JAKARTA. Industries supporting the meetings, incentives, conferences and exhibitions (MICE) sector are bracing for possible losses in light of the government’s decision to reduce lavish state spending and dampen the extravagance of public officials.
The hotel industry, for instance, must take swift measures to adopt or risk losing a significant client base, an industry representative says.
Vivi Herlambang, the Sahid Hotel Group’s director of sales, marketing and business development, estimated that hotel occupancies by public officials would shrink from 30 to around 15 to 20 percent of all market segments, depending on market strategy and location.
“This policy will impact negatively on the industry, but we’ve been asking around in places like Manado or Papua and finding that people still need to conduct lots of meetings.”
Vivi believed that hotels operating in higher-class markets were more prone to losing business, but was optimistic that industry players could adapt to the conditions. She suggested that hotel operators either adjust their target market or focus on the industry’s secondary strengths, such as food catering.
At the request of President Joko “Jokowi” Widodo, Administrative and Bureaucratic Reform Minister Yuddy Chrisnandi recently issued three circulars banning government officials from lavish lifestyles and instructing them to make numerous savings.
One of these circulars, came into effect on Monday, ordering all government bodies to use their own meeting rooms and banned them from renting meeting halls or other venues, including resorts and villas, except for meetings that required many participants.
Jokowi has targeted to slash the 2015 budget for the meetings and travelings of government officials by Rp 16 trillion (US$1.31 billion) to Rp 25 trillion.
The West Java chapter of the Indonesian Hotel and Restaurants Association (PHRI) recently revealed that the national hotel industry was looking at a possible 40 percent drop in revenues due to the President’s demands.
PHRI West Java chairman Herman Muchtar also revealed that Rp 60 trillion in loans connected to the hotel and MICE-related investments were at risk of being non-performing loans.
Jakarta Governor Basuki “Ahok” Tjahaja Purnama said the Jakarta administration would immediately implement the policy.
“I will think about alternatives to meetings in hotels or function halls. We will scrap the budget for that. I want to save the budget [...] because I don’t think it’s wise to rent hotel meeting rooms at the end of the year like this just because [we] need to spend our [allocated] budget.”
Early last month, State-Owned Enterprises Minister Rini Soemarno also barred the executives of state firms from flying business class on work-related trips. National flag carrier airline Garuda Indonesia is the first choice of government officials and any changes to the government’s business-class policy will affect the airline’s revenue.
Garuda spokesman Pujobroto acknowledged the possible effect the decision would bring to the airliner’s revenue, but declined to elaborate further.
“There is a possibility that this appeal can disrupt the composition of passengers flying business class. [...] But in general I think that the government should keep the business class option open in cases of medium- to long-haul flights,” Pujobroto said on Sunday.
“We understand the government’s concern for efficiency, but I think that this [policy] is best meant for short-haul flights” of less than two hours.
Echelon III public officials, including the heads of ministerial units, were previously given leeway to use business-class flights for overseas trips of no more than eight hours, in a ministerial regulation issued by then finance minister Chatib Basri. (Tama Salim)
