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Bali: luxury and luxuriance

After several difficult years, Bali is back on its feet because the Indonesian island succeeded in preserving its tourism potential. An upscale destination, the island continues to attract hotel developers. Many small luxury properties flourish amidst rice fields or near the beaches on this paradise island with its exclusive and intimate retreats.

Bali offended, but Bali refound. The small Indonesian island is rising back up after a painful period. Murderous terrorist attacks, tsunami, earthquake, SARS, aviary flu: the trials have been many for this vast 3,500 resort. October 12, 2002 dealt a brutal blow to tourism growth that had been constant on the “island of the gods” for two decades. On that day, a terrorist attack caused more than 200 deaths at a beach resort in Kuta with a devastating effect on its primary economic resource. Australian neighbors, the resorts second clientele, were at the center of the target of that explosion. They deserted Bali in 2002 (-23.2%) and 2003 (-24.3%), with the Japanese -the island’s greatest amateurs- and long haul clientele following in their wake.The event will precede another major meeting held in December: a UN summit on global warming. A subject that is particularly sensitive for this island where the coral reefs are endangered. And it constitutes one last challenge for this island that is both economically and socially fragile. Many hoteliers are committed to sustainable development such as the Conrad Bali, which just received its Green Globe certification. Preserving its natural resources, controlling tourism development without denaturing an island with its original charm still intact is the best way to guarantee that Bali’s success story continues.Fortunately, the island has very powerful charms. The appeal of Bali, member of the Top 3 worldwide in terms of heavenly islands along with Phuket and Mauritius, allowed it to reverse its negative spin. After a catastrophic 2003, 2004 beat occupancy records with nearly 1.5 million tourists versus less than a million the previous year. Australians made a strong return (+92.4%), even surpassing their volume in 2001 with 267,520 visitors. The same rapid recovery occurred for the Japanese and Europeans, the primary clientele of luxury hotels.En route towards a new record, Bali felt a new shock almost exactly three years after the first terrorist attack. The Jamaah Islamiyah hit Kuta and Jimbaran once again, causing 30 deaths and a hundred or so wounded. This grievous anniversary had a less immediate effect. The year 2005 recorded 1.4 million tourist arrivals. Nonetheless, the first months of 2006 were difficult. “Business remained slow until July,” observes Michael Burchett, general manager of the Conrad Bali and president of the island’s hoteliers’ Association, “but despite a drop in occupancy across the year, average daily rates continue to increase.” Hoteliers can now see the end of the tunnel, and 2007 already looks “like one of the best years in history,” according to Nicolas Pillet, general manager of Ubud Hanging Gardens.These tragic events painfully showed how fragile Bali’s rapid tourism development is and raised the awareness of all the sector’s players. “Until 2002, tourists came all by themselves; there was no need to make the slightest effort to attract them,” remarks Nicolas Pillet. Several initiatives were taken to reassure sensitized clientele. Security was reinforced around resorts. Some cities such as Sanur were outfitted with surveillance cameras. A tsunami alert system was implemented near the island’s main beaches. The final challenge: show that the Ngurah Rai airport in Denpasar is not the most dangerous in the world, which many Americans continue to believe.Simultaneously, the Bali Recovery program, despite its weaknesses, has resulted in promotional and press campaigns, inaugurating a veritable marketing program for the destination. Such efforts became necessary for finding new sources of clientele after the debacle in 2003. This necessary diversification made it possible to discover several sources just a few hours flight away. Malaysians and Singaporeans took advantage of major promotions to discover the island. Along with them, the Taiwanese and Koreans, already conquered, supported the activity during the difficult times. All these clientele represent strong potential for luxury hotels. Koreans first and foremost are “a key market for honeymoons,” underscores Michael Burchett. Advantage for hoteliers: weddings in Korea mostly take place in April-May and in October- November. Which is outside the high tourist season that runs from June to September.Definitively speaking, the Hindu enclave of the largest Muslim country preserves its growth potential and continues to attract the hotel trade. “Bali is experiencing a period of major investment at a time when the island is becoming a real luxury destination, one of the most exclusive playgrounds in the world,” observes David Carey, the general manager of MC2, a local developer that supports the establishment of the Hawaiian group Outrigger. Far from the mass tourism of Kuta, VIP quarters are taking shape in Ubud, the island’s geographic and cultural center, on the beaches of Jimbaran and Seminyak or on the peninsula of Bukit, near Uluwatu and Nusa Dua. No loss of interest may be observed. Projects continue to be as numerous as ever. St Regis, Banyan Tree, Anantara, Outrigger will all make their mark in the two years to come. And yet the opening rate was already very high: the Conrad Bali has been open for three years, Uma Ubud and Ubud Hanging Gardens are just barely two years old. “Growth in the supply shows Bali’s continuing appeal to the upscale traveler,” explains Vincent Guironnet, manager of Four Seasons at Jimbaran.In the 2000s, authorities supported upscale tourism development on the peninsula of Bukit. Several groups established their presence there such as Angsana, the little sister of Banyan Tree, Alila and Bulgari. Opened at the end of 2006 at Uluwatu, the second fruit of the JV between Ritz-Carlton and the Italian jeweler perches atop a cliff looking out over the sea. Its 59 rooms expertly blend Bali’s architectural tradition with Italian design, the Bulgari is characteristic of the current development trend on the island: properties with voluntarily limited inventories, consisting only of private villas, each with its own private swimming pool, and a spa worthy of that name. Intimate hotels where calm and sensual pleasure are not just words. The Bale and Kayumanis hotels even push minimalism to its climax in a concern for tranquility, going so far as to proscribe children under 16.For well-to-do clientele, there is thus an incredibly vast selection. Alongside large luxury resorts such as the Four Seasons Jimbaran Bay, Ritz-Carlton, Conrad and soon St Regis, a multitude of boutique hotels, each with its own concept, make up Bali’s ultra-luxury landscape: Amandari, Amankila and Amanusa, the three Amanresorts; the Chedi and Legian, two GHM hotels, the other group owned by Adrian Zecha; the Alila Maggis and Ubud the Jimbaran Puri and Ubud Hang-ing Gardens, ex- Pansea, now two Orient Express properties after the takeover of the small French group, or even Uma Ubud and Shambhala Estate at Begawan Giri owned by the group Como.A faraway destination, sold mostly through tour-operators, Bali may be discovered in just ten days– except for the Japanese who, less available, don’t stay as long. Today, increasing numbers of visitors add a more cultural angle to the unavoidable beach resort holiday by visiting Ubud, at the center of the island in the middle of the rice fields. The result: it is important for hotel groups to have both offers in their portfolio. Thanks to their small size, it is easier to establish boutique hotels. Four Seasons followed the example by opening Four Seasons at Sayan - 18 suites and 42 villas – near Ubud. “Many of our guests stay at both our properties in Bali during their sojourn,” confirms Vincent Guironnet.With this constant renewal of the supply, it is not easy to stay at the top in Bali. “We opened just two years ago and it feels as if our concept dates back to ten years ago when I look at the new projects,” remarks Nicolas Pillet. “In order to last, you have to be strong; it is necessary to have a group backing you in order to make renovations and constantly refresh”. This aspect is necessary because Bali has its devotees: clients don’t hesitate to travel thousands of kilometers to return to the unique atmosphere of “the island of the gods”. A main asset of the island, according to Nicolas Pillet: “Bali offers a very good quality for price value. Even with the ticket a stay there is less expensive than on the Côte d’Azur”.Other actors target this clientele and have joined an already tough competition: luxury rental villas such as Rice Terrace Villas, Villa Iseh or the six villas from Ahimsa Real Estate. “This segment is in full expansion. Many private villas and residences are being built to satisfy the strong demand for this type of accommodation,” underscores Vincent Guironnet. Hotel groups are finding a way to fight back. Banyan Tree will launch its Private Residences near Uluwatu. At Jimbaran, Four Seasons has had nine villas with two to four rooms for some time now. A success: “they are very popular for family vacations and weddings,” confirms Vincent Guironnet. The St Regis and the Panorama Bali & Resort & Spa from Outrigger go even further by selling these “homes away from home”. In addition to its 79 suites, the hotel by the Starwood group will offer sixty residences to the highest bidders. Of Outrigger’s 170 units of condominium resort, only 35 will be reserved for hotel operations.Can Bali absorb this intense development? “With an activity back on an uptrend all the hotels will meet with success,” predicts Michael Burchett. In this competition, each player takes advantage of its assets and for the time being this has had no damaging effects: a global distribution system and brand strength for some, appeal of discovery and intimacy for the others. But it is global promotion that will ensure the destination’s longevity. To achieve this, the government recently approved the idea of opening Indonesian tourist offices in the principal source markets.This is an important advantage at a time when competition is no longer just internal, but also external. Malaysia and Thailand are active on the luxury market, not to mention new emerging destinations. “There are practically no more Swiss in Bali: today they all go to India. In fact, a major Swiss tour-operator comes for an eductour in order to make its travel agents rediscover the destination,” admits Nicolas Pillet. Other challenges await the island. “One of the main ones is to cope with the limited number of seats available on flights and the lack of new routes from Europe or Australia,” explains the president of the Bali Hotels Association.Fortunately, however, the island may rely on the dynamism of new Asian clientele such as the Chinese, who just 2,000 in 2001 grew to 7,000 in 2003, 17,000 end 2005 and nearly 40,000 in 2006. A leisure destination par excellence, the island is also able to explore development niches that continue to be under exploited. The MICE segment in particular. “This market is very limited,” outlines Michael Burchett. By bringing together 450 persons in Bali for a major regional convention, the Starwood group hoped to set an example: “We think Bali is ready – and already was – with its high-quality properties and capacity to host large meetings,” commented Oliver Bonke, VP Sales & Marketing Asia Pacific.The feeling is the same at Four Seasons. “Bali is a unique MICE destination. The local culture makes it sell. We receive regional incentives that fill up slow periods,” explains Vincent Guironnet. In order to stimulate this demand, at the end of the month the Pacific Area Travel Association will organize its annual rendezvous, Travel Mart, in Bali. This offers an opportunity to promote the island among the segment’s deciders.The event will precede another major meeting held in December: a UN summit on global warming. A subject that is particularly sensitive for this island where the coral reefs are endangered. And it constitutes one last challenge for this island that is both economically and socially fragile. Many hoteliers are committed to sustainable development such as the Conrad Bali, which just received its Green Globe certification. Preserving its natural resources, controlling tourism development without denaturing an island with its original charm still intact is the best way to guarantee that Bali’s success story continues.

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