After welcoming 8.8m visitors in 2013, Indonesia’s tourism industry is set for further expansion in 2014, bolstered by growing foreign investment in hotel construction. While Bali and Jakarta typically receive most international visitors, the pristine and unique province of East Nusa Tenggara (ENT) is also slated to see its visitor arrivals and regional infrastructure grow, bolstered by the increasing global popularity of its diverse attractions, including the world-famous Komodo Island. The government has ramped up efforts to promote the province in recent years, with opportunities for hotel investment underpinned by planned airport upgrades, while new flight services should enhance accessibility.
Overview
Located in the eastern region of the Lesser Sunda Islands, ENT, known within Indonesia as Nusa Tenggara Timur (NTT) is a geographically and culturally diverse province. Predominantly Catholic and heavily influenced by Portuguese colonists, the area is known for its European heritage and unique natural beauty. NTT is made up of 566 islands, with Flores, Sumba and West Timor (part of Timor island) home to the largest urban centres. Others include Adonara, Alor, Komodo, Lembata, Menipo, Raijua, Rincah, Rote, Savu, Semau and Solor. West Timor is the principal landmass in terms of population and home to the regional capital, Kupang.
NTT’s islands are formed by protruding peaks of a mountain chain spanning from northern Sumatra and across Java to the east. The rare ecosystem offers a host of natural wonders, which are expected to boost future tourism development, including Komodo Island, with its population of Komodo dragons, Kelimutu volcano on Flores, Mount Mutis to the east of Kupang, Nihiwatu Beach on Sumba Island, and Nemberala Beach on Rote.
Outside of tourism, NTT’s economic activities are largely constrained to agriculture, fisheries and mining, with the tourism, fishery and animal husbandry sectors contributing 56% to regional GDP, according to Abraham Klakik, head of the provincial tourism agency for the Ministry of Tourism and Creative Economy (MTCE). In a 2012 interview with Antara News, Klakik reported that these sectors increased their contribution to regional GDP by 11% annually between 2009 and 2012, with tourism expected to become the main long-term growth driver in the province.
National Strategy
Tourism promotion and economic development of the historically poorer eastern regions of Indonesia have been highlighted under the government’s Master Plan for the Acceleration and Expansion of Indonesia’s Economic Development 2011-25 (MP3EI), with the Bali-Nusa Tenggara corridor receiving special focus on tourism development.
In late 2012, President Susilo Bambang Yudhoyono visited NTT in an effort to highlight the need for investment in that part of the country, announcing that 48% of the government’s 2012 infrastructure budget of Rp194trn ($19.4bn) would go to projects in eastern Indonesia. Meanwhile, NTT’s provincial government is working to expand the tourism industry to become an economic pillar for the province’s 4.6m inhabitants.
Tourism inflows to NTT have increased tremendously in recent years, rising from 148,763 visitors in 2010, to 412,072 in 2011. According to Klakik, the province hoped to attract 1m tourist arrivals in 2013, up from 750,000 visitors in 2012.
Komodo National Park
Located between the islands of Sumbawa and Flores, Komodo National Park (KNP) is spread over three main islands, Rinca, Komodo and Padar, and numerous smaller ones. Covering an area of 219,322 ha, the park is home to a diverse ecosystem, which includes open grass-woodland savannah, tropical deciduous forest and quasi-cloud forests. KNP was initially established to conserve the population of Komodo dragons, which are estimated at 5700, with native colonies on each of Komodo, Gila Motang, Rinca and Flores. In 1977, the park was declared a biosphere reserve by the UN Educational, Scientific and Cultural Organisation, with Komodo Island designated a World Heritage Site in 1991. The government has ramped up efforts to promote the island internationally in recent years, hoping to bolster visitor numbers and enhance local economic development through entrance fees charged at the park. In 2011 the MTCE began a six-month festival on Flores, gateway to Komodo Island, after the park was announced as a finalist to become one of the New7Wonders of Nature. The New7Wonders Foundation announced that the island’s bid was successful in May 2012, with KNP officially inaugurated in September 2013. Since then, there has been a steady rise in the number of foreign tourists. In December 2013, Sustyo Iriyono, a KNP spokesperson, announced that more than 60,000 tourists from 104 countries visited the park in 2013, a jump of 10,000 visitors, or 20% growth, over 2012. Tourists from the US, Russia, Germany, Italy and South Korea comprised most arrivals, with Iriyono reporting that the park could become a profitable venture generating substantial tourism revenues, if entry ticket prices were raised from current levels of Rp2000 ($0.20) for domestic tourists and Rp20,000 ($2) for foreign visitors.
Sailing also represents a future source for increased revenue and visitor numbers. NTT is already serviced by vessels travelling from Jakarta, Surabaya, Denpasar, Makassar and Biak. An annual touring sailing event, created under the Sail Indonesia umbrella, was held in NTT for the first time in 2013, and could set the stage for sailing to expand its contribution to tourism revenues. Yudhoyono attended the opening ceremonies of Sail Komodo 2013, titling it “The golden bridge toward East Nusa Tengarra”, in September 2013.
Infrastructure Upgrades
In April 2014, Mari Elka Pangestu, Indonesia’s minister of tourism and creative economy, announced that tourism investments reached $602.6m in 2013, of which $462.5m came from foreign investments, driven by new hotel construction and expansion of existing international chains.
The fishing settlement of Labuan Bajo on Flores, the entry point to Komodo Island, has seen a steady influx of domestic and foreign tourists following the New7Wonders announcement. However, provincial officials reported in 2012 that tourists had been forced to postpone visits to the town during peak season, as existing facilities consistently stood at 100% occupancy. As such, opportunities for future hotel investment in NTT are plentiful. According to Statistics Indonesia, the province offered just 18 classified hotels, with a total of 1458 beds as of 2013. Some 34,836 guests stayed in the province’s non-classified hotels and 57,300 in classified hotels in 2011.
Aviation upgrades will also help to meet new tourism demand, with handling capacity increased in 2012 and several new projects set to commence in 2014. NTT currently has 14 airports, although most can only accommodate small airplanes such as MA-60s, Fokker 50s and ATR 72s. Flight services are relatively limited; Kupang serves Darwin in Australia twice a week, while regular shuttle flights from Bali, Makassar and Surabaya provide additional connections. In the run-up to Sail Komodo 2013, NTT moved forward on three new runway extension projects at Komodo Airport in Labuan Bajo, Frans Seda, also on Flores, and Umbu Mehang Kunda on Sumba. The airports previously offered 1.85-km long runways capable of accommodating Boeing 737-300 aircraft, with Komodo and Frans Seda later extending their runways by 200 metres, while Umbu Mehang Kunda extended its runway by 600 metres, respectively.
Future expansion of Komodo Airport could dramatically improve visitor arrivals. The Ministry of Transportation’s (MoT) air transportation directorate general allocated Rp5.6trn ($560m) in 2014 to build and maintain 178 non-commercial airports under its management, while Bambang Tjahyono, airports director at the MoT, has announced the ministry is preparing documents to tender management of three non-commercial airports, including Komodo, in the first quarter of 2014. The ministry plans to tender 10 additional airports after the first three tenders, selecting high-potential facilities witnessing arrivals of more than 500,000 passengers annually, as well as double-digit growth.
Komodo Airport, with an estimated 800,000 annual passengers, represents one of the best opportunities for near-term investment. In April 2014, Indonesian flagship carrier Garuda announced it would be the first company to submit a proposal to take over management of the airport. Tjahyono told the Jakarta Post that Garuda had submitted a written statement to express its interest due to Komodo’s potential. Garuda had already begun offering direct flights to Komodo in late 2013, with early successes leading to the April proposal. Given that Indonesia’s visitor arrivals exceeded 8.8m in 2013, and are set to reach 10m in 2014, new arrivals, coupled with a growing interest in visiting less-frequented sites, should continue to drive NTT’s growth.
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