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Indonesia’s star-rated hotels across the 34 provinces hosted 93.4 million room nights in 2017, up 16% from 80.4 million in 2016. Over the past five years (2012-2017) the demand for star-rated hotels (room nights occupied) has grown at a robust CAGR of 24.7%, compared to 17.4% over the ten-year period 2007-2017.

The demand for 2-star hotels, albeit from a small base, has led the way growing by a CAGR of 33% over the past five years. This is followed by 3-star, 4-star, 5-star and 1-star growing at CAGRs of 28.8%, 26%, 16.1%, and 12.3% respectively.

Source: Hotel Investment Strategies, LLC based on an analysis of BPS- Statistics Indonesia – Hotel and Other Accommodation Statistics in Indonesia.

As a result, the distribution of demand has shifted between the rating categories as illustrated in the graph above. In 2007, 5-star hotels captured 23.9% of demand compared to 15.3% in 2017. Today, 3-star hotels account for about 32.4% of demand compared to 24.9% in 2007.

Five-star hotels in the Provinces of Bali and DKI Jakarta captured almost two-thirds (65.3%) of the demand for 5-star hotel accommodation in Indonesia in 2017. Top 10 Provinces for 5-star hotel room demand were Bali (37.7%), DKI Jakarta (27.6%), Sumatera Utara (4.5%), Jawa Barat (4.5%), Jawa Timur (3.8%,) DI Yogyakarta (3.8%), Jawa Tengah (3.7%) Banten (2.8%), Kepulauan Riau (2.3%) and Kalimantan Timur (2.2%).

Only twenty of the 34 provinces in Indonesia hosted guests in 5 star hotels in 2017 as illustrated in the table below. This is up from thirteen provinces in 2007.

The island of Bali accounts for more 4 and 5-star hotel demand compared to any other province. DKI Jakarta captures more 1, 2 and 3-star room nights compared to any other province.

Source: Hotel Investment Strategies, LLC based on an analysis of BPS-Statistics Indonesia data.

While the demand for star rated hotel accommodation across the country grew by 24.7% CAGR over the past five years, the growth in Jakarta and Bali, the two most popular destinations, grew less than the national average, at CAGR 21.2% and 19.5% respectively.

Source: Hotel Investment Strategies, LLC based on Statistics Indonesia data.

The fastest growing Top 5 Provinces for star rated hotel demand for 2012-2017 include Gorontalo (63%), Sulawesi Tengah (44%), Nusa Tenggara Timur (42%), Banten (42%) and Sulawesi Selatan (39%). DKI Jakarta and Bali achieved growth rates below the national average at CAGR 21% and 19% respectively.

While the demand for star rated hotels in Indonesia has grown at CAGR 24.7% since 2012, growth rates have varied considerably over the period from a high of 62.8% for Gorontalo Province to -1.2% in Maluku Utara as illustrated in the graph below.


Source: Hotel Investment Strategies, LLC based on an analysis of BPS-Statistics Indonesia data. Note: While the growth rate for Gorontalo reflects the total growth between 2012 and 2017, total demand for 2017 includes 1, 2, 3 & 4 star room nights compared to only 3 star room nights in 2012.

Indonesia’s growing middle class has recently provided a range of opportunities for tour operators and hoteliers throughout the country. It is likely to have a major impact on the hospitality industry in secondary and third-tier cities and emerging tourist destinations, especially in the eastern part of the country.