[Kabar-indonesia] Batam's star-rated hotels in the doldrums [+Qantas affirms weak earnings]

[JoyoNews at aol.com]

also: Dow Jones: Qantas Affirms Weak Earnings Outlook

The Jakarta Post
Thursday, June 22, 2006

Batam's star-rated hotels in the doldrums 

Fadli, The Jakarta Post, Batam

The general manager of the Panorama Regency Hotel in Batam, Lody Anjex, 
frowned as he listed the components that triggered an increase in room rates 
at his hotel, from the ambiguous tax assessment system and employee salary 
increments to the annual hike in electricity and water tariffs.

Other contributing factors that have led to a sluggish hotel business in 
Batam 
are the drop in foreign tourist arrivals and the cut-throat competition among 
star-rated hotels offering huge discounts to guests. 

The current rate for a standard room in a four-star hotel in Batam, which 
used 
to be more than Rp 400,000 (US$45.00), is now the same as that of a two-star 
hotel in the Riau provincial capital of Pekan Baru, only Rp 275,000. 

Lody said star-rated hotels in Batam were now in a state of inertia, not only 
due to the rise in overheads, but also as a result of negative competition 
among star-rated hotels and Batam municipality's policy of not limiting 
construction permits for new hotels. 

The increasing number of hotels is in contrast to the dwindling number of 
foreign tourist arrivals, who form the largest number of guests at star-rated 
hotels in Batam. 

There are no less than 38 star-rated hotels operating in Batam now, of which 
10 are four-star, 11 are three-star, five are two-star and 12 are one-star 
rated hotels, not to mention the dozens of shophouses-cum-hotels. 

"It's not the hotel that sets the market in Batam, but the other way round. 
Apparently, hotel room rates are determined by guests. We, as hotel operators, 
cannot do much about it," said Lody. 

Hotels are unable to fix room rates due to the local industry's lack of a 
communication network, a situation aggravated by the idle state of the Batam 
chapter of the Indonesian Hotels and Restaurants Association. 

Lody said his hotel had called on hotel operators in Batam to form an 
organization to facilitate communication and help standardize room tariffs. 

"The government no longer monitors the rate mechanism. It's up to the 
four-star hotels whether they set the same room rate as that in one-star hotels. This 
is ironic, especially when the municipality refuses to stop issuing permits 
for shophouse-cum-hotels," said Lody. 

A number of star-rated hotel operators in Batam, the Hotel Panorama Regency, 
Hotel Novotel Batam and Hotel Planet Holiday, all four-star rated, have 
established the Batam Hotel Association to deal with the less-than-ideal 
circumstances. 

The 32 percent rise in electricity tariffs and the 24 percent rise in the 
city's minimum wage, from Rp 635,000 to Rp 815,000, triggered the increase in the 
star-rated hotels' operational costs. 

Foreign tourist arrivals in 2004, numbering 1,527,216, dropped by as many as 
522,216 to only 1,005,000 in 2005, causing a decline in the hotel occupancy 
rate from between 30 and 60 percent of the total number of available rooms. 

General manager of Hotel Novotel Batam Yonto Wongso said the condition of 
star-rated hotels in Batam was totally different from that of those in other 
cities like Yogyakarta or Bali, because the hotels there kept a close rapport with 
one another. 

"If the condition continues, it won't be impossible that the fate of 
star-rated hotels will be difficult," said Yonto. 

Yonto also criticized the ambiguous tax assessment system because tax 
officials used the average estimation of the occupancy rate. "For example, they 
calculate the weekly average occupancy rate as 70 percent, whereas in fact there 
are days in a week when only 30 to 50 percent of the rooms are occupied. The 
situation is quite different, but they seemingly refuse to understand," said 
Yonto. 

Head of the Batam Tourism Office Arifin Nasir said his office had been aware 
of the hotels' grievances for some time. 

"The situation involves other related agencies, not just us. However, we will 
discuss it with them and try to find the best way to resolve the problem," 
said Arifin. 

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Dow Jones Newswires
Thursday, June 22, 2006

Qantas Affirms Weak Earnings Outlook

By BILL LINDSAY

SYDNEY, Australia -- Qantas Airways' share price fell to a three-year low 
yesterday, after the Australian carrier confirmed earnings will decline more than 
25% during the current fiscal year primarily because of surging fuel prices.

Chief Executive Geoff Dixon said profit before tax for the year ending June 
30, will be about 670 million Australian dollars (US$494 million). The forecast 
was on the low end of analysts' forecasts that were as high as A$895 million. 
For the previous fiscal year, Qantas had pretax profit of A$914.3 million.

After twice warning that it expects lower earnings, Qantas for the first time 
issued a specific estimate of its full-year result. It said it was surprised 
some analysts kept their forecasts so high despite the hostile environment.

"If you have a look at where some of the analysts are, it's outrageous, to be 
honest," Chief Financial Officer Peter Gregg said in an interview. "They've 
got figures of up toward A$1 billion when we've said it's going to be lower 
than last year's [pretax profit of] A$914 million, so it's quite sad we have to 
do this."

Qantas shares fell below A$3 for the first time since May 2003, hitting 
A$2.99 before closing down 4.7%, or 15 cents, at A$3.03.

Qantas said its fuel bill last year rose 45% to A$1.93 billion despite 
hedging on the price of crude oil and lifting its capacity by just 9%. While the 
carrier bought much of its 2004-05 oil requirements at US$32 a barrel, the price 
this fiscal year rose to US$56 a barrel. It has contracts in place for 50% of 
expected demand next year at US$66 a barrel.

"We're seeing the fuel bill go up A$1 billion in the year we're in and 
another A$1 billion next year," Mr. Gregg said. "We're just about to complete a 
program of sustainable future reductions over three years to take A$1.5 billion 
out of the company, but that's just been wiped out by those two fuel-bill rises."

While its earnings are poised to fall for the first time in three years, 
Qantas has remained among the world's most profitable airlines. Losses in the U.S. 
airline industry alone have been more than $40 billion since 2001.

Mr. Dixon said Qantas has decided not to sell its catering operations. He 
said while Qantas is making "solid progress" toward its target of A$3 billion in 
savings over the five years ending in June 2008, he warned "if fuel prices 
continue at this level, further restructuring will be required."

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Joyo Indonesia News Service
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