Tourism’s contribution to Indonesia’s gross domestic product (GDP) exceeded 5% before the pandemic and the country has vast tourism potential. With its thousands of islands and their diversity of culture and landscape, it can offer a wide variety of tourism experiences. As business travellers provide an important contribution to Indonesian tourism (Figure 5.1), the country seeks to intertwine its cultural heritage with Meetings, Incentives, Conferences and Exhibitions (MICE) tourism, and is currently advocating a strategy to replicate Bali’s success as a tourist destination throughout the Indonesian archipelago.
Economic Outlook for Southeast Asia, China and India 2023
Reviving Tourism Post-Pandemic
Economic Outlook for Southeast Asia, China and India
Indonesia
Source: OECD Development Centre based on data from UNWTO (2022), “Global and regional tourism performance” (database), UN World Tourism Organization, https://www.unwto.org/tourism-data/global-and-regional-tourism-performance.and WTTC (2022), “Indonesia 2022 Annual Research: key highlights”, https://wttc.org/DesktopModules/MVC/FactSheets/pdf/704/131_20220613162338_Indonesia2022_.pdf.
Introduction
Figure 5.1. Arrivals by purpose, 2019
Source: Authors’ calculations based on UNWTO database.
The country’s latest slogan, “Wonderful Indonesia”, promotes appreciation of the archipelago’s diverse cultural heritage and natural beauty. The most successful tourism destination has been Bali, and Indonesia’s “10 New Balis” project seeks to create similar successful tourist areas at ten new cultural destinations. The country’s National Tourism Strategic Areas project includes Lake Toba, Borobudur and Lombok as areas for further development, while the Integrated Tourism Master Plan calls for better connectivity and further development to attract tourists to sites in Sumatra, Java, Kalimantan, Sulawesi, Bali, Nusa Tenggara, Papua, Maluku Islands, and other areas. This country note will examine the “10 New Bali” initiative, the potential offered by blue economy tourism and issues related to human capital in Indonesia’s tourism and hospitality sector.
Current situation and policy challenges
Infrastructure expansion and the “10 New Balis” initiative
Indonesia’s attempt to direct and develop destinations other than Bali has met with resistance from local communities. Several conflicts over land rights developed between communities and prospective tourism developers at sites at Lake Toba and in Lombok (Jong, 2022). In order to be inclusive, dialogue among authorities, key stakeholders and the local community, focusing on the positive aspects of tourism development such as beneficial infrastructure while noting stakeholders’ concerns, is crucial. However, infrastructure development connected to tourism needs a strategy that will reduce negative ramifications on communities. Careful studies of the social impact of the projects are important to ensure that the development includes a community acceptance dimension.
The government can adopt a holistic strategy by involving communities, travel agents, tour operators, airports, seaports (including cruise centres) and other stakeholders, as well as taking account of the culture, traditions and population of each site. A concerted effort is needed to determine how the cultural heritage of existing communities and the uniqueness of that destination can be shared with tourists. This will require earnest efforts by the government to communicate with communities on the benefits of presenting their culture to tourists. In the case of domestic tourists, ample opportunities can be facilitated through regional cultural fairs and interaction with the diverse Indonesia citizenry.
Expanding blue-economy tourism
In terms of maritime leisure, Southeast Asia has much potential. One of the greatest opportunities for Indonesia lies in developing the blue economy tourism industry. With more than 17 000 islands stretching from Sumatra to Papua, Indonesia has the potential to further promote maritime activities. Formulating a policy that facilitates greater maritime leisure activities would have the advantage of bringing tourism to many islands beyond the major destinations such as Bali and Lombok and would thus stimulate economic activity. However, it is important to ensure that blue economy tourism is conducted sustainably, as discussed in the previous chapter. This could be done, for instance, by ensuring protection and conservation of natural and cultural heritage, and encouraging sustainability concept throughout the cruise value chain. Moreover, the socio-economic impact of tourism development on the local communities in coastal villages should also be taken into account.
Indonesia currently has a well-established approach that allows international yachters to anchor at any of its international ports of call across the archipelago. The government has made it convenient for international ships to validate their entry permit online. This can help bolster tourist arrival numbers. Indonesia has also initiated a strategy of promoting a major port-of-call event each year since 2009, when the first such event, Sail Bunaken 2009, was held. The latest, Sail Nias 2019, placed the north Sumatran island of Nias on the map of prospective adventure yachters. This strategy of promoting a different port and its region each year should continue, together with developing infrastructure from ports to villages and attractions which are in line with local culture, working closely with local residents and agencies to enunciate clear and unique tourism products and packages, and expanding market reach by deepening networks with other ports in Southeast Asia to boost intra-ASEAN cruise and yacht tourism.
Human capital and education
Human capital is another challenge for Indonesia’s tourism and hospitality industry. Much of the workforce comes from vocational institutions, with only a small number of graduates having university education in tourism (Rosyidi, 2021). In addition, there is evidence that many multinational hotels favour expatriates over locals as senior managers. In a recent study, local managers said there was an average two-year turnover for expatriates, while they remained in their positions unpromoted (Situmorang and Japutra, 2019). These two factors suggest that greater effort is needed to improve skills and education in this sector.
One example is by encouraging student exchanges and internship programmes that facilitate travel by tourism students to other countries for further education and training. Overseas experience might help local graduates to become candidates for higher managerial positions at multinational hotels. A stronger government thrust is also needed to convince multinational tourism and hospitality companies to facilitate work for local senior managers in their overseas operations. This would allow Indonesian managers to gain experience and improve their skills.
References
IMF (2022), “World Economic Outlook Database” (accessed October 2022).
Jong, H. N. (2020). “Indonesia’s push to become a tourism paradise sidelines land rights”, Mongabay Series: Southeast Asian infrastructure, Jakarta, https://news.mongabay.com/2020/01/indonesia-tourism-development-infrastructure-land-rights-indigenous-investment/.
Rosyidi, M.I. (2021), “Undergraduate students’ perceptions and attitudes towards a career in tourism industry: The case of Indonesia”, Jurnal Manajemen Dan Kewirausahaan, Vol. 23/1, https://jurnalmanajemen.petra.ac.id/index.php/man/article/view/23360, pp. 40–51.
Situmorang, R. and A. Japutra (2019), “Foreign versus local managers: Finding the perfect leaders for multinational hotel subsidiaries”, International Journal of Hospitality Management, Vol. 78, https://doi.org/10.1016/j.ijhm.2018.11.015, pp. 68–77.
UNWTO (2022), “Global and regional tourism performance” (database), UN World Tourism Organization, https://www.unwto.org/tourism-data/global-and-regional-tourism-performance (accessed on 25 October 2022).
WTTC (2022), “Indonesia 2022 Annual Research: key highlights”, https://wttc.org/DesktopModules/MVC/FactSheets/pdf/704/131_20220613162338_Indonesia2022_.pdf.