In Indonesia’s Bali, hotels on sale for cheap as coronavirus hammers tourism
- With no tourists and no income courtesy of the pandemic, struggling owners on the resort island have been forced to put their properties up for sale
- While major global chains have the financial firepower to stay afloat, smaller hotels at the budget end of the market are struggling to survive
With no tourists and no income courtesy of the coronavirus pandemic, struggling hotel owners on the Indonesian resort island of Bali have been forced to put their properties up for sale. Given the dire state of the market, some may have to stomach a loss. For investors with a long view, it’s a chance to grab a slice of paradise on the cheap.
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Balangan Wave, a 50-villa resort under construction near its namesake popular surfing beach, has already hit the market, and developer Michael Halim has slashed his asking price to US$9 million from US$17 million in May.
“In the current market, one can’t avoid selling at a loss,” Halim said. “Businesses are closing, there’s cash flow issues.”
A record 6.2 million travellers flocked to the island’s beaches, hotels and yoga retreats in 2019. This year, tourist arrivals slumped 22 per cent to 1.04 million in the first quarter, even before the worst of the outbreak. Now, the usually pumping beach clubs lay quiet and the once-thronged Tanah Lot Temple is deserted.
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While major global chains such as Marriott International and Hilton Worldwide Holdings have the financial firepower to stay afloat, smaller hotels at the budget end of the market are struggling to survive. The number of lodgings listed for sale in Bali has jumped 30 per cent since the pandemic struck, according to Indonesian property firm Galaxy Kuta.
Also looking for a buyer is the two-star POP! Hotel Teuku Umar in Denpasar. With eye-catching neon window frames and interiors, the 140-room hotel was put up for sale for US$7.7 million in May.
Situated a 30-minute taxi ride from Kuta and Seminyak beaches, and with rooms as low as US$14 a night, it was a hit with backpackers. Not any more.
“The hotel has no income at all and has maintenance costs to pay,” said Meirina Rajianto, an agent at Bali-based Galaxy Kuta, who is handling the sale. “The owner decided to sell rather than bleeding more money.”
Still, buyers are likely to remain active as opportunities to buy discounted assets arise, Hamabata said. “We expect most buyers will be driven by three main themes: buying at a discount; buying under-utilised properties to improve them; or buying properties in strategic locations to grow a brand or platform.”
“We are expecting domestic demand will be quicker to recover than international demand,” said JLL’s Hamabata.
That may dent plans to reopen Bali’s economy. Under a three-step strategy, domestic tourists would be allowed back in August, with international sunseekers welcomed in September if everything goes according to plan, The Jakarta Globe reported earlier this month, following a visit by tourism minister Wishnutama Kusubandio to the island.
Even in the best case scenario, it’s unlikely tourists will arrive in droves.
That makes Bali a risky bet. The 5,780-square-kilometre island has more than 4,300 hotels, according to government figures. Intense competition at the budget end of the market had many hotel owners strained even before the virus hit.
“Those with little cash flow to cover the lockdown period and unable to restructure or delay debt payments will likely come under pressure very quickly,” said Govinda Singh, head of hotels and leisure for valuation and advisory services in Asia at Colliers.
