Speedy Recovery

4 months ago . 6 min read
Marella Putri
Writer at Forbes Indonesia
Speedy Recovery
Abdulbar M. Mansoer, president director of ITDC. Photograph courtesy of ITDC.

For its fascinating landscapes, Indonesia offers attractive tourism destinations, and the industry alone is said to contribute 5.5% to the country's GDP, or around Rp 280 trillion in 2019. Although this year the figure dropped significantly due to the COVID-19 pandemic, travel demand has begun to bounce back in the past couple of months, as people have become more accustomed to the "new normal" and the promising news of vaccine arrival. Many are looking towards a more positive year to revive the business and continue their projects, including the state-owned PT Pengembangan Pariwisata Indonesia (Persero), commonly known as Indonesia Tourism Development Corporation (ITDC). Continuing its role in developing and managing tourism destinations in the country, ITDC is positive for its exciting agendas in 2021, particularly of hosting MotoGP and World Superbike (WSBK) in its current ongoing project the Mandalika, in Lombok.

Established in 1972, the company is known for its decades of success in developing and managing its flagship project The Nusa Dua, turning the formerly barren land in the south of Bali into a 350-hectare world-class luxury tourism complex and top MICE destination. The area hosts around 5,000 rooms from 22 hotels and villas. It has a track record of hosting international-scale events—from world beauty pageant Miss Universe 2013, APEC, and IMF-WBG 2018.

"For 43 years until 2015, ITDC had been developing only in Bali. Now we're operating across Indonesia, that's our most significant transformation in the history of our company—from owning only one asset in Bali, now we're building The Mandalika in Lombok, Labuan Bajo (East Nusa Tenggara), and soon we'll begin our project in Likupang (North Sulawesi). We also have several other projects related to tourism destination development all over the country," says Abdulbar M. Mansoer, president director of ITDC since 2015.

The vision to grow its business beyond Bali was reflected when the company changed its name in 2015. ITDC was formerly named PT Pengembangan Pariwisata Bali (Persero). The transformation doesn't only refer to reaching new areas, but also expanding ITDC's business lines beyond its core: as destination owner, they lease land and manage areas.

A cornerstone of the transformation, ITDC created a Destination Management Organization (DMO), offering the company's expertise of integrated management from planning to operating of a tourism destination. Thus for this scope, ITDC was able to land the trust of developing Labuan Bajo and Likupang from the government's five super-priority tourism destinations. Moreover, ITDC will also develop Bakauheni in Lampung and the north of Bali.

Furthermore, ITDC established two subsidiaries to take charge of more new business lines. The first one, PT ITDC Nusantara Property (INP), allows the company to be more flexible in getting property projects, scouting for potential land, working with owners, as well as getting the potential upside from the increase of land value. The second subsidiary, PT ITDC Nusantara Utilities (INU), provides utility services like clean water and waste treatment, as well as area maintenance and operations.

By getting more ambitious and diversifying its business, ITDC is aiming for better growth in the future. Last year, ITDC was able to book Rp 316 billion in revenue mainly from leases, up 9% from Rp 290 billion in 2018, with 11% CAGR over the last five years. Thus, entering new business lines will also add revenue sources.

"Take the property line, for example. Land lease price can only increase 6% maximum or inline with the inflation rate, but if we develop the land, the price can increase by 20%-25% per year," Abdulbar says.

Another grand plan is hosting events, where two events are on their way to Mandalika in 2021: MotoGP and World Superbike (WSBK). "We'll soon be hosting MotoGP and WSBK. And in the future, after 2021, there will be more world-class sports events such as L'Etape by Tour de France, Ironman, and Volleyball World League," Abdulbar says.

Abdulbar adds that based on a feasibility study with Deloitte, the race alone could double the revenue of ITDC to around Rp 700 billion. With many upcoming events up their sleeves, Abdulbar expects that Mandalika will become a major contributor to ITDC revenue in a five-year time—replacing Nusa Dua, which is currently contributing nearly 95% of ITDC revenue.

The races will be operated by PT MGPA Nusantara Jaya, an entity under INP, with potential 430 million worldwide audiences. In addition, a digital tourism platform called Xplorin that was built by ITDC and other SOEs will be the exclusive ticket partner for the race and other events.

Projection of Mandalika

While The Mandalika offers exciting future benefits, preparation as a host in a limited time is not an easy feat. In addition to building the 4.31- km circuit and the venue to house 150,000 people for three days, ITDC also needs to develop and revamp the infrastructures in Mandalika, such as roads, airport and runway, as well as cruise ports.

In total, the project bears a massive price tag totaling around Rp 9 trillion for over 15 years, and ITDC started off with just Rp 250 billion in capital from the government to begin constructing infrastructures in 2015. For ITDC, securing the rest of the massive amount was as much a challenge as it is an achievement. In late 2018, it received $248.4 million from AIIB and became the first company to receive a B2B funding from the development bank instead of AIIB's usual G2G approach. The Indonesian Export Financing (LPEI) also lent Rp 1.2 trillion after being convinced by ITDC of how the tourism sector is also part of export activities by bringing tourists in. Finally, this July, the StateOwned Banks Association (Himbara) lent Rp 900 billion, which secured the next few years' finances.

Things seem to be going well for Mandalika, as Abdulbar says that the progress is on track. It's at 32% completion in mid-December and will finish in July as scheduled. However, while the race was initially set for October 2021, they are still waiting to see how COVID-19 develops to pick a definitive date.

The real challenge for ITDC currently lies in maintaining its business that centers around tourism. As the pandemic heavily impacts tenants, they are given defer payment, allowing them to pay half of their due this year, and the rest split into a 2-year installment. This consequently reduced ITDC's revenue this year, to which Abdulbar expects it to drop by more than 50%. Hence he is looking forward to hosting MotoGP as a feasible recovery plan to cover the loss.

Meanwhile, along with more online promotions and gradually returning tourist confidence, ITDC has had its 22 hotels in Nusa Dua to be CHSE (Cleanliness, Health, Safety, Environment) certified as instructed by the Tourism and Creative Economy Ministry. It is also preparing Nusa Dua as a green zone, open only to tourists from certain countries. To maintain safety during the pandemic, tourists can only stay within the Nusa Dua area and are provided essential attractions from shopping, food, and arts.

Currently, ITDC has also begun preparing Labuan Bajo to host the G20 summit in 2022. After that, the company will focus on Likupang. Likupang will promote the vast diversity of both Asian and Australian animals as it is crossed by the faunal boundary Wallace line and targets the Chinese market due to its proximity with China's southernmost province, Hainan.

"Our nation is rich in nature, and we want to show this by building integrated destinations that support mobility and connectivity so they can be reached by land, water, and air. We want to be the leading, world-class best tourism destination developer in Indonesia," says Abdulbar.

Written By
Marella Putri
Writer at Forbes Indonesia