hotels in bali go on sale for cheap as virus hammers tourism

Hotels owners in Bali are now forced to put their properties for sale as there are no tourists, no income stream at the island courtesy to the disastrous corona virus. Given the situation of the market many may have to stomach their loss. It also opens an opportunity for the long term investors to grab a slice of paradise for cheap.

Balangan Wave was supposed to be a famous 50 villa resort under construction near the its namesake surfing beach but it is now already available on the market for sale and the developer Michael Halim has already slashed down the price to $9 million from $17 million in May.

“In the current market, one can’t avoid selling at a loss,” Halim said. “Businesses are closing, there’s cash flow issues.”

Without any doubt the pandemic has halted the tourism business from Hawaii to Phuket but Bali is the one most vulnerable. 60% of Island's economy is based on tourism. 

In 2019 a record number of 6.2 million tourists visited Bali's beaches, yoga retreats and hotels. The same number was slumped down to 1.02 million in the first quarter with a drop of 22% even before the worst of the outbreak. Now the beaches that were once hustling and bustling with the tourist lay quiet and Tanah Lot Temple is deserted.

While many International Hotel Chains like Marriott International Inc. and Hilton Worldwide Holdings Inc. have the financial backbone to keep their chin high during the pandemic, smaller hotels and chains are struggling to survive. The sale of lodging listing has jumped 30% since the start of pandemic as per the stats given by ndonesian property firm Galaxy Kuta.

“It’s a good time to buy,” said Chandran V R, managing director of Singapore-based Cosmopolitan Real Estate, which is handling the Balangan Wave sale. “Bali will bounce back to normal. When that happens, prices will soar again.”

Hotel Teuku Umar in Denpasar is also looking for a buyer. This beautiful eye catching two star pop with neon window frames and interiors, the 140-room hotel was put up for sale for $7.7 million in May.

It is situated on a 30 minutes taxi ride from Kuta & Seminyak beaches, with rooms that go as low as $14 a night it was a haven and hit for backpackers but not anymore.

“The hotel has no income at all and has maintenance costs to pay,” said Meirina Rajianto, an agent at Bali-based Galaxy Kuta, who is handling the sale. “The owner decided to sell rather than bleeding more money.”

Hotel deals across Asia Pacific were record breaking before the Corona virus hit, they were fueled by cashed-up private equity and real estate funds with the involvements of wealthy individuals said Corey Hamabata who is the senior vice president of JLL's Hotels and Hospitality group in Hong Kong.

Trump Organization was also drawn to Bali, they signed an agreement in 2015 to lend their name to a new golf club and hotel on the Island. Now even they are scaling back as their local partner signaled last week that they might opt for a 4 or 5 star resort and not six any more to make it affordable.

Still in this despair, buyers are most likely to remain active to grab those discounted assets as they arise. Hambata said “We expect most buyers will be driven by three main themes: buying at a discount; buying under-utilized properties to improve them; or buying properties in strategic locations to grow a brand or platform.”

Indonesia is the world's 4th most populous country with a constantly growing domestic travel market so it may also prop up hotels until the globe trotters return. The international trips seen a rise of 303 millions from 270 million in 2018 as compared to 2017.

“We are expecting domestic demand will be quicker to recover than international demand,” said JLL’s Hamabata.

Bali with the population of 4.2 million managed to success early in containing the virus, however it is now seeing a spike recently, to more than 1400 cases with 13 deaths. Indonesia overall has now 54000+ cases with 2754 deaths which makes it the worst hit Southeast Asian nation.

These stats are also on what Bali depends on reopening its economy. With a three step strategy Bali will open to domestic tourist in August while international sun seeking lovers will be welcomed in September if they manage to make every thing go by the plan. 

Even in the best case scenario, it’s unlikely tourists will arrive in droves.

Its biggest source of tourists, Australia, has signaled it’s likely to keep borders closed until next year. In Singapore, just a 2 1/2-hour flight away, the government is only allowing essential trips and has warned that mass holiday travel will take longer to resume.

Over all it makes Bali a risky bet. The Island has over 4300 hotels as per government figures. This brought an intense competition with lower budget end of the market as many hotel owners got strained even before the proper hit of the virus.

“Those with little cash flow to cover the lockdown period and unable to restructure or delay debt payments will likely come under pressure very quickly,” said Govinda Singh, head of hotels and leisure for valuation and advisory services in Asia at Colliers.