As governments around the world grapple with the enormity of the current economic downturn caused by the COVID-19 pandemic, hospitality operators seek to forecast the depth and duration of the current downturn. With occupancy rates dropping to as low as 20% for many of Bali’s hotels and resorts according to the Indonesia Hotel and Restaurant Association (PHRI), we decided to examine the immediate impact of previous economic shocks on the growth in foreign tourist arrivals to Bali after the initial shock. The impact is calculated by quantifying the difference between the forecasted growth of foreign visitors beginning the month before the economic shock and the actual arrival of foreign visitors. The shocks included:
- 1997 Asian Financial Crisis – July 1997
- 2002 Bali Bombings – October 2002
- 2005 Bali Bombings – October 2005
- SARS – February 2003, and
- Mount Agung volcanic eruptions – September 2017 – June 2018
The impact of these irregular or random events can be observed in the following graph. It is not possible to observe the impact of the SARS epidemic in 2003 as it began several months after the 2002 Bali bombing.
The 1997 Asian Financial Crisis which began in July 1997 had an almost immediate impact on the number of visitor arrivals to Bali. The forecasted number for the first twelve months (July 1997 – June 1998) was about 1,314,000 compared to the actual number of 1,139,000, a decline of 175,000 or 15.4%.
The Impact of the Asian Financial Crisis, Terrorist Bombings and Volcanic Eruptions on the Historical Growth of Foreign Visitors to Bali January 2002 – February 2020
The immediate impact of the 2002 Bali bombings on foreign visitor arrivals to Bali can be seen in the accompanying graph. Actual visitor arrivals after the 2002 bombings were not able to recover to pre – October forecasts before the 2005 October Bali bombings. Actual visitor arrivals were down 70% on forecasted visitor arrivals for the first twelve months after the bombings. It was followed by a decline of 16% in the second year and 9% in the third year.
Historical & Forecast Growth (Pre – October 2002 Bali Bombings) on Foreign Visitor Arrivals to Bali
The immediate impact of the 2005 Bali bombings on foreign visitor arrivals to Bali can be seen in the accompanying graph. Actual visitor arrivals after the 2005 bombings were able to exceed to the pre – October forecasts in the third year after the bombings. Actual visitor arrivals were down 39% on forecasted visitor arrivals for the first twelve months after the bombings. It was followed by a decline of 6% in the second year but a growth of 10.4% in the third year.
Historical & Forecast Growth (Pre – October 2005 Bali Bombings) on Foreign Visitor Arrivals to Bali
Mount Agung, a volcano on the island of Bali, erupted five times in late November 2017, causing thousands to evacuate, disrupting air travel and causing environmental damage. Since September 2017 the number of foreign visitors to Bali has not recovered to its pre September forecasts due to a combination of factors, including continuing volcanic activity, uncertainty due to trade wars between China and the US and the coronavirus pandemic.
Historical & Forecast Growth (Pre – September 2017 Mount Agung Volcanic Eruptions ) on Foreign Visitor Arrivals to Bali
The extent to which the current slump in foreign visitors to Bali dissipates over the next three to six months will depend on the ability of potential source markets to control and minimize the spread of coronavirus in their own countries and the ability of the Indonesian government to control the spread of the disease in the country’s major tourist destinations.
Making detailed projections about the timing and nature of the recovery of foreign visitors to Bali is a fool’s errand, but the previous impact of the major demand shocks on Bali’s international visitor market may provide some guidelines for future planning.