Tourism Industry in Bali started to take a structured shape and methodical approach since the mid 70s when

Bali tourism Development Corporation and relevant tourism authorities forged a blue print to turn the Island of Gods into the best Tourism destination in the world, Bali has been voted as the Best in the World for several years. The transformation of tourism infrastructure has since evolved and continues to shape itself by Market Forces and business trends from a lowly back pack destination to catering for the rich and famous.

This cyclical transformation of Balis tourism growth has been dictated by global, regional and domestic politics, social and economic trends. From accommodation known as Losmen for backpackers to Melati bungalows then to 2 & 3 star hotels to 6 star diamond resorts. However, this progression to the upper tier market level was clearly dictated by Market Forces. Immediately after the 1st Gulf war the Positive Market forces kick started a tourism boom with a series 4 & 5 star hotels construction in Bali until the Asian Financial crisis this followed by chain of natural and manmade disaster such as Bali Bomb, global pandemic on Sars, mad cow disease, chicken flu, another gulf war and 911, thus forcing the tourism industry to back pedal.

Given the above negative global trend and events the tourism industry, particularly regional and domestic market reinvented itself in Bali thus thrusting upon the emergence of budget accommodation purely catering for the 220 million Indonesian middle market which was fast recovering from the last financial crisis. Between years 2000 to 2010 due to new local government regulations in Bali which only gave building licenses to build approximately 6000 to 8000 condotel apartment style accommodations. This condotels without any hotel star rating was built to cater for the budget category Indonesian domestic and regional family markets, particularly from Malaysia, Thailand and Singapore.

Historically Human needs necessitated changes and discoveries, hence, the need to travel even during trying times of financial crisis gave birth to a magical business model to the airline industry in the form of Low Cost carriers. Low Cost carriers has since change the lives of middle class Indonesian and 300 million people in the rest of ASEAN Region. Hence Now everyone can fly. Air Asia, Tiger Air, etc has made Balis condotel business very lucrative. History has deemed that the cyclical tourism business trend in Bali have to either peak up or bottom out therefore, without exception this phenomenal No Star condotel business module is at the point of bottom out due to oversupply and lower yield.

Unfortunately the construction of condotel is still continuing in Bali, particularly in destination Pecatu. The fast growing middle income market in Indonesia is almost 40% of the population and this will mathematically push up the middle to the upper tier economic bracket in less than 3 years thus facilitating the demand for 5 star luxury travel and accommodation on the Island of Gods. Total available accommodation in Bali is estimated to be around 40,000 rooms and the breakdown in star category is as follows.

Total available accommodation in Bali is estimated to be around 40,000.00 rooms and the breakdown in star category is as follows.

ESTIMATED ROOMS AVAILABLE PER CATEGORY

3,000 4,000

7,000

Melati
5,000 9,000

Condotel 3 Star 4 Star 5 Star (Chain Hotels)

12,000

Luxury Villas

It is a fact that the tourism development in Bali was shaping up to meet the growing demand from middle market for the last 8 10 years, hence, the inadvertent oversupply in Condotel Category. It is very clear that middle class category is in over supply but the 5 star categories is lagging far behind in room count partly due to the emergence of another luxury accommodation trend in the form of Villa Living in the last 5- 6 years. Thus the emergence of Bvlgari , Banyan Tree, Allila, Four Seasons Sayan, Como-Shambala, etc pushed the bar even higher that sold the Island of Bali to the Rich & famous in a pricing category beyond the normal 5 star hotel pricing.

Based on the above development, market and business trends are forcing investors and developers to review historical business cycle. Thus propagating that accommodation structure is reverting to the urgent need to develop low rise, low density large suite accommodation resorts with modern and Hi-Tech in room facilities such as internet-protocol enable facilities, digital High definition Televisions systems with fiber optic communication and sound systems. This is the product positioning of MERITUS, PECATU , Bali, as a 5 Star Resort which is ahead of this development trend to fulfill the developers return of investment. The developers and Investors through intensive research analysis have embarked to develop the following 5 Star international Chain Hotels in Bali. This is the re-emergence of 5 star Chain Hotels in Bali after the Condotel fever subsides.

NEW 5 STAR CHAIN HOTEL IN BALI (ROOMS)

120 350
300 Shangri La Hotel - Rooms & Villas, Nusa Dua (2015) Jumairah - Rooms & Villas, Jimbaran (2015) Sheraton Luxury collection, Seminyak - 2016 Ritz Carlton Rooms & Villas, Nusa Dua (2016) Westin Ubud Villas 2014

150

200

This is particularly true to the new tourism development destination of PECATU Indah Resort where 11 known hotel projects at various building stages which could potentially give rise to 4000 rooms in the next 5 years. However, 80% of these projects are earmarked as 3 and 4 star category condotel Resorts namely The Rich Prada, New Kuta Condotel, Wuku Centara, The Bay, The Jewel, Swiss-Bell Resort, The Terrace, Lor-In Resort and several others yet to be confirmed. If the above facts indicating an oversupply in this category are taken into account and should they continuing construction of similar category products as planed in Pecatu , then it may only lead to price war, low yield, poor quality of product and services which does not augurs well for the industry and destination Pecatu.

As such Meritus Pecatu Bali with 128 Suites, Penthouse and Villas will positioned its product and services as a 5 Star, low rise, low density with ultra modern and Hitech facilities with branded Clarins Spa & Gym and Chatterbox Food & Beverage facilities. Its the only International chain hotel managed property in Pecatu thus catering for a small high end clientele who wants to be accommodated within an international standard Golf Course and modern entertainment outlet known as Klapa and a water theme park and the famous Dreamland beach. Meritus, Pecatu , Bali with its super deluxe boutique resort product positioning within 3 and 4 star condotel properties will be able to position its product at an average room rate between US$150 - $180. The price positioning is based on the following competitive set in the Upper-Tier Hotels: Luxury Villas

% ROOM OCCUPANCY LUXURY VILLAS

50%

70% Four Season Sayan Ubud Como-Sambala Ubud Karma Kandara Ungasan Allila Villas Uluwatu 67% Banyan Tree Uluvatu

57%

65%

ARR POSITIONING LUXURY VILLAS

$300 $475

Como-Sambala Ubud
Four Season Sayan Ubud

$350

Allila Villas Uluwatu Banyan Tree Uluvatu

$400
$355

Karma Kandara Ungasan

% Room Occupancy Positioning - 5 Star Resorts

65%

80%
Nusa Dua Beach Hotel

70% 75%

Saint Regis Nusa Dua Inter-continental, Jimbaran Melia Hotel Nusa Dua

73% 75% 75%

Conrad Hotel , Benoa Sheraton Laguna Grand Hyatt

ARR. Positioning - 5 Star Resorts

$165 $185

$275

Saint Regis Nusa Dua Sheraton Laguna

Conrad Hotel , Benoa $230

$200 $220 Inter-continental, Jimbaran Grand Hyatt $200 Melia Hotel Nusa Dua Nusa Dua Beach Hotel

% Room Occp. Positioning 5 Star Non Chain Hotel

60% Bintang Bali, Tuban
Bali Padma Hotel Legian

78%

70% 75%

Kartika Plaza , Tuban

Patra Jasa Tuban The Seminyak

70%

ARR. Positioning 5 Star Non Chain Hotel

$90

$135

Bali Padma Hotel Legian Kartika Plaza , Tuban

$100 $120 $110

Bintang Bali, Tuban

The Seminyak Patra Jasa Tuban

It is evident that the so called 5 Star hotels who are not managed by International Chain Hotels are unable to demand a higher average room rate because the market perception on quality of product and services is a reality. 5 Star Chain hotels are able to produce higher yield due to Brand Recognition , Quality of product & services, Quality of Food & Beverage facilities, Brand Loyalty Programs, Extensive marketing network through their international marketing Network. Meritus Pecatu Bali will be the first 5 Star International Resort in Pecatu.

Dreamland