Entering the year 2019, The Peak will take a look at the rising trends from industry leaders in key sectors that drive the Indonesian economy. From the lifestyle perspective, we cover the hospitality, tourism, luxury automotive industry, as well as the overall trend on the economic outlook from the assessment of a management consulting firm.
It is predicted that the Indonesian economy will improve in 2019, mostly due to the rise of digital and the emergence of a large middle class. Challenges, however, still remain with political tensions ahead of a national election in April and the state of global economic outlook.
John M Flood, President & CEO of Archipelago International
Hotel and Restaurant Industry
Since he was ten years old, John already decided to be in the hotel business. Today, he worked in the hotel and restaurant industry for more than 30 years in Dublin, London, Paris and Copenhagen. John moved to Indonesia more than 15 years ago managing and opening new hotels and resorts, in which he is responsible for the rapid growth of the company’s seven core brands ranging from 2-star to 5-star.
What is the main factor that drives the hotel industry in Indonesia during the last five years?
The past 5 years have been challenging with more competition opening in all the major markets. This has caused lower occupancies and average rates. Inbound has been dominated by the Chinese market has been growing steadily every year. The Indian market is also growing and overall the Asian market has also been strong.
On the domestic front, the domestic market has been strong with over 200 million domestic tourists expected this year. So many hotels in key areas have had great support from the domestic market. Channel wise, online business has seen enormous growth and we’re happy to have been at the cutting edge of it with our centralized e-commerce division. Branded hotels normally get 20% more business online than non-branded hotels, so this has been great for us. On the back-end of increased domestic travel – foreign arrivals are also growing and should hit 20 million by 2020.
How do you see the Indonesia hotel industry in 2019?
Indonesian hotel supply will continue to stretch regionally but Java and Sumatra will continue to dominate. Brand growth will continue as more people look for stable and dependable branded hotels. Currently, in Indonesia, there are about ten thousand hotels and only 5% of them are branded so the potential is huge. If you compare that with the US where there are fifty thousand hotels – eighty percent of their hotels are branded.
How do you tackle the millennial market?
The millennial market is important to us and we’ve been working hard in developing our hotels to cater to them over the past few years – developing that sense of community and togetherness that people are looking for these days. In today’s sharing environment we’ve been adding several new things to our hotel offering and created trendy hang-out spaces, blending a combination of vintage and modern, around our hotels for millennials to hang out and get to know each other. Technology is also key and with everyone having their own device and the increased personalization of content platforms like YouTube, Netflix, Spotify, etc. People really are adopting “smart homes”, and we’re working to make sure our hotel rooms keep up with this.
What are some of the challenges for the Indonesian hotel industry?
A lack of major international events such as Formula One racing or big festivals are missing in Indonesia and this makes it difficult. We can see from the huge bump in business experienced from the Asian and Para Games. These events really have a positive effect for months at a time. Infrastructure is improving, especially the airports, but apart from that, a lack of international standard public transportation like underground or monorail systems in popular destinations like Bali, Jogjakarta and Jakarta make it difficult for people to easily get around in these destinations. Hopefully, this will improve in the future.
Do you see any potential up-and-coming locations for the hotel industry in Indonesia?
The surrounding Jakarta area will see growth in the next few years as business moves out of the CBD. Further afield we feel that Flores, the Raja Ampat islands, the Bromo Tengger Semeru National Park and the Komodo National Park are all up and coming destinations and well worth a visit. North Bali around Lovina should also be much busier than it currently is so we also see that as having good potential.
Ivan Breiter, Director of Southeast Asia for Switzerland Tourism
Travel and Tourism Industry
Growing up in a small mountain town in Switzerland, like many other teenagers, Ivan didn’t know what to do with his life. Until one evening, a group of children from Belgium who were amazed by the beauty of Switzerland, made him realised that the place he called home was something special. Today, he manages teams in Singapore, Jakarta, Bangkok and Kuala Lumpur to promote Switzerland tourism. Ivan has held different management positions for Switzerland Tourism in Zurich, Toronto, and Brussels. He believes that travelling is the best way to learn from people with different lifestyles, values and beliefs and helps to understand each other better.
What role does the Indonesia market have on Switzerland Tourism?
Indonesia is a strategic growth market for us. Since we started operation in Indonesia 5 years ago, this source market grew by over 50%. In 2019, we expect to reach more than 100,000 overnights from Indonesians. Most of our guests come from Europe and looking for warm weather or for sports opportunities such as Biking or Skiing. Indonesians have a different travel pattern, as they stay in urban areas, prefer cooler weather and travel during the time of the year when Europeans don’t have a vacation. This is a win-win for both, Indonesians benefit from great hotel and attraction deals and for our suppliers, it is a good way to increase their occupancy rate throughout the year.
What are the three highlights of Switzerland Tourism?
I could tell you about the mountains with its glaciers and eternal ice that give 360 views across the awe-inspiring landscape, or our medieval boutique towns made for pedestrians to stroll around and indulge in designer and luxury shopping, or the easy access to all the attractions with a single ticket for the entire Swiss Travel System. But at the end, a vacation is about the simple things in life: breathing fresh Alpine air, having crystal clear and clean water in every river, lake and in 1000’s of fountains throughout the country and the feeling of a Swiss quality vacation pampered by the legendary Swiss hospitality that make the journey for many guests there best trip ever.
What do you think is the main factor that drives Indonesian traveller’s choice of destinations during the last five years?
In a representative survey of Indonesian guests in Switzerland, we ask to tell us the main reason for visiting our country. There are three clear answers; first, Indonesians come for our beautiful nature and panoramas, second, they love the cities and the historical experience within Switzerland, and third, they love the atmosphere, the comfort, the high service quality and the easy way to travel around.
What is the outlook next year in the tourism industry for the Indonesian traveller?
Travel gets more and more independent, guests like to travel with their friends and family and discover areas at a slower pace. Having more time to emerge with the local culture. Luxury travel to Europe is still a lot about talk-ability but it became much more meaningful. Instead of standing in front of a famous landmark, guests want to experience it. Touching eternal snow and discovering a glacier from the inside and at the same time learning something about permafrost, climate change or the ice age.
How do you approach the millennial market in Indonesia?
On one hand, we work with celebrity marketing as well as working with influencers and bloggers. On the other hand, we work a lot with special interest groups, such as Destination Weddings to Switzerland, partnering with sports organizations such as hiking and biking clubs or student marketing. Increasing the number of young people that study in Switzerland and discover Switzerland first hand during their journey is often the best marketing for our country. Those guests often become ambassadors of Switzerland for their lifetime and bring friends and family along often sending their own children to study in Switzerland.
Christoph Choi, Managing Director of Porsche Indonesia
Luxury Automotive Industry
Born and raised in Germany has influenced Christoph’s passion for cars. Germans are very proud of their automotive history, and this leads to the fact that he has been brainwashed from an early age. While attended university, Christoph already dreamed of working at Porsche. After he graduated, although there was no job opening, he literally drove five hours from Hamburg to Stuttgart, knocked at the door and asked for a job. Today, Christoph has been a part of the Porsche family for more than a decade. He started off his journey in South Korea and Singapore, then appointed the Managing Director of Porsche Indonesia in 2012. Under his leadership, Porsche Indonesia is growing rapidly with his transformational marketing strategy and sales and after sales management.
What differentiates Porsche than any other luxury car brand?
We build the most personal car. We are not a mass production manufacturer. We are more demand driven, which means that a customer has the liberty to choose whatever they like. The whole idea is that we turn dreams into reality. Whether they have dreamt about it for many years when they were younger, we want to make these people’s perception and dreams a reality so that we can increase our customers satisfaction level. Our cars are pieces of engineering.
What do you think is the main factor that drives the luxury automotive industry in Indonesia during the last five years?
The automotive manufacturers are literally re-inventing the industry on a daily basis. Never have we seen so many new technologies and innovations as we do now. Companies are no longer focusing on special models but diversifying their product portfolio more and more, this leads to the fact that the customer has more choices than ever before. Life-cycles are becoming shorter and the selection of luxury automotive grew over the past five years, that is one of the key drivers for me.
What is in store for the luxury automotive industry in Indonesia next year?
I see a digital revolution in the automotive world, a change from the traditional retail channels to highly customized digital retail. The demand for luxury vehicles is still existing and will grow even bigger due to the fact that the upshot in the income pyramid. Luxury cars are still seen as a status symbol for success and wealth and the appetite is there.
How does Porsche approach the millennial market in Indonesia?
The way we do business will change drastically towards digital solutions and more convenience for consumers. Especially millennials are used to a digitalized convenient buying experience, whether it’s hotel bookings, grocery shopping or food deliveries. We at Porsche are going through a transformation stage that will touch every step of our processes. The world is changing and we have to transform as well. Charles Darwin, the evolution scientist, summarized it as the “survival of the fittest”, which many misinterpret as the survival of the strongest. It is not the strongest species that will survive but the one that is most able to adapt.
Can you tell me a little about Porsche Taycan? Do you think the Indonesian market ready for an electric car?
Porsche Taycan marks a new era in the Porsche world. Not only it’s the first series production fully electrical vehicle, but it’s equipped with two electric engines generating more than 600 hp. However, it’s not only the product that is amazing, its investment is mind-blowing. Porsche invested more than 6 billion Euros in e-mobility, built an own factory for Taycan and created 1,200 new jobs. This clearly shows the importance of the vehicle for Porsche’s future. We are now in the midst of preparing the arrival of the Taycan in the market, this goes from setting up high-voltage charging stations, special tools and equipment to qualification of staff. As you can see we are equally committed to electric mobility and I definitely see a market for electric cars in Indonesia. It might not be at this stage, as there are currently no favourable government regulations for fully electrical vehicles and the infrastructure is still in the development phase.
Furthermore, I am giving lectures at universities and summits to promote education and the significance of a good academic qualification. Education is unfortunately on a poor level in Indonesia but plays a significant role to design your future as a successful person and as a useful citizen in the ‘society. For this reason, I am supporting education programs as much as possible.
Guillaume de Gantès, Partner at McKinsey & Company Indonesia
After graduating from harvard business school, Guillaume admitted that management consulting was not his passion. When he first joined mckinsey in Paris, it was because he was keen to be exposed to different businesses across multiple sectors. After almost two decades with the firm, he found that to be true and what kept him at McKinsey was the environment, where opportunities to keep learning were endless. Guillaume worked in the new york office where he became a partner, and now in indonesia over the last five years, addressing challenges facing local clients with a strong base of local talents.
You have been assisting companies in Europe and America, what differentiate the companies in Southeast Asia, particularly Indonesia?
The opportunity to innovate in Southeast Asia and in Indonesia are endless, compared to advanced economies where the business environment is more mature, often with less capacity or desire to evolve long-standing models and ways of doing things. Indonesia – as one of the largest countries in the world – is a place where this innovation can happen an a big scale.
In Indonesia you have been involved in the financial, healthcare and telecommunication sectors, just to name a few, can you tell me about your recent work?
These last five years have been the busiest of my life. I work with banks and financial services to develop their next frontier as they’re hugely impacted by digitization. Recently, I’ve been helping clients in their digital transformations in Asia, US and the Middle East. This includes helping large companies transform their culture and the way their employees work.
What are the main factors that drive the Indonesian economy during the last five years?
Firstly, digital. Indonesia is the country that digitized the most rapidly in the world last year. We looked at a broad set of factors including the penetration of smartphones and the evolution of infrastructure. Secondly, our manufacturing sector has exceeded the size of our agricultural sector, which has helped balance our economy overall. What will be key moving forward will be boosting productivity, income and demand, through technology. Thirdly, labor force participation is also critical for Indonesia and will become even more pressing in the years to come. By increasing labor force participation, Indonesia could add USD$135 billion to GDP annually by 2025. Finally, innovation here can also be a game-changer. We have been among the digital pioneers and this is just the start, as automation and artificial intelligence technologies increasingly get adopted in workplaces.
What is your view of the Indonesia economic outlook in 2019?
Indonesia’s economy can be casually described as “stable but noisy”. It not well known, but – despite some well-known changes to the exchange rate, to commodity prices etc.- it is the most stable large economies in the world in terms of consistency of growth, over the last 15 years. There are good reasons for it: we have a balanced economy that is driven by consumer spending, with a relatively low level of debt. Despite the headwinds from the global economy with slowing growth in the US and China and contraction in Germany and Japan in Q3, given Indonesia’s resilience, we are optimistic about Indonesia’s economic prospects. But we do see a rebalancing of where this growth will come from. The rise of digital and the emergence of a large middle class are changing our economy. More specifically.
We see major shifts in retail, where online commerce will grow – according to our research, by 8 times by 2022, generating 30 percent new consumption. Traditional formats are struggling, down more than 20%, but even new retails formats – beyond digital – are up 20%+ for the year. More broadly, we see the digital “revolution” creating massive upside for Indonesia, especially in financial services and in services, to the tune of US$150 billion in additional economic output by 2025. The rise of the middle class – we add 5 million people, or one Singapore, every year to our middle class – is changing consumption patterns. Creative and service industries are seeing sustained demand.