The competitive position of Medium and Large Organisations in Destination Kuta

“A research on how MLOs can adapt to the impact of saturation of the business environment”

Ekaterina Larionova Sven Guy Freerks Rick van Nieuwkerk

29-04-2016

“If there is sugar, many ants will come”

“Dimana ada gula, disana ada semut”

TABLE OF CONTENTS

1. EXECUTIVE SUMMARY ........................................................................................ 3

2. INTRODUCTION ................................................................................................... 5

3. BACKGROUND ..................................................................................................... 6

3.1 RESEARCH AREA ............................................................................................ 6

3.2 MEDIUM AND LARGE ORGANISATIONS ........................................................ 6

3.3 ELEMENTS OF SATURATION.......................................................................... 7

4. THE RESEARCH .................................................................................................... 8

5. FINDINGS ............................................................................................................. 9

5.1 BUSINESS ENVIRONMENT ............................................................................. 9

5.2 COMPETITIVE POSITION ............................................................................. 10

5.3 IMPACT OF SATURATION ............................................................................ 11

5.3.1 MARKET ............................................................................................... 11

5.3.2 ENVIRONMENT .................................................................................... 12

5.3.3 DESTINATION IMAGE ........................................................................... 13

5.3.4 SOCIAL ................................................................................................. 15

5.3.5 ECONOMIC .......................................................................................... 15

5.4 RESPONSE ON SATURATION ....................................................................... 16

6. RECOMMENDATIONS ........................................................................................ 17

7. THE FINAL WORD .............................................................................................. 24

8. REFERENCES ...................................................................................................... 25

9. APPENDICES ...................................................................................................... 27

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1. EXECUTIVE SUMMARY

This consultancy report represents the final assignment of 2016´s TDM field

research, taking place in Bali, Indonesia. In that context the group of

researchers has been commissioned to assess the current situation of

MLOs in the designated research area of Destination Kuta, in order to

elaborate effective interventions dedicated to improve of the competitive

position of the abovementioned group of tourism stakeholders.

The first step required to achieve the abovementioned objective in a most

appropriate manner, has been to understand the destination itself. For that

purpose the designated research area has been divided into three sub-

areas, named Central Kuta, South Kuta and Sunset Road, due to their

differing characteristics in terms of tourism product, types of businesses

and markets. The second step involved gathering insights into the

designated group of stakeholders, Medium and Large Organizations

(MLOs). Concerning that issue, the group of researchers has deliberately

chosen to avoid formulating a precise definition for Balinese MLOs, due to

significant divergence in annual revenue, number of employees and

business focus among medium and large enterprises based in Kuta.

Since an oversupply of tourism facilities has quickly been identified as main

cause for the competitive environment of Kuta, academic theory related to

that issue, has been gathered in order to back up primary data. Tourism

theory addressing the aspect of saturation from five different angels

(market, environment, destination image, social & economic), has been

selected and integrated as theoretical pillar of this research.

The findings of the research are pronominally grounded on the outcome of

15 informal interviews with relevant stakeholders from different sectors

and locations. Additionally, the professional observations as well as

outcomes of multiple conversations among the three researchers have

been integrated in the findings. The findings themselves revealed that the

majority of surveyed MLOs suffer under the highly competitive business

environment, an individualistic business focus, differences in types of

management, a strong cultural influence on business activities, and a lack

of collaboration between stakeholders. In order to assess the competitive

environment of Destination Kuta´s MLOs in an appropriate manner it

became clear that a distinction between 3 different types of MLOs would

be beneficial. Consequently MLOs have been categorized as 1.) Lions, thus

well-positioned businesses with an innovative, professionally managed and

therefore very competitive product, 2.) Chameleons, with a replaceable

product, dependency on travel agencies, and a more competitive

environment, and finally 3.) poorly positioned Turtles, with major

managerial shortcomings, who slowly adapt to changes and offer a mass-

product to a price-minded mass-market. Concerning the issue of

saturation, the outcomes of field research stressed that in Destination

Kuta, 1.) market saturation is marked by an increasing gap between tourism

supply and tourism demand, 2.) Environmental saturation involves aspects

related to a shortage of water and electricity supply as well as poor waste

management, 3.) the saturation of the destination image is characterized

by Destination Kuta´s tarnished image of an overcrowded mass-tourism

destination, 4.) Social saturation by a noticeable pressure on the socio-

cultural environment, and 5.) economic saturation by a lack of skilled

employees and an increasingly competitive business environment. Further

has the analysis of MLOs´ responses to the different aspects of saturation

emphasized that the awareness and consequent reaction of these issues

depend on the designated type of MLO facing them.

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At the end one general and multiple other recommendations, dedicated to

four different types of MLOs, have been elaborated. The general

recommendations suggest that enhancing collaboration by mean of a

cross-sectoral project entitled Kuta Connect Project (KCP), represents a

valuable option to improve Kuta´s destination image. The KCP project will

further accommodate the Sustain Kuta and Business Kuta projects, devoted

to ameliorate the natural & socio-cultural environment of the destination,

and the competitive environment of MLOs. Recommendations proposed to

Lions include and intensification of collaboration, raising awareness for the

destination, secure market position and improve their HR focus.

Chameleons are advised to strengthen strategic management tools, create

and effective market focus, develop alternative distribution channels, re-

develop their HR focus and invest in co-opetion with other MLOs. Turtle on

the other hand should consider a refurbishment of their product, integrate

innovative aspects into their product, implement effective management

tools and increase their awareness for their business environment. Finally

Ants have been introduced, and represent potential newcomers to the

destinations or expanders. In order to successfully penetrate the highly

competitive business environment of Kuta, Ants should remain humble and

realistic, be well-prepared, have awareness for the markets, be well-

located and finally be aware of saturation elements.

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2. INTRODUCTION

If there is sugar, many ants will come! This Balinese proverb has been mentioned by numerous interviewees and precisely describes what tourism scholars would relate to the aspect of saturation in tourism. In fact, the designated research area of Kuta has experienced large scale developments over the last decades, and has emerged to Bali´s number one tourism magnet. However, today the destination is seriously affected by the downsides of more than 40 years of poorly regulated developments. In the very specific context of Destination Kuta, an increasing tourism supply is opposed to a decreasing demand for the destination’s tourism product. This development has resulted in a highly competitive market, negative impacts on the environment, as well as a deteriorating destination image. These are considered as the most crucial challenges Medium and Large Organizations (MLO), the pillars of Kuta´s tourism supply, are confronting. Tourism academics have extensively covered the issue of oversupply, and came up with the term of saturation. Saturation in tourism can be considered from many angels and therefore represents a relevant theoretical pillar this research is grounded on. Combined with rich data collected during a substantial field research, this report approaches the most essential aspects of saturation, from the point of view of Kuta´s MLOs. Finally, the aim of this report is to provide in-depth insights into the saturation-related challenges Kuta´s MLOs are facing, in order to offer relevant and effective recommendations to this important group of stakeholders. The recommendations will focus on sustaining or increase the competitive position of the MLOs within the area.

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3. BACKGROUND

3.1 RESEARCH AREA

The research is conducted in Bali, Indonesia, and focuses on the tourism

context of Kuta and Tuban. Although the overall area is mostly named as

South-Kuta this research defines the area as Destination Kuta. The study

approaches Destination Kuta in three different research fields as a tool to

simplify the research process. The research fields are divided based on the

differences in market and the diverse level of development and gap

between prime and secondary location. In figure 1 an overview of the two

research fields is shown.

3.2 MEDIUM AND LARGE ORGANISATIONS

In order to provide MLOs with relevant recommendations to increase the

competitive position in the tourism market, it is essential to understand

which MLOs can be adopted in the research. The division of MLOs is based

on the different sectors the organizations are active in. The majority of

MLOs in tourism within the research are active in the accommodation, food

and beverage (F&B), leisure, retail and transportation sector. Besides that,

tour operators and travel agencies are strongly present in the research

area. The number of employees, annual revenue, strategic plans or the

position in the market are common factors that are used to define the

organization level to micro, small, medium or large. However, the research

revealed that within the different sectors a significant difference exists in

these factors. Therefore, the researchers chose a flexible approach of

defining organizations as MLO in this study. In this approach MLOs in each

sector were defined separately based on the level of employees compared

to the other businesses within the sector and their dependence on tourism.

Figure 1: Research Fields. Authors’ own development

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3.3 ELEMENTS OF SATURATION

In order to review the competitive position of MLOs in Destination Kuta, the impact of saturation is seen as important. To analyse the impact of saturation on

MLOs, the concept of saturation has been studied. Based on academic research and theoretical papers the following five elements of saturation are examined.

The elements of saturation formed the base of the research and are used to structure the report.

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4. THE RESEARCH

The research was conducted in Destination Kuta with a total research duration of 21 days. To conduct the research, secondary and primary data sources were used to obtain the information from different sources and perspectives.

Desk research on academic articles, reports, news articles, social media websites and travel blogs were reviewed to provide the background of the study. Theories related to tourism and other related topics, management models, tourists' perspectives and practical ideas were used to enrich the data and create new insights for MLOs within Destination Kuta.

Five stakeholder presentations of organisations active in the tourism industry in Bali were attended to create insights in the context of Destination Kuta. The presentations contributed to the study in the sense of creating a first idea what matters for organisations in the research area.

In total fifteen unstructured interviews were conducted to collect data. The organizations for the interviews were chosen according to the location, medium and large size enterprises' definition and scope of the business, connected to the tourism industry. Only broad topic areas related to general and saturations aspects were addressed and discussed. Therefore, the interview structure can be described as a free-flowing conversation with an average of 60 to 120 minutes. The above-mentioned type of the interviews allowed the interviewees to lead the process and uncover in-depth and valuable information for the researchers. The conducted interviews were spread out over the total research area, covering the 3 research fields which is visible in figure 2.

The researchers personal experience and discussion sessions are considered as an added value to the results of the research. Besides discussion within the research group, other group discussions with

researchers, experts and other participants in the area resulted in new insights and contributing data.

Consequently, the triangulation approach of data collection has provided with the high quality information and has led to worthwhile findings.

Figure 2: Map of Conducted Interview. Authors own development

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5. FINDINGS

5.1 BUSINESS ENVIRONMENT

The business environment of Destination Kuta has different characteristics which are relevant for the study. These characteristics of the destination influence the way MLOs are reacting to the elements of saturation and their competitive position. In order to understand the recommendations of the research it is important to understand the context where these recommendations are given in. Although, MLOs are strongly aware of this situation, differences have been recognized during the research. To clarify the researchers point of view and which characteristics have been taken in consideration in the study, this business environment will be shortly described.

First of all, the business environment is seen as highly competitive. The number of MLOs in the small area of Destination Kuta can be described as dense and the differentiation in products is small. Furthermore, the competition on similar target markets among the MLOs is high.

Secondly, the MLOs tend to think individually in terms of their business within Destination Kuta. Their perspective of what is going on is mostly related to what is happening in the market, competition and organization, focused on their business. Furthermore, the vision of the future can be described as short term thinking, where MLOs which are part of an international or larger chain differ from. Future predictions are mostly seen from an individualistic point of view with limited attention for the destination perspective.

The research also revealed a strong difference in national and international MLOs. International management MLOs are mostly stronger positioned in the competitive business environment of Destination Kuta due to their resources, knowledge and relations. On operational level, the difference in the knowledge about the positioning of products and services in the competitive market is highly visible. Although, some national managed MLOs are an exception in this finding, the majority of domestic MLOs are

behind from international ones in product or service, market and organization awareness.

The influence of culture within the MLOs is strongly visible. The culture of Bali has a strong impact on operational, tactic and strategic decision making processes. An example of this are the HR departments in MLOs, which are aware of the need to employ not only Balinese due to cultural or religious activities. Furthermore, religious offerings, temples and other cultural aspects are part of the business environment in the area. However, due to the rapid developments over the last 10 – 15 years and the increase of tourism, the culture has a less strong presence in the business and touristic environment. Another aspect of the Balinese culture, which specifically needs to be named, according to the researchers’opinion, is the influence of the different Banjars in Destination Kuta. The Banjars have a strong influence on the currently present and incoming MLOs in the area. Although, the influence is strong, communication between the MLOs and the Banjars is lacking. Opinions about this lack of communication differ from the studied MLOs, but a general finding is that it should be increased in the future to keep Destination Kuta “sustainable” or to create more “power” in terms of influencing governmental bodies.

Collaboration between MLOs, Pubic Organizations (PO), Micro and Small Enterprises (MSE) and “other” MLOs is not strongly notable in the business environment. Although, different associations are active, which represent the voice of the different MLO sectors, the results are not effective. The Government of Bali and Indonesia is interpreted as passive in terms of tourism management and development and the numerous MSEs are seen as a result of the tourism growth and development over the years. Co-opetition or competitive collaboration between MLOs on a marketing and market exchange level is notable but only between MLOs which have already established relationship. Examples of this are the South Kuta Beach Business Association (SKBBA) and the Kuta Executive Club (KEC). However, these associations are interpreted by several MLOs as not effective with small scaled activities that only benefits few individual businesses.

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5.2 COMPETITIVE POSITION

While researching the competitive position of MLOs, three types of organisations have been identified: Lions, Chameleons and Turtles. These MLO types are

identified through the brand strength, type of management, strategic thinking, market focus, employee skills, location and adaption to the competitive

environment.

.

LIONS The Lions are the MLOs who are strongly positioned in Destination Kuta with limited threat of the competition. Generally speaking, these MLOs are

characterized by a clear understanding of their competitive environment and an adequate long-term strategic planning and management. Other

relevant factors are a unique and creative product or service, a prime location within Destination Kuta, an effective staff-management, a strong

market, and a low-dependency on other stakeholders. Since all of the above-mentioned factors do in fact affect the competitive environment of

MLOs, the good performance of Lions on these attributes, to certain extend reduces their competition with other MLOs of the destination. The

well-known brand of businesses play an important role in this position as well. The negligible degree of competition Lions are facing consequently

carries the potential to expand their business within the area or export their business idea to other Balinese destinations.

CHAMELEONS Chameleons are businesses which adapt to the situation in the competitive environment and are, therefore, well positioned. Chameleons include

businesses which are facing a more challenging competition with other MLOs. This category of businesses is marked by a medium-term strategic

thinking, operations of a domestic scale and a replaceable product or service. The important degree of competition entails a number of challenging

impacts Chameleons have to comprehend and tackle accordingly. Seasonality, dynamic market trends, increasing number of businesses offering

similar products or services, do commonly imply a decline of numbers of clients and an increasing dependency on other stakeholders, such as tour

operators or travel agencies. The lack of a unique selling point, secondary locations and dependency on travel agencies, force many Chameleons to

consider creative product, market or organisation strategies in order to remain competitive.

TURTLES The Turtles are companies with a weak competitive position in Destination Kuta by slowly adapting to the market situation but have the ability to

change to a better position and create golden eggs in the future. Turtles consist of MLOs which products or services may be considered as mass

product, easily-replaceable, outdated and therefore difficult to sell. Turtles are further characterized by local management, a lack of strategic long-

term thinking, an unfavourable location, and a high or total dependency on travel agencies due to a focus on a price-minded mass-market. The

businesses operate in a highly competitive environment and their main effort is to remain somehow profitable without new solutions to increase

their competitive position. Some of these MLOs are further characterized by a higher tendency to have been established for money laundry

purposes so that the creativity and profit generation play a secondary role.

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5.3 IMPACT OF SATURATION

The elements of saturation are used to identify in what way the competitive

position of MLOs in Destination Kuta is impacted. In this chapter the impact

of the elements of saturation will be discussed separately.

5.3.1 MARKET

Market Trends

The research area of Destination Kuta, and especially the long-established

Central Kuta area have traditionally been the centre of the Balinese tourism

industry. However, entailed by an increasing competition with other

upcoming Balinese destinations, as well as the development of Kuta

towards a mass-tourism destination, the research area has recently

experienced a stagnation, if not already a decrease of tourists´ arrivals, as

stressed by multiple interviewees. Further, current trends are suggesting a

shift within the destination´s traditional tourism markets, due to the

decrease within the Australian market and emergence of the Chinese

outbound market.

Market Saturation

The market saturation on the business environment of the researched

MLOs has been a topic of concerning. In the case of Destination Kuta, the

area´s main tourism market constituted by an Australian mass-market has

been exploited for the decades and therefore is currently reaching a

saturation point. Simultaneous to this development the supply of tourism

facilities within the destination is continuously increasing, and has not even

been stopped by 2011´s moratorium for the construction of new hotels,

issued by the provincial administration. The oversupply especially within

the accommodation sector, coupled with an increasing competition with

other Balinese destination and the market saturation of the Australian

market, has led to a highly competitive business environment of

Destination Kuta´s tourism sector. In fact, the tourism demand is

stagnating and may even decrease in the upcoming years, while the supply

side and the development of new tourism facilities is still increasing. This

development has been observed and deplored by practically all surveyed

businesses of the research area, and is widely considered as the

destination´s major challenge. The major gap between demand and supply

triggered a number of consequences, and this gap is responsible for an

increasing competitive business environment of local MLOs. The

consequences for the accommodation sector are complex, but have been

made accountable for the significant decrease of hotel rates as well as

increase dependency on travel agencies and tour operators. Furthermore,

the F&B and retail sector have been affected by recent developments

within competitive destinations such as Seminyak and Jimbaran. Since

precise estimation about the overall amount of tourism supply as well as

size of the tourism demand in the designated research area are not

accessible, graph 1 is based on estimations and the strong testimonies of

interviewees. Appendix 2 will provide more detailed information on the

change in tourism demand and supply in Destination Kuta.

0

1

2

3

4

5

2010 2011 2012 2013 2014 2015 2016 2018 2019 2020

Tourism Demand & Supply in Destination Kuta

Tourism Demand Tourism Supply

Graph 1: Demand and Supply Overview. Authors own development

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5.3.2 ENVIRONMENT

The environmental saturation impacts the MLOs in Destination Kuta in different ways. Based on desk research, informal interviews, stakeholder presentations, the following environmental aspects of saturation have been identified which impact the competitive position for MLOs now or in the future.

Water Scarcity Destination Kuta and Bali will face issues with the supply of fresh water in the future as the island is running out of their water resources. The predictions are that Bali will run out of fresh water between 2020 – 2025 if no new solutions will be created. MLOs in Destination Kuta are highly depended on fresh water in their services and products, which makes this problem highly relevant. Statistics reveal that tourists in Bali use 15 times more water during their visit compared to the local community. Suppliers within the tourism industry, and therefore also MLOs in Destination Kuta, are seen as the cause of the problem. The scarcity of water will lead to a decrease of the quality of fresh water which can cause a danger for the local community and its visitors in terms of health problems. Besides that, a shift takes place in water supply from agriculture to tourism. This impacts the local living conditions strongly as water supply for rice paddies and other agriculture products are decreasing. Eventually, this results in a lack of food and income for the Balinese communities and a decrease of supply of agriculture products for MLOs. Furthermore, from a business perspective it is important to understand that a scarcity in fresh water will drive up the price of the water supply and agriculture products. This leads to an increase of variable cost for MLOs which results in higher prices of products and services or a decrease in revenue for MLOs.

Lack of Electricity The lack of electricity is a problem that not only Destination Kuta will face but is an issue for the total nation of Indonesia. The increase of businesses on Java and the rapid development of tourism in Bali in the past are seen as strong influencers of this problem. Destination Kuta will start to face electricity scarcity between 2018 – 2020. The ongoing developments in Bali will impact Destination Kuta, in the sense that more businesses are in need of power connections which will limit the availability of electricity. MLOs are impacted by the lack of electricity as the cost will be driven up due to the scarcity which increases the variable cost for businesses. The biggest threat for MLOs is that electricity is a core need in their products and services. According to an interviewee who was aware of this issue: “no power = no business”. Furthermore, it is notable that the lack of electricity can lead to safety issues for locals and visitors combined with the decrease of the standards of life in Destination Kuta.

Pollution MLOs in Destination Kuta are suffering from the increasing pollution in the area due to the lack of waste management. The area is strongly impacted as it is one of the largest tourism magnets in Bali which creates a lot of waste by businesses and residents. Banjars and private companies, such as Eco Bali, are involved in actions in waste collection and disposal services. However, these are not seen as the core solutions for the pollution issue as the actions are small scaled and collaboration is lacking. Furthermore, the lack of awareness among local community seems to be the core of the problem. The pollution is impacting MLOs as Destination Kuta and Bali is getting less attractive. Pollution causes a decrease in living, working and visiting circumstances which can finally results in health threat and vermin. Furthermore, the visitor experience is impacted as beaches are polluted and area is unclean. Within the element of destination image this problem is explained more briefly.

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5.3.3 DESTINATION IMAGE

The destination image of Destination Kuta is influenced strongly by visitor experiences, online reviews and Word of Mouth from tourists. Nowadays, the online reviews obtained an increased importance in destination image, as 50% of the travellers worldwide use online reviews in their destination choice (Think Digital, 2013).

In order to integrate the tourists’ perspective, TripAdvisor reviews of Kuta Beach as an attraction have been reviewed. Since Kuta Beach remains to be the main attraction for Destination Kuta, the visitor’s opinions about the beach are considered to be of high importance as a part of the image of the destination. As it can be seen in figure 3, 472 reviews out of 2532, is rated as “poor” and “terrible”. Although this is “only” 20 % of all the reviews, the negative reviews increased the last years and therefore play a significant role in destination success (TripAdvisor, 2016).

Furthermore, the collage of reviewed comments has been developed, showing the overview of the current situation. This collage, visible in figure 4, is based on several social media channels where visitors reviewed Destination Kuta. During the research four main topics of the negative tourists’ experience were determined:

- “Dirty beach” - “Not what I expected” - “Overcrowded” - “Highly commercialized”

Important to mention is the fact that the destination image is not only based on the experience of the product and service of MLOs. Most of the reviews are based on the experience from a destination perspective with all different aspects as environmental, social and cultural elements.

Due to the desk research it is clear, that tourists, who gave “poor” and “terrible” reviews are not willing to come back to Kuta, because the impression of the beach dramatically influences the perception of whole Destination Kuta and sometimes even Bali as an island. Significantly, some people advise to rather go to another destination, such as Seminyak or to Nusa Dua and even mention that the beach is much less attractive than the beaches in Thailand. Such image of Kuta Beach makes Destination Kuta less competitive not only within the island of Bali, but also globally.

Via the conducted interviews, it has been revealed, that most of the stakeholders are not aware of the unpleasant image of Kuta beach. And those who are aware, do not consider dissatisfied visitors as a threat for their businesses. Few interviewees are concerned about the situation, but do not know whether and how it can be changed.

The overall findings reveal that the image of Destination Kuta is significantly suffering in the last years. Importantly, all the stakeholders should realize how urgent the issue is and the competitive position of both MLOs and the destination is impacted negatively. In order stay well positioned and to compete with new upcoming Indonesian and global destinations, a destination approach seems an urgent need.

Figure 3: TripAdvisor Reviews. Retrieved from TripAdvisor

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Figure 4: Overview Visitor Reviews. Authors own development

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5.3.4 SOCIAL

As it has been mentioned earlier in the report, social aspect has a huge impact on the image of the destination and not only on the local residents and, therefore, it is considered to be an influential factor in the tourism industry.

First of all, it was found that, many tourists complain about “pushy vendors” and “hawkers”, since these sales people are sometimes quite aggressive, disrespectful and they even disturb people's privacy by physical contacts. The researchers had the same impression walking along the streets of Central Kuta and Kuta Beach. The misunderstanding between visitors and local people might provoke serious problems which can lead to insufficient tourists' experience and even conflicts. However, one of the reasons for such a reaction from tourists is the lack of knowledge about the local community, their culture and behavior. Another problem is pickpocketing which occur more often due to the growth of people coming to Bali. The host – guest relationship is undoubtedly a key factor to a success of the destination management.

Secondly, the growing tourism industry is influencing the local culture not always in a good way. Several stakeholders say, that local community does not have enough time anymore for ceremonies and daily religious activities. Nowadays, people spend all their time on their job and, thus, it is considered that the culture does not play such a big role anymore. Some are concerned, that tourists cannot find the cultural aspect in Destination Kuta and it might be a reason for the decrease in popularity of the destination.

Above-mentioned aspects of the social saturation influence the MLOs in a way, that the success of the business is inevitably dependent on the tourists' perception of the destination. Since the part of the destination image belongs to the social situation in Destination Kuta, it should not be diminished.

5.3.5 ECONOMIC

It has been found that the saturation of economic aspects in Destination Kuta exists in following ways:

Firstly, the majority of the stakeholders mentioned, that it was not an easy task to find a skilled stuff for a certain position. Most of the times the situation is caused by the lack of high educated Balinese people, since most of them are trained on the operational level and just few of them have managerial and problem-solve skills. Therefore, the situation creates the labor migration process, when the companies employ mostly the people from the other parts of Indonesia or other countries and when the locals are trying to move to the other place in order to get a sufficient education or to find a more suitable job. Generally, as it was revealed, the increasing number of Balinese are struggling to find a job place in Destination Kuta due to the growth of competition in a labor market.

Secondly, the number of investments is constantly rising, which can easily be seen by growing number of new hotels, restaurant, shops etc. in Kuta. The given situation leads to the high competition amongst all the groups of the stakeholders. Even though the competition is considered to be a motivation for the progress, the capacity of the destination should be taken into consideration. The vast majority of the interviewees agreed, that Kuta has no space for the development any longer and the “greedy” investors should search for another place.

Thirdly, the fact, that the “price war” exists amongst the competitors has been proven by all the interviewees. Moreover, some of the companies are too much price-focused, not paying so much attention to the quality of the product and service. One of the companies has said, that the price war is the war to the death and has to be stopped immediately, otherwise Destination Kuta as a destination will suffer from unwilling consequences: bankruptcy of the businesses due to “zero” profit, no quality tourists, negative image of the destination.

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5.4 RESPONSE ON SATURATION

In order to analyse the impact of saturation on specific MLOs in Destination Kuta the response of each MLO type to the elements of saturation is studied.

The response on the saturation elements of the MLOs is taken highly in consideration to provide the recommendation within this report.

LIONS CHAMELEON TURTLES MLOs which are classified as Lions, have a clear strategic understanding of characteristics and developments within their markets. Their markets tend to be relatively strong with a significant degree of loyal customers. The impact of market saturation on the Lions is low due to their strong position in the business environment. However, their individual focus can be interpreted as a threat in the future as their interest in the destination is high.

MLOs classified as Chameleon are aware of characteristics and trends within their main markets. Chameleons tend to rather adapt than anticipate trends within their markets, due to a lack of strategic expertise and financial resources. If the Chameleons do not anticipate with innovative interventions on the market saturation, the high competition can change their competitive position negatively. However, actions are been taken to tackle this issue but can be intensified.

Turtles have little strategic knowledge and understanding of their market, which is commonly based on own subjective assumptions and experiences. The response on the competitive environment is to be price and service focused. However, their products and services are not innovative which does not result in a better competitive position. Without re-developing their strategy, management level or product and services the Turtles are highly threatened by competitors which can result in bankruptcy.

The Lions react individually on the environmental saturation. Actions such as beach clean-up days, purifying of waste water and the usage of private waste management organisations are visible. However, collaboration and solutions from a destination perspective stay out.

Chameleons are aware of the environmental issues but mostly do not have strong resources to create long-lasting solutions. On operational level actions are taken such as tourist awareness programs. The knowledge and resources for more effective solutions are lacking. However, stimulation can result in active participation.

The Turtles are mostly not aware of the environmental saturation and do nott take actions to counteract these issues. The awareness of these MLOs is missing and the businesses do not have the knowledge or capability to change this position. The main focus keeps on surviving in the competitive environment.

Lions generally do not see a threat of bad image of Destination Kuta. Some are not even aware of the topic, those who are aware do not take any steps to change it for the better. The Lions seem to be satisfied with their strong brand and do not see the need for a stronger destination image.

Some of the Chameleons are aware of the fact that the image of Destination Kuta is decreasing, but they take it for granted and see no reason to change the situation. The Chameleons are mostly focus on the image if the business and satisfaction of the customers within the company, not thinking about the destination scale.

Several Turtles are aware of the bad reviews about Destination Kuta, some are not. Though, none of them are taking any actions in order to change the image of the destination. Furthermore, the image of the Turtles itself does not play a central role in their marketing strategies which make them not aware of the situation.

The Lions are aware of the social and sometimes cultural saturation in Destination Kuta. However, due to their strong position they tend to think individually in this issue. Management tools are used successfully to improve their host – guest relationship of the business, but attention for a destination perspectives stays out.

Chameleons are sometimes aware of the social disturbance in Destination Kuta. Some MLOS in this organisation type use the guest review cards to improve their business and relation with the visitors. However, the actual use of the results stays out. Furthermore, excellent “guest relationships” and the Balinese culture is in some cases used as unique selling point of their business which differ them in the competitive environment

Turtles take little action to react on the social saturation. Although the Balinese culture in some cases strongly remain in the business, the attention for the host – guest relationship is weak. What differs Turtles from the other MLOs is that in some cases the business itself is the cause for the disturbance of the relationship.

The Lions are highly aware of the lack of the strategic level of employees, though they still prefer to employ mostly Balinese staff. To support this strategy, companies provide the trainings to local staff. Though, there is still a combination of different staff with a different religious background in order to deal with the numerous Hinduistic holidays of Bali.

Chameleons are also aware of the lack of skilled employees, and partly provide the trainings. Though, the organisations employ more daily workers than Lions and are not primary focused on hiring the local people. Furthermore, efficiency of the staff is not seen urgent which creates an overload of employees on the “working ground”.

The Turtles are aware of the lack of skilled staff and increasing competition within the labour market. However, they do not see an urgent need of improving the quality of the staff to improve their business.

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6. RECOMMENDATIONS

The findings of the study reveal that saturation elements have a strong impact on the business environment and competitive position of MLOs based in Destination Kuta. Although the different types of MLOs respond in their own way on these elements, effective interventions can increase the competitiveness of the MLOs.

The recommendations provide interventions and objectives that can increase the competitive position of MLOs and Destination Kuta. The study has gathered information from different perspectives in the of the research area´s business environment. Although several issues within the saturation elements seem urgent, the solution for this does not lie within the capability and responsibility of MLOs. Consequently, recommendations do not cover the field of duty of political or governmental institutions, where interventions related to development regulations, environmental policies or infrastructure are given. In this sense, realistic and achievable recommendations are provided within the capability and interest of the MLOs of Destination Kuta.

The recommendations of this advisory report are structured on five different levels: Destination Kuta, Lions, Chameleons, Turtles and Ants. Each level is addressed individually in a tailored way in order to formulate suitable and effective interventions for each group of stakeholders.

The recommendations for Destination Kuta are focused on environmental, destination image and social aspects of saturation. The study revealed that none of the MLOs undertakes strong actions against these important influencers of the competitive position. Therefore, this study suggests an intensified collaboration of MLOs, dedicated to raise attention and stimulate private sector´s involvement in these elements of saturation. Efforts in that direction should be channelled and directed through the Kuta Connect Project (KCP). This project would be financed by a joint fund of MLOs, covering the expenses for this project. The KCP will empower external professionals from a Balinese and Western background to take

action and responsibility, dedicated to reduce the negative influences of saturation on Destination Kuta and at the end create mutual benefits for all MLOs. According to interviews from different perspectives, the government and associations which are in the responsibility to tackle these saturation issues are currently passive and actions are not being effective. The Kuta Connect Project will therefore “connect” MLOs of the private sector and assure a sustainable future for Destination Kuta involving its private sector, the local community and visitors. The project consists of two sub-projects: Business Kuta, which will focus on aspects related to a proper marketing and management of the destination, and Sustain Kuta which addresses issues related to the socio-cultural and ecological environment of Destination Kuta.

Figure 5: Kuta Connect Project. Authors own development

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Even though the South Kuta Business Association (SKBBA) and Kuta Executive Club (KEC) are currently concerned and dealing with the abovementioned issues, their scope and reach does not include the entire destination. Further will the involvement of an external and independent project management team, increase the credibility of the project among members.

The recommendation dedicated to the distinct types of MLOs, are devoted to the aspect of remaining competitive in the business environment of Destination Kuta. The recommendations are based on the elements of market and economic saturation. Specific interventions are suggested, in order to allow MLOs to remain or even ameliorate their competitive position. Since research has stressed that the competitive environment of MLOs may differ according to their organisations category, the clear distinction between types of MLOs is also integrated in the elaborated recommendations.

The recommendations, related to the Lions, are focused on increasing collaboration within the KCP project and strengthen their current position within their competitive environment. This type of MLO is seen as strong, resourceful, with high financial interest and have a higher risk to get affected by a tarnished destination image. Therefore, their interest in the collaboration on destination level is more relevant than internal improvements. Chameleons are provided with recommendations that should ameliorate their innovative and creative character and in the meanwhile improve their competitive position. Due to their current limited strategic knowledge and financial resources, they would benefit from an exchange of knowledge within the KCP project. Recommendations dedicated to Turtles involve basic internal improvements of their business and a reposition of their company in order to move from their dangerous and highly competitive position within Destination Kuta´s business environment. Basic, straight-foward and easily achievable business improvements are explained and suggested. Even though the role of Turtles in the KCP is seen as passive, their increase awareness for the

destination is seen as beneficial. Similar to Chameleons, Turtles will substantially benefit from the shared business expertise and knowledge of Lions.

Finally, a new type of organisation is integrated in the recommendations for destination Kuta´s MLOs. As suggested by the headline of the report, “If there is sugar many Ants will come”, the popularity and overall success – the sugar of Destination Kuta will attract new businesses, or in other words Ants. Ants are therefore businesses with the intention to penetrate the market of Destination Kuta. Even though the large majority of surveyed MLOs have explicitly expressed the necessity to stop developments, thus preventing further granting of permissions for new businesses, authorities will not adhere to their wish. Therefore, providing potential newcomers and expanders – Ants, with valuable recommendation, based on the findings of the research, is considered as significant. Ants should generally follow the example of Lions, and offer an innovative, well marketed product, in order to be successful in the highly competitive business environment of destination Kuta.

The next section of the report will provide all recommendations that are

suggested to MLOs in Destination Kuta. The recommendations are

structured in order of importance from the perspective of the

researchers.

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Business Kuta

1. Marketing

Create a “realistic” promotion and image to satisfy the visitors' expectations Develop a new slogan for Kuta to change the negative perceptions to more positive image Promotion of the strengths of Destination Kuta to attract more tourists and differ the destination from Balinese and global competitors

2. Research

Collect the data and recent statistic to adapt the strategies

3. Membership

Involve new businesses to increase the effectiveness of goals implementation

Sustain Kuta

1. Environment Collaboration Program

Stimulate B2B connection with Environmentalists to create effective interventions Develop Environment Policy to create a transparent strategy Create a clear structure to organize waste management and balance the role of Banjars and private companies to decrease pollution Develop solutions for water scarcity such as the usage of “grey” water, rain water purification, implementation of simple activities within

MLOs as towel policies, low flush toilets to obtain or reduce the use or fresh water Discuss the electricity problem and brainstorm about solutions for this future problem

2. Socio-Cultural Platform

Measure visitor experience in Destination Kuta to improve the tourists' satisfaction Create independent tourist information point to provide tourists with necessary information Collaboration with Banjars to share the knowledge with local communities Improve host-guest relationship to increase the tourists and locals' satisfaction

Develop Visitor Handbook for Destination Kuta and distribute this tool along the MLOs Increase cultural activities to bring back the Balinese feeling in Destination Kuta

3. Online Educational Platform

Provide free business, hospitality and environmental knowledge for the staff of MLOs and the local community in Destination Kuta Online Workshop: Experts provide basic theory about different topics to increase the knowledge and awareness Online Handbooks: Online handbooks will support the workshops and can be studied individually Promotion: Promote the Online Education Platform through online media, offline media and promotion trips in Destination Kuta

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1. Strengthen Collaboration

Collaborate strongly with other MLOs in the Kuta Connect Project (KCP) to increase your competitive position and sustainability of Destination Kuta

Professionalize and intese involvement in Business Associations (BA) to stay aware of trends in your current and other sectors Create interest through the KCP and BA within the government to create long-term interventions and strengthen your destination

competitiveness of Destination Kuta and Bali focused on: Environmental Issues Infrastructure Bottlenecks Corruption

Create a stronger interest with Banjars for future interventions that can contribute to your business Increase the support of social and cultural activites within the local community Support the local community with first-choice job possibilities Collaborate with the Banjar in environmental education and waste management

2. Create Destination Awareness

Change from individually thinking to destination thinking to be aware of your destination environment Forecast of negative impacts on Destination Kuta to increase your competitive position in Bali and globally

3. Secure Market Position

Anticipate global and local market trends to acquire new markets and products or services for your business Understand and anticipate trends within market to remain innovative in your product and services Monitor possibilities to expand within Destination Kuta or export product/services to other areas to grow your business Anticipate on online reviews and Word of Mouth (WOM) of tourist to remain up to date and competitive

4. Improve HR Focus

Remain around 60 % of Balinese staff to decrease overload of employees in Destination Kuta Develop trainee programm for Balinese Young Professionals to increase ammount of strategic educated employees

Internships Train the Employee Programm Intensify the relationships with Tourism Universities in Bali

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1. Create involvement and contribute in the Kuta Connect Project to increase the competitive position and sustainability of Destination Kuta

2. Strengthen Strategic Management Tools

Focus stronger on visitor experience to create a higher amount of re-peat visitors in your business - Develop more efficient visitor experience measurement tools - Approach visitors a “friends” and not as mass tourists to create customer intimacy

Focus stronger on data and tourism statistics in marketing and product development to increase the effectiveness of your product and service positioning.

3. Create Effective Market Focus

Adapt your product, services and marketing strategy to the specific target groups within your area to be more effective Focus on Australians and 18 - 35 age group market around Central Kuta Focus on Australian Families and 35 + group market around South Kuta Focus on Asian Groups and Business market around Sunset Road

Create a more effective market profile of the domestic tourists’: According to the research the domestic market has a significant impact on the arrivals in Bali. Although you are aware of the domestic market, an effective market profile can help your organisation to improve the growth of this market in your business. Market research on the domestic tourists’ can lead to a better understanding of this target group and can result in a higher added value in revenue for your business.

4. Develop Alternative Distribution Channels

Increase of direct selling’s and limit the “revenue leakage” to OTA of your business Decrease dependency on TO and TA to increase the flexibility of your organisation Professionalize Social Media Strategy to increase your marketing effectiveness

5. Re-develop HR Focus

Stimulate internships to improve the quality of your business through internal research Optimize your HR efficiency program to decrease your variable cost Focus on training employees instead of recruiting to avoid competition on qualified and skilful staff with other businesses

6. Create Co-opetition with other MLOs

Use knowledge of well positioned stakeholders to acquire information about market changes and habits to optimize your products and services

Learn from MLOs other sectors to change your perspective, stay innovative and discuss tourism related issues in Destination Kuta

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1. Contribute in activities of Kuta Connect Project to increase the competitive position and sustainability of Destination Kuta

2. Refurbish!

Screen your markets, competitors, and own organization in order to identify your current position: Non-profitable products, services,

markets and organizational elements can be eliminated and the productivity increases. Through a repositioning of your product your

competition may decrease. Further will an improved understanding of your market result in a more efficient exploitation of your markets.

Increase management level of your business: Train your current staff on management level or recruit new qualified staff for this position

to increase the quality of your business

Increase quality of your staff by using workshops and handbook provided through the Kuta Connect Project

3. Be Innovative! Be Unique!

Implement traditional Balinese aspects in your products and services: Giving your customers the feeling to be in Bali and nowhere else, by

implementing a Balinese dress-code for employees and add Balinese appearances to your facility. By doing so you add more individualistic

character to your product, and in the meanwhile enhance your customers´ experience of the destination.

Focus on Customer Intimacy: Build up an honest and informal relationship to your clients, to understand their complaints and needs by

initiating a dialogue with them. Making them feel at ease and understood may compensate many shortcomings in your product. Undertake

the same approach with B2B clients, since an open and fruitful dialogue may motivate them to recommend your product more easily.

Add Creative & Unique Services to your product: Small changes in the way you service clients will create a more memorable customer

experience. Offering them a free drink, or starter for recommending your product via social medias or travel blogs cost you l ittle but

provides you the best publicity.

4. Implement Management Tools!

Visitors Experience Program: Introduce a visitor review card to more effectively identify your shortcomings.

HR Measurement: Measure the efficiency of your work force in order to ameliorate the productivity of your staff.

Understand Competitors: Screen your competitor´s activities and pricing to anticipate trends and developments.

Sales via Social Media: Use social media as tool to increase direct sales, by advertising special offers and generate sales via an included

direct-link to the website.

5. Be Aware of Your Business Environment!

Investigate your location´s Markets, Tourism Product, Organization and Collaboration: Understanding the business environment you

are operating in will help you to identify trends you should adapt to remain competitive. Further will an indebt assessment of your

business environment allow you to identify potential business opportunities. You may even detect opportunities to collaborate with

competitors and create awareness for your destination.

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1. Be Humble and Realistic!

Competition at Destination Kuta is fierce, high expectation may be shattered by the business reality. Therefore it is important to realize if your

business suits in the highly competitive environment of Destination Kuta. An already established strong brand can support your success in the

destination. However, take in consideration that Destination Kuta is an area where lots of businesses have been trying to create a successful

organisation. Therefore, make sure your business model is not strongly present yet, or that it is something new, innovate that will catch the eye of

tourist and differ yourself from the competition. An competitor forecast can help you with the review of the already existing competition.

2. Be Well-Prepared!

Penetrating the Kuta market involves many additional costs and outsider may not consider. Contributions to the local community, thus Banjars and

local government are aspects commonly overseen by Western investors. Also dealing with specific rules and regulation within the area can lead to

problems during the development or execution of your business. Balinese cultural aspects are also topics which should be overseen in dealing with

local staff and the community you are working in.

3. Be aware of the Markets!

A well-elaborated market analysis is a fundamental aspect for businesses willing to implement services/products in a highly competitive

environment. Be aware that relying on one single market in tourism is the key to failure. Diversification is therefore crucial, even in an Australian

dominated destination.

4. Be Well-Located!!

Location is the crucial key to success for Destination Kuta. You will be operating at a beach destination with traffic related issues comparable to

those of Asian metropolises. Attracting guests into narrow and hidden streets or to the hinterland of the destination is practically impossible. For

F&B and retail related businesses walking-in guests are still of major importance in Kuta. Surveyed Lions have therefore unanimously stressed the

competitive advantage location represented at the area. Also the adaption of your market towards the location your business is active in seems

crucial for success.

5. Be aware of the saturation elements

Before entering the market of Destination Kuta you have to be aware of market, social, environmental, economic and destination image saturation.

Taking into consideration all of the elements of saturation will allow you to build an effective strategy and business plan, therefore, it will increase

your competitiveness and you will stay relevant to the current situation in Destination Kuta. The present and future issues relating to the saturation

elements should be taken into consideration by you before entering the competitive market.

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7. THE FINAL WORD

The following consultancy report entitled „Where there is sugar, many Ants will come“, has pointed out the main challenges the strong developed tourism destination is facing, and has further offered achievable interventions to tackle these challenges. The challenges for MLOs which are active in Destination Kuta, are considered as a direct consequence of the poorly regulated and therefore extremely competitive business environment. An important finding which is responsible for this situation, is the absence of effective destination management of public and socio-cultural authorities and the lack of strong collaboration between MLOs. While the lack of collaboration is caused by a narrow view marked by individualistic or corporate focused management, the deficiencies in destination management and regulation are provoked by corruption on multiple levels.

The recommendations in the report can be adopted by MLOs to increase their competitive position in Destination Kuta. The differentiation of the interventions to MLO type, contribute to the effectiveness of the implementation of the recommendations. MLOs can adopt the recommendations to review their position in the highly competitive market of Destination Kuta and to improve their business.

With the final words, the researchers would like to stress that besides all constraints, Destination Kuta has evolved over the decades to a successful and internationally known and acclaimed destination. It quickly became clear to the researchers that the enchanting and diverse tourism product, with its strong cultural, natural and man-made assets, compensates its weaknesses. The research further suggests that weak destination management and regulation do not impede a destination with strong assets to flourish, bring benefits to the local community and in the meanwhile providing a great visitor experience to travellers. Therefore, sugar attracts not only Ants in a negative way, but gives space to a diverse mix of people and businesses to shine!

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8. REFERENCES

Academic Articles

Buhalis, D. (2000, 02). Marketing the competitive destination of the future. Tourism Management, 21(1), 97-116. doi:10.1016/s0261-5177(99)00095-3

Chin, W. L., Haddock-Fraser, J., & Hampton, M. P. (2015, 11). Destination competitiveness: Evidence from Bali. Current Issues in Tourism, 1-25. doi:10.1080/13683500.2015.1111315

Mccool, S. F., & Lime, D. W. (2001, 12). Tourism Carrying Capacity: Tempting Fantasy or Useful Reality? Journal of Sustainable Tourism, 9(5), 372-388. doi:10.1080/09669580108667409

Sutawa, G. K. (2012). Issues on Bali Tourism Development and Community Empowerment to Support Sustainable Tourism Development. Procedia Economics and Finance, 4, 413-422. doi:10.1016/s2212-5671(12)00356-5

Vickers, A. (2011, 01). Bali rebuilds its tourist industry. Bijdragen Tot De Taal-, Land- En Volkenkunde / Journal of the Humanities and Social Sciences of Southeast Asia, 167(4), 459-481. doi:10.1163/22134379-90003580

Reports

Horwath HTL Indonesia, & C9 Hotelworks Company Ltd. (2015). Hotel & Branded Residences. Bali (pp. 1-18, Rep.).

Websites

Ando, R., Lushyna, A., Tarabrina, P., & Wulandari, N. (2013, November). Bali rejuvenation strategies. Retrieved April, 2016, from https://www.academia.edu/4952942/Bali_Tourism_Strategies

Bali, Indonesia – An Impending Water Crisis. (2015, March 2). Retrieved April, 2016, from https://alicenoycemead.wordpress.com/2015/03/02/bali-indonesia- an-impending- water-crisis/

Bali Travel News. (n.d.). Bali tourism marginalizes Balinese people? Retrieved April, 2016, from http://www.bali-travelnews.com/Headline- News/bali-tourism- marginalizes-balinese- people.html

Cahyafitri, R. (2014, August 14). Java, Bali to face power crisis soon. Retrieved April, 2016, from http://www.thejakartapost.com/news/2014/08/14/java-bali- face-power- crisis-soon.html

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De Suriyani, L. (2014, May 28). Bali is reaching saturation as tourist hub. Retrieved April, 2016, from http://indosurflife.com/2014/05/bali-is- reaching-saturation- as-tourist- hub/

Electricity in Indonesia: Plenty Natural Resources but Shortage of Electricity. (2014, August 16). Retrieved April, 2016, from http://www.indonesia-investments.com/nl/news/todays- headlines/electricity-in- indonesia-plenty- natural-resources- but-shortage- of-electricity/item2325

Is Tourism Killing People? Bali Warned that Water and Time Running Out for Bali Tourism. (n.d.). Retrieved April, 2016, from http://www.balidiscovery.com/messages/message.asp?Id=11822

Longman. Dictionary of contemporary English. (n.d.). Retrieved April, 2016, from http://www.ldoceonline.com/dictionary/saturation-point

Maggi, E., & Fredella, F. L. (n.d.). The carrying capacity of a tourist destination. The case of a coastal Italian city. Retrieved April, 2016, from https://www.researchgate.net/publication/230793635_The_carrying_capacity_of_a_tourist_destination_The_case_of_a_coastal_Italian_city

Navarro Jurado, E. (2015, September 15). The saturation of the tourist destinations. Barcelona exports its model to the south. Retrieved April, 2016, from http://www.theeconomyjournal.com/en/notices/2015/09/the-saturation- of-the- tourist-destinations.- barcelona-exports- its-model- to-the- south-218.php

Philip, B. (2012, August 7). Beauty of Bali under threat from pressures of mass tourism. Retrieved April, 2016, from http://www.theguardian.com/world/2012/aug/07/bali-tourism- threatens-natural- beauty

The Importance of Online Reviews. (2013, July). Retrieved April, 2016, from http://thinkdigital.travel/opinion/the-importance-of-online-reviews/

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9. APPENDICES

Overview Data Collection

Unstructured Interviews

Organisation Sector Area Date Duration

Gloria Jeans Coffee F&B South Kuta 11-04-2016 45 min

Serela Legina Accommodation Central Kuta 11-04-2016 100 min

MBA Tour Operator Central Kuta 12-04-2016 120 min

Pepito / Mini Markt Retail South Kuta 12-04-2016 120 min

Ibis Accommodation Sunset Road 13-04-2016 90 min

Holiday Inn Accommodation Sunset Road 13-04-2016 90 min

Quiksilver Retail Central Kuta 14-04-2016 90 min

Aston Kuta Accommodation South Kuta 15-04-2016 90 min

Circus Waterpark Leisure South Kuta 18-04-2016 30 min

ProSurf Leisure Central Kuta 18-04-2016 150 min

Bali Garden Beach Resort Accommodation South Kuta 19-04-2016 100 min

Bamboo Bar & Grill F&B South Kuta 20-04-2016 120 min

Waterbom Park Leisure South Kuta 20-04-2016 150 min

South Kuta Beach Business Association Association South Kuta 22-04-2016 150 min

Milenium Travel Tour Operator Sunset Road 25-04-2016 75 min

Stakeholder Presentations

Organisation Sector Area Date Duration

Hotelbeds OTA All 05-04-2016 120 min Alila Seminyak Accommodation Seminyak 05-04-2016 60 min Four Seasons Resorts Bali Accommodation Jimbaran 06-04-2016 90 min

Peppers Seminyak Accommodation Seminyak 06-04-2016 75 min

Grand Nikkon Bali Accommodation Nusa Dua 13-04-2016 60 min

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Appendix 2: Demand & Supply in Destination Kuta

Supply

The supply side of the destination Kuta/Tuban changed increasingly over

the last 15 years. After the terrorist attacks in 2002 and 2005 the

destination is developed towards a tourism magnet with businesses in all

sectors of the industry.

MLOs in Kuta/Tuban

Within the sectors where this research is focused on, developments in

Kuta/Tuban in the last 5 years were analysed. According to the interviews

with MLOs and statistics obtained through desk research, the

accommodation sector is still increasing strongly. In South Bali,

developments will increase until 2019 with 35 % which will affect the

Kuta/Tuban area. The F&B sector is going through an “unsure” time where

businesses start frequently but close at the same time due to the high

competition in the area. However, according to the MLOs the sector is still

noticing a growth in numbers of companies. The TO / TA were stable but

opening markets from Asia increased the number of MLOs the last 3 years.

The MLOs in the retail sector are still noticing a slow increase due to the

opening of new retail shops in South Kuta, North Kuta and the start of

Legian. Although the transportation sector seems stable new, creative

ways of offering transportation to tourist are invented as Uber, Go-Jek and

the TO / TA which are penetrating this sector. The leisure sector is the most

stable in terms of MLOs which are suppling services or products. According

to MLOs only a small growth is notable in this sector. In figure X, the

increase in supply side in Kuta/Tuban is showed.

Competition

Besides the increase of the supply side in Kuta/Tuban, the MLOs are

noticing a growth in of supplier in other areas which affect the competitive

position.

Bali

Indonesia

South – East Asia

Global

2010 2011 2012 2013 2014 2015

Supply MLOs Destination Kuta

Accommodation F&B TO / TA

Retail Transport Leisure

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Demand

On the demand side, field research has revealed major differences within

the tourism markets of the three distinct research areas.

Central Kuta is widely considered as the “Australian backyard”, with the

predominance of an Australian mass-market. In fact, as highlighted by

several respondents, repeat visitors from down-under constitute a crucial

market of the local accommodation sector. While the European market is

of marginal importance for the area, the upcoming – bus travelling -

Chinese group market is utterly absent due to the poor accessibility and

overcrowded one-way roads of Central Kuta. The area´s colourful and vivid

nightlife, popular catering and retail sector however, attracts a diverse mix

of tourists, accommodated in other parts of the island.

South Kuta is a more diverse area with a strong leisure market staying in

the beach resorts along the coast and an important business/MICE market

in the hotels located along the quarter’s main street. The proximity and

easy access to the airport is a fundamental asset to many three to four star

hotels in order to attract business travellers. In terms of nationalities

surveyed MLOs have emphasised the prevalence of the Asian market.

Japanese & Korean travellers, Chinese groups, as well as the major

domestic market remain the most important target market of many locally-

based domestic hotels chains. Similar to Central Kuta, the quarter´s leisure

facilities and restaurants along Kartika street attract a significant amount

of Western tourists from other areas.

Sunset Road - the hinterland, accounts a minor proportion of tourism

facilities of the designated research area. Nonetheless, the accommodation

sector has recently expanded to the area with a notable development of 2

to 4 star hotels. The area´s retail and accommodation sectors are

consequently targeting a middle / low-end market. Due to its excellent

accessibility and proximity to the airport, the local hotels are frequented by

a majority of Chinese group-travellers as well as domestic tourists.

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