Ciputra sees gold in budget hotel business

JAKARTA. Buoyed by the increased mobility of Indonesians and a bustling domestic tourism industry, PT Ciputra Property (CTRP) is set to enter a new business market for the company by developing 50 budget hotels.

The company will start by allocating Rp 115 billion (US$16.47 million) for the construction of six budget hotels in Bandung, West Java, Semarang, Central Java and Yogyakarta this year, director Artadinata Djangkar said.

“We have finished designs for a budget hotel in Bandung but are still working on designs for Yogyakarta and Semarang. We hope to start breaking ground [for the Bandung budget hotel] in July or August,” Artadinata said on Wednesday.

“We are in negotiations for three more locations in Sulawesi, Kalimantan and Sumatra. We hope to secure one more location within a month,” Artadinata said, adding that the hotels would target budget-savvy travelers.

“We cannot tell how much budget hotels will contribute to our property portfolios until we already have a chain of budget hotels. In China for example, a chain budget hotels can be about 900 units. However, Ciputra’s strategy is to have and operate a chain of 30 to 50 hotels,” Artadinata said.

He said that a budget hotel will need about Rp 35 billion to Rp 40 billion in investment.

Spending for the budget hotels is included in Ciputra’s targeted capital expenditure of Rp 1.81 trillion, which is 30 percent supported by internal cash and another 70 percent by loans from Bank Mandiri.

Ciputra is allocating Rp 1.38 trillion of its total capital expenditures to continue the development of Ciputra World 1, a superblock located on Jl. Prof. Dr. Satrio, South Jakarta. Another Rp 215 billion will be channeled to another ongoing superblock project on Jl. Dr. Satrio, Ciputra World 2, of which 100 percent of the 77,000 square meters of retail space is rented by South Korean Lotte department store.

The company will use remaining portion of its capital expenditure to renovate its Ciputra mall in Jakarta and Semarang.

“We will allocate Rp 44 billion to renovate the Ciputra mall in Jakarta and Rp 24 billion in Semarang this year. Renovations will start in April and May, however, the mall will keep operating. We hope to finish renovations in 2013,” CTRP director of retail Sugwantono said.

Ciputra, belonging to the family of prominent businessman Ciputra, booked Rp 158 billion in net profits in 2011, an increase of only 1 percent from Rp 155 billion in 2010.

Despite the minor increase in net profits, the company saw a nearly 24 percent increase in revenues to Rp 440 billion in 2011 from Rp 355 billion in 2010.

Artadinata said that high increase in revenues was supported by sales of myHome apartments, part of the Ciputra World 1 superblock. However, construction of myHome also contributed to higher costs, which together with lower interest income, contributed to a slight increase in net profits.

Ciputra’s marketing sales stood at Rp 500 billion in 2011. The company is targeting this year’s sales to triple to Rp 1.5 trillion, with expected contributions from sales of Ciputra World 1 and 2 and Dipo Business Center — an 18-story office building located in Slipi, West Jakarta.

Sales growth is expected to help the company to reap Rp 902 billion in revenue and Rp 223 billion in net profits.

“Marketing sales in January reached Rp 227 billion, or about 15 percent of our target in 2012. Sales of Ciputra World 2 contributed to the achievement. We expect that the property market will continue to grow this year,” Artadinata said.

Ciputra World 2 will comprise four towers, with construction of the first two towers on 1.2 hectares of land starting last month. The first tower will contain 210 condominiums and 117 Fraser serviced suites belonging to luxury property company Fraser Hospitality Pte Ltd, and the second will have 349 condominiums.

The third tower is allocated for offices, while the fourth tower will become a W Hotel, a luxury hotel owned by Starwood Hotels and Resorts Worldwide, Inc, one of the world’s largest hotel companies. (Raras Cahyafitri, The Jakarta Post)