insidesumatera.com | tourism & lifestyle magazine

When I came to Medan in 2007, the competition consisted of just a number of 4 star hotels. Without much difficulty, we could attain occupancies of an average 80% to even 90% every month, being the leader in the market. During the opening of the fasting month in September 2007, we even closed at 83%. What was considerate to be impossible we made it possible, it may sound arrogant but it is a fact and we are proud of it. However that was last year, back then in the good old days when the number of star rated hotel rooms available in Medan were still approximately 2.000. The projected number in 2008 will be around 3.500 hotel rooms, an increase of 75%. As the result, the occupancy levels currently have dropped to an average of 65%. Irritated with this drop, I have been trying to find many reasons why and what affected this current figure. It might sound too statistically and analytical, but who knows one day this article could be a good case study. An interesting clue can be seen during the Cheng Beng period last March. As we know, Cheng Beng is one of the high season periods for Medan when all hotels normally are fully booked and most of them apply a surcharge of approximately IDR 100.000+ on top of the normal room rates. This year, numerous hotels surprised the market by offering special Cheng Beng packages: up to 50% discounts on the room rates! They did the complete opposite compared to previous years, which is a first in Medan. Running normally full house for a week in the previous years became full for only 3 days in 2008. Another alarm which is not helping the recent hotel occupancy is the number of daily flights from Jakarta, which has been reduced by approximately 30%, with some airlines being grounded. Then there is the global oil crises contributing to a further dilemma. Airlines have no choice then to increase the fuel surcharge. In what way does this influence the hotel, you may ask? Roughly, more than 80% of our guests originated from Jakarta, Malaysia and Singapore, all inbound passengers who are our bread and butter. The increase in airline tickets means looking for cheaper accommodations. If I would be a businessman who had a budget for a 5 star hotel, then I would really re-calculate the finances for my event or stay in Medan. As in all probability I will have to assign some additional sum from my budget to the airline ticket, and at the end I need to find a cheaper hotel. The hotel side will be facing a dilemma: is it going to turn down this business? Or is it going to bid a lesser rate? For the most part, the latter. It is sad but true. Just like a virus, it starts small but then it grows. We find reasons to rationalize the rates and at the end it becomes lower and lower. And so the price war begins. However, additional competition does not only manipulate the average occupancies of hotels but as well her advertising partners. In particularly, the exceptionally strategically located billboards and neon signage, where they have become extraordinarily business minded and to some extend you can’t blame it on them–let me give you an illustration to what I mean, but in a different ratio–please keep that in mind. Previously we paid $10 for a billboard of which 50% in a barter great deal. But starting this year we have to pay $20 with no barter. Take it or leave it since other hotels will take the space if you don’t. We are completely aware that there will be more demand by the increase of the hotels. But what formula are they using for this increase? Or shall we blame it on the increase of the oil barrels–I don’t see the connection, do you? Last but not least is the electricity problem, an ongoing problem which will not be resolved anytime soon--unless there is a secret power plant under construction--it doesn’t need any further introduction or explanation (but at least the generator dealers can make some profit out of this). All hotels will need to run their generators to make sure that the guest’s comforts and services are not affected by this; big hotels will be able to survive as they charge higher rates but what about the smaller hotels, and for how long will they be able to maintain the high operational expenses? So what would be my “Cinderella ending” on this occasion? Anyway, with 75% more competition, 30% decrease in inbound flights and ongoing power problems, the show must go on as these problems are relatively small ones, compared with what is happening now in Indonesia and the rest of the world. Unfortunately “in my world” these problems are big. It now rest on me, on how I will steer my team through these “stormy waters”. It is a time of change–a time of being and becoming innovative and becoming a lasting difference to you--our guest. I dedicate this article to my team–all the staffs of the Grand Angkasa International Hotel, the finest crew I ever had the privilege to work with. And regarding the billboards…yes we paid.