SMEs Catch a Boost from the Bud­ding Travel Sec­tor

Indonesia Expat - - FRONT PAGE - By Sharon Ham­bali

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 brickand-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.”

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.

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