Should investors follow hipster surfers to Bali’s Canggu?

/ EdgeProp Singapore
April 27, 2019 11:23 PM SGT
Foreign tourists to Indonesia hit a record 15.8 million last year, 13% higher than a year ago, according to Indonesia’s statistics bureau. Bali, the most popular tourist destination in Indonesia, had the lion’s share at 6.07 million, 38% of the total and up 6.6% from the previous year.
Topping the chart in terms of foreign visitors to Bali is China in first place with 22.5%, followed by Australia (19.3%) and India (5.8%). Bali’s Tourism Promotion Agency has set a target of eight million foreign visitors by the end of this year, or 40% of Indonesia’s total foreign tourist arrival target in 2019.
This year, 1,764 new hotel rooms are expected to open in Bali by 3Q2019, says Colliers International in its 1Q2019 research report. These comprise 969 four-star hotel rooms and 795 five-star hotel rooms.
The average hotel occupancy rate for Bali was 71.1% last year, said Ferry Salanto, Jakarta-based senior associate director of Colliers International Indonesia, in the report. On the back of stronger inbound tourism, he is projecting occupancy rates to reach 75-80% this year. The average daily rate of hotels in Bali was US$116 ($158) last year, and is expected to increase to US$117-118 by end of 2020.
While the overall average hotel occupancy rate in Bali may be around 71%, beachfront properties like those in Canggu tend to enjoy higher occupancy rates (Credit: Edwin Chua)

Capitalising on strong tourism

The strong tourism figures in Bali have also ushered in the popularity of “apart-hotels”, says Alice Tan, Knight Frank director of residential project marketing. “The apart-hotel concept is refreshing as investors can count on the strong tourism numbers to support hotel occupancy rates in such assets, especially in an established international tourist destination like Bali.”
However, there are three factors to consider before investing in any project, cautions Tan: its location; background and track record of the developer; and the type of guaranteed rental return (GRR) package offered. “The success of such a concept hinges on the commitment of the developer,” she says. “Typically, the GRR schemes are only for two to three years, or five years at most.”
Tan points to the upcoming Citadines Berawa Beach as an example. Developed by Indonesian developer Genesis Indojaya, the 226-unit serviced residences is located on...