According to global research firm McKinsey, Indonesia is among the fastest growing emerging markets in the world today, with a budding middle class that is gaining more disposable income on average each year. Indonesia’s economy could become the world’s seventh largest by 2030, up from 16th today.
The country is made up of more than 17,000 islands. Each island has its own potential for business and tourism and for the past few years, the tourism sector in the country has seen steady growth. So how can local businesses truly capitalize on Indonesia’s travel sector growth? Some stakeholders recommend striking while the iron is hot.
Skyscanner is a global travel search company, providing a free online search engine for flights, hotels and car hires around the world. Founded in 2003, the tech company is available in 30 languages and helps more than 60 million people each month find travel options.
According to Skyscanner Country Marketing Manager for Indonesia Yulianto Balawan, the Indonesian Tourism Board has successfully managed promotion of the country through focusing on its natural landscapes and beautiful beaches.
According to government figures, inbound tourism continues to rise in Indonesia. After reaching over 8 million visitors in 2015, the number grew by another 9 percent the following year with the government now targeting 15 million foreign visitors in 2017. The booming tourism sector is a win for small and medium-sized enterprises (SMEs), explains Balawan, as visitors bring with them new opportunities.
“For instance, customized activity packages that cater to specific segments, such as couples and newlyweds, families, adventurers and others will see growth from increased inbound traffic. SMEs such as local travel agencies could potentially offer multiple packages that suit different segments,” Balawan told Indonesia Expat.
SMEs can also provide services offering a variety of local experiences, including local cuisine cooking classes, dancing courses or private tours led by guides trained in multiple foreign languages.
SMEs Born Online
Another trend that has been growing rapidly in Indonesia is the phenomenon of travel SMEs being born and thriving on the web alone, with no brick-and-mortar shops to speak of. The second largest accounting firm in the world, Deloitte, mentioned that 36 percent of SMEs in Indonesia are still offline, while 37 percent are in fact internet-based.
“In the next five to ten years, we expect SMEs in Indonesia to be increasingly online and incorporating sophisticated technology into the way they provide and deliver products and services,” Balawan said.
Skyscanner recently partnered with Bang Joni, a LINE app-based chatbot, to provide domestic travellers with a whole new experience in searching for and booking tickets.
“These days, we can hardly escape from the internet and mobile. This has enabled Indonesian travellers to be savvier and better informed when making decisions as they will research, compare and plan their trips online,” he added. “They want to have the independence to plan their own vacations, and they are always looking for the best promo fares and cheapest prices.”
While Skyscanner is just one online travel startup attacking Indonesia’s travel sector growth, there are many more that span other parts of the value chain. Some popular names at the intersection of tech and travel in the archipelago include the likes of behemoth online travel agencies such as Traveloka and Tiket.com but also newer accommodation and experience names like ZenRooms, PegiPegi, MisterAladdin and Travelio.
While there are no official figures on how much SMEs have contributed so far to Indonesia’s gross domestic product (GDP) in 2017, CNN Indonesia found that in 2016, SMEs accounted for 60.34 percent of GDP, up from 57.84 percent the previous year. Year on year, the 5.76 percent growth represented an added value of Rp.641.8 trillion (US$48.7 billion).
In the 15 SME subsectors, food and beverage businesses recorded the greatest contribution to GDP with a value of Rp.209 trillion (US$15.6 billion).
Currently, Indonesia’s travel and tourism sector accounts for at least 4 percent of the country’s GDP, coming from both SMEs and larger companies. By 2019, the government has targeted a rise in GDP contribution to 8 percent, which translates into Rp.320 trillion (US$24 billion) overall.
Tourism Minister Arief Yahya wants the sector to be Indonesia’s largest foreign exchange earner by 2019.
Balawan pointed to the growing middle class along with the archipelago’s many popular tourism sites as two key indicators that the local travel space should continue to show healthy growth annually.
“This can be observed from the rising number of SMEs in the travel and tourism industry coupled with the mushrooming growth of airlines. We are certainly excited about the prospects of Indonesia’s travel industry and will continue to innovate so as to provide the best travel solutions for local travellers,” he added.
All of this paints a bright picture for current and potential SME operators planning to invest further in Indonesia’s travel and tourism sector. Further research, as well as networking with fellow SMEs and utilizing data should help entrepreneurs optimize their businesses in the booming segment.
“Always be creative in finding organic growth. Also be innovative in utilizing the available technology to increase productivity,” Balawan recommended. “Last but not least, always be solving the user’s problems.”