which expanded into Bekasi, Cilacap, Jepara and Pare Pare and Pizza Hut
which opened new outlets in Banten, Tangerang, Bogor, Bandar Lampung and Papua.
Chained consumer foodservice outperforms independents
The consumer foodservice market in the country is fragmented, with a large numbers of operators.
Independents dominate Indonesian consumer foodservice but chained outlets continued to increase
their numbers and importance in 2009. Indeed, chained consumer foodservice outlets enjoyed an
advantage over independents and posted stronger growth in 2009. In addition to improved
economies of scale, chained outlets benefit from higher consumer trust in the quality of their food
and service. During the review period, chained outlets sustained high double-digit current value
growth buoyed by the prevalence of franchising in both local and international brands.
Healthy prospects still await consumer foodservice
The consumer foodservice is expected to see weaker performance over the forecast period than it
experienced during the review period, this is due to the economic recession that impacted in late
2008 and its affects will continue throughout the review period. Further, the number of consumer
foodservice outlets in Indonesia was already very high by the end of the review period, thus
prospects for growth will be limited as the market reaches saturation in terms of the number of
outlets. However, consumer foodservice performance is expected to remain positive, as urban
consumers with a hectic lifestyle will eat out. Towards 2014, the constant value growth of consumer
foodservice is anticipated to accelerate. Companies are expected to continue to compete strongly in
terms of price promotions, menu innovations, advertising and outlet expansion which continue to
add dynamism.