973-723-0423

This is the first post, in a series of four, that briefly examines the tourism potential of four provinces in Eastern Indonesia. The posts include:

  • Tourism Potential in North Sulawesi Province, Indonesia
  • Tourism Potential in Sulawesi Selatan, Indonesia
  • Tourism Potential in Maluku Province, Indonesia
  • Tourism Potential of West Papua Province, Indonesia

We plan to roll-out the posts over the next few weeks. Let us know if you want a PDF report of any post. A PDF report for each post is available by email.

Background

North Sulawesi (Sulawesi Utara) is an Indonesian province located in the northeastern peninsula of the greater island of Sulawesi. Separated by the Celebes Sea, it is located directly south of the Philippines, and is bordered by the Maluku Sea to the east, Gorontalo province to the west, and the Gulf of Tomini to the south.

North Sulawesi is approximately 14,000 square km, with a population of nearly 2.4 million. This gives the province a slightly above-average population density of 180 per square km, compared to Indonesia’s of 141 per square km average. The capital and largest city of North Sulawesi is Manado, which is situated in the northeast of the province, and has a population of about 430,000. North Sulawesi is comprised of eleven individual regencies and four independent cities.

North Sulawesi is a promising region for hospitality developers, investors, and tourism entrepreneurs. In 2018, the province placed seventh out of all 34 provinces in its human development index and was only one of eight provinces to be placed in the “High Human Development” category. The Human Development Index measures economic development and economic welfare. It combines three indexes to create an overall score between 0 and 1, with 1 representing a high level of economic development. The three indexes are life expectancy, education, and income. North Sulawesi scored 0 .722, which places it above the national average of 0.713.

Marine and eco-tourism largely drive North Sulawesi’s tourism market, given its abundance of notable and easily accessible diving sites. Successful hospitality enterprises will most likely be constructed to cater to beachfront activity industries. However, the mountainous topography of North Sulawesi’s mainland allows for successful alternative hospitality businesses. Private nature walks and guided treks are among the most popular paid services on the mainland.

Manado City – The Largest City in the North Sulawesi Province

Visitor Attractions

North Sulawesi’s four large cities and expansive coastline provide the region with many activities for visitors. The major attractions of the province are attributed to its beautiful beachfront, mainly scuba diving and snorkeling. Among the most popular diving sites are Bunaken’s National Marine Park, and off the Lembeh Strait. In addition, North Sulawesi’s many notable beaches, such as Paal, Pulisan, and Likupang, offer an excellent snorkeling experience.

For visitors that prefer to stay on the mainland throughout their stay, North Sulawesi also offers a range of options. Given its mountainous topography, there are several impressive hiking sites, such as Tangkoko National Park and its accompanying research station, Mount Klabat, and Nani Wartabone National Park. These sites all offer reasonably priced options for private wildlife tours and guided treks. Popular landmarks in North Sulawesi are Christ Blessing, Ban Hin Kiong Temple, and the Soekarno Bridge, all of which are easily accessible to visitors.

Visitor Arrivals

The number of international visitors to North Sulawesi has grown from 16,930 in 2004 to 122,100 in 2018, a CAGR of 15.2%. This long-term growth rate masks the fact that the growth of international visitors to North Sulawesi has occurred in two distinct phases as illustrated in the graph below. For 12 years between 2004 and 2015 the number of international visitors to North Sulawesi averaged about 19,700 per year, oscillating between a low of 15,800 in 2005 to a high of 29,700 in 2009. Over the period, international visitor arrivals grew at a CAGR of 1.3%.

Historical & Forecast Growth of International Visitors to North Sulawesi, 2004-2020

Source: BPS – Provinsi Sulawesi Utara & Hotel Investment Strategies, LLC

In the space of three years, the tourist industry in North Sulawesi has been transformed dramatically with the introduction of charter flights from China. Beginning in July 2016, the national airlines of Lion Air, Sriwijaya Air and Citilink started flying passengers directly from cities such as Macau, Shenzhen, Chongqing, Wuhan, Shanghai, Changsa and Guangzhou. Citilink also began a service from Hong Kong. Prior to the introduction of these services about 250 Chinese visitors per month visited the province. This jumped to almost 4,300 per month after the services began.  

For 12 years between 2004 and 2015 the number of international visitors to North Sulawesi averaged about 19,700 per year, oscillating between a low of 15,800 in 2005 to a high of 29,700 in 2009. With the introduction of direct flights from China to the City of Manado, the number of international visitors has grown from 19,465 in 2015 to 122,100 in 2018, a CAGR of 43.7%. 

The number of international visitors has slowed in 2019 with a forecast growth rate of 5.1% in 2019 and 7.6% in 2020. It is forecast to grow by almost 17% in 2021.

In 2018, 842,000 visitors in total used classified hotels in North Sulawesi, with a breakdown of 148,360 foreign and 693,870 domestic visitors. During the same year, non-classified hotels in the province attracted 21,083 foreign and 471,113 domestic visitors.

Connectivity/Access

North Sulawesi’s prime location and transportation infrastructure provide visitors with easy access to both the province and inter-provincial travel to other regions in Indonesia. Located just 30 minutes outside of Manado, Sam Ratulangi International Airport is one of the 11 main entry ports to Indonesia, as designated by the Ministry of Tourism and Culture. The airport is considered the gateway into both North Sulawesi and the Bunaken National Marine Park. Taxi services and buses are available for transportation from the airport to visitor destinations. While visitors to North Sulawesi most commonly arrive by plane, the province is also accessible by boat from the Philippines. Roll on Roll Off (RoRo) ships can be taken to Bitung from General Santos and Davao in the Philippines. Visitors will have access to the Trans-Sulawesi Railway, which is currently under construction. The railway is planned to have various stations dispersed throughout Northern Sulawesi and will connect to other provinces on the greater Sulawesi island.

Hotel Market Overview

The number of classified (star rated) and non-classified hotel rooms in North Sulawesi has grown at different rates since 2004, as illustrated in the graph below. The number of star-rated hotel rooms has grown from 1,502 in 2004 to 3,072 in 2018, a CAGR of 5.2%. Over the same period, the number of non-classified hotel rooms has grown from 1,209 to 4,766, a CAGR of 10.3%.

The accompanying graph highlights that there was little growth in the number of star -rated hotel rooms between 2008 and 2016. Both classified and non-classified categories saw significant additions to room supply in 2018.

Growth in the Number of Classified & Non-Classified Hotel Rooms in North Sulawesi Province 2004-2018

Source: BPS-Statistics of North Sulawesi Province. Note: No official data is available for 2017, but we have used an interpolation technique to derive an estimate for 2017.

The composition of today’s accommodation sector in North Sulawesi has evolved slowly over the past five years. Catering to a wide range of domestic and international guests, the number of star-rated hotels has grown from 25 in 2013 to 35 in 2018.  Over the same period, the number of star-rated hotel rooms has grown from 2,182 to 3,072, a CAGR 7.1%. This compares with national CAGRs for star-rated hotels and rooms of 13% and 10% respectively.

Growth in the Number of Hotel Rooms by Star-Rating in North Sulawesi Province 2013 -2018

Source: BPS – Statistics of North Sulawesi Province

Non-classified accommodation has grown at about the same rate as star rated hotels over the past five years. The number of non-classified hotel rooms has grown from 3,342 in 2013 to 4,766 in 2018, a CAGR of 7.4%. The majority are found in Manado.

The demand for star-rated hotel accommodation has grown rapidly in North Sulawesi as illustrated in the following graphs. The number of domestic guests, which accounted for 82% of all guests in classified hotels in 2018, grew from 88,200 in 2003 to 693,900 in 2018, a CAGR of 15%.

Growth in Number of Domestic Guests Staying in Star Rated Hotels in North Sulawesi 2007 – 2018

Source: BPS – Statistics of North Sulawesi Province

While foreign guests accounted for 18% of all guests in star-rated hotels in 2018, their growth is a little stronger than the growth in domestic guests. The number of foreign guests staying in classified hotels has grown from 8,900 in 2003 to 148,360 in 2018, a CAGR of 21%.  Over the past three years, 4-star hotels have captured a significant proportion of foreign guests, as illustrated below.

The significant jump in foreign guests in 4-star hotels is explained by the significant jump in visitors from China over the past three years.  Refer to the earlier graph on the growth in international visitors to North Sulawesi.

Growth in Number of Foreign Guests Staying in Star Rated Hotels in North Sulawesi 2003 – 2018

Source: BPS – Statistics of North Sulawesi Province

North Sulawesi’s 4-star hotel market has been the major beneficiary of the significant growth in visitors from China over the past three years as illustrated in the graph below.

Its performance over the long term (1998-2019) can be broken down to four phases:

  1. 1998-2004 – occupancies rose sharply from about 28% to about 43% in 2004
  2. 2005-2010 – occupancies fell from a high of about 48% in 2005 to 36% in 2010
  3. 2011-2017 – occupancies rose sharply from an occupancy of about 48% in 2011 to 71% in 2017
  4. 2018-2019 – despite the significant growth in foreign tourists over the past couple of years, occupancies have moderated from a high of 71.4% in 2018 and is expected to finish 2019 at 67.4%.

Growth in Historical & Forecast Hotel Room Occupancy in 4-Star Rated Hotels – North Sulawesi 1999-2021

Source: BPS – Statistics of North Sulawesi Province & Hotel Investment Strategies, LLC

The 3-star market has behaved in its own idiosyncratic way and reflects the dynamics of supply and demand changes in the market. The segment achieved an annual occupancy of 63% in 2018 and is forecast to end 2019 with an occupancy of 63.5%.  Room occupancy is forecast to decline slightly to 59% in 2021 and 58% in 2020.

Growth in Historical & Forecast Hotel Room Occupancy in 3-Star Rated Hotels – North Sulawesi 1999-2021

Source: BPS – Statistics of North Sulawesi Province & Hotel Investment Strategies, LLC

Bunaken National Park

Among the most popular attractions that North Sulawesi has to offer is Bunaken National Marine Park. Bunaken is an island located at the northern tip of Sulawesi, (as displayed in the map below). The National Park is predominantly aquatic. While Bunaken island is only 8 square km, the Park covers approximately 891 square km, making it 97% aquatic habitat. The other islands included in the park that comprise of the remaining 3% terrestrial habitat are Manado Tua, Mantehage, Nain, and Siladen.

Visitors to Bunaken will be pleased to find that water temperatures average between 27 and 29°C, which makes for a very comfortable snorkeling or diving experience. Visitors will also be pleased to find that over 70% of all fish species in the Indo-Western Pacific can be seen within the domain of the park.

Location of Bunaken National Park

Conclusion

The province of North Sulawesi is ideal for the development of future tourist facilities. A developing economy paired with world-class diving sites and tourist attractions give it the potential to be a leading destination in eastern Indonesia for both foreign and domestic visitors. While North Sulawesi’s visitor arrivals is projected to sustain continued growth, its tourism market is unsaturated. This offers developers, investors, and entrepreneurs the assurance that North Sulawesi is fully capable of maintaining a financially lucrative tourism business.

As international visitors and domestic travelers are anticipated to grow, they are expected to bring about corresponding increases in both capacity requirements and demand for new facilities and services. This paves the way for local and foreign investment opportunities.

Future accommodation facilities must be built to address these lodging requirements for both foreign and domestic travelers. The Trans-Sulawesi Railroad, which is currently under construction, will likely open investment opportunities for future transport when fully operational.