Hold On issuing hotel licence in Badung regency

Mickey

Dear Friends, After putting my initial plans on hold for the last 3 years due to capital limitation, something happened 2 weeks ago that really took me by surprise. i got the necessary money to start my adventure again! The sector i want to invest in is Hospitality, and should include some surfing activities (25%) to catch some market share but it shouldn't be the main focus. i'm considering different options as each option comes with its pros and cons: the good thing is that my partner has over 20 years in construction business from Holland 1. Lease or buy existing accommodation, renew, upgrade and start exploiting. 2. Buy or lease land, build from scratch and start our operations...(yes i looked into the land prices, they are scary..!!!) i have decided to start my PMA procedure right away even before starting the hunt for the land or accommodation so that all the purchases be under the company name. Before proceeding i just wanted to hear the advice of some great old veterans in this forum and to just name a few: Gilbert de jong, matsaleh, Markit....:05.18-flustered: My questions: 1. is there a hold on Melati hotel/ star Hotel licence in Badung Regency? 2. if we build 5-6 Bungalows + 2 villas, Restaurant, SPA, swimming pool...what kind of licence do we need? 3. if we build a resort with more than 10 bungalows, what kind of licence do we need? Thank you guys and please feel free to ask questions. Regards, Mickey

ferdie

For the license and the classification of the business, its more technical to the common people, go to an agent or knock the door of the local PHRI (Hotel & restaurants owners Association) and consult with them?

Markit

Hey Mickey, Welcome to Bali and the forum. Understand that a lot of people come to Bali and think the best option is to open a guest house/home stay and then sit back and let the good times roll. I'm advising a young couple about that right now and frankly - they will lose all their money because they think enthusiasm instead Due Diligence and experience will pave the way to success. I have pointed out to them that that might work with a rock band or if you try swimming but not with a hotel. And it is fecking hard work to make guest house work - more so now than ever. Have you heard about the thousands of new hotel rooms that have gone online in the last 2 years? And the thousands more that are being built as we speak? They are cutting each others throats with pricing - do you really want to get into that fight? Doesn't the fact that they are even talking about a building stop for tourist accommodation give you pause to consider? If it was me I would be looking for a guest house that already exists and the owner wants out (yes, usually because it won't pay) perhaps the "concept" was wrong or it's (or he) are too old. Both situations you [B][U]might[/U][/B] remedy with a new idea and hard work, oh not to forget - money. It may not be pretty but it's truth Markit style.

ferdie

Don't know whether the policy is already being implemented or not, but you might want to check this news : Badung’s accommodation policy supported Make sure you have what it takes to survive beforedeciding to invest a lot:icon_biggrin: markit's suggestion might be the answer, but it will be better if you take over a PMA also, if it's a local and you are a PMA, there's still extra cost and legal steps to do for acquiring local business into your PMA Also the trouble of finding the right hotel for your plan is a big problem:concern:

spicyayam

I really don't think it is economically viable to start a budget type hotel/guesthouse now in the south of Bali because of the current property prices. In other areas, it is still not going to be easy. I would definitely be looking at established places and renovating. I heard there was an old hotel in Lovina that was recently leased for 30 years for 7 billion rupiah or about $700,000. It needs a lot of work and I am sure the new owners could easily spend another $300k fixing it up. How can they expect just to recover their money let alone turning a profit? I would be inclined to build just one or two really nice villas and rent them out for $200-$300 a night, rather than building a place with say 10 rooms and renting the rooms out for $20-$30 a night.

Mickey

Markit wroteHey Mickey, Welcome to Bali and the forum. Understand that a lot of people come to Bali and think the best option is to open a guest house/home stay and then sit back and let the good times roll. I'm advising a young couple about that right now and frankly - they will lose all their money because they think enthusiasm instead Due Diligence and experience will pave the way to success. I have pointed out to them that that might work with a rock band or if you try swimming but not with a hotel. And it is fecking hard work to make guest house work - more so now than ever. Have you heard about the thousands of new hotel rooms that have gone online in the last 2 years? And the thousands more that are being built as we speak? They are cutting each others throats with pricing - do you really want to get into that fight? Doesn't the fact that they are even talking about a building stop for tourist accommodation give you pause to consider? If it was me I would be looking for a guest house that already exists and the owner wants out (yes, usually because it won't pay) perhaps the "concept" was wrong or it's (or he) are too old. Both situations you [B][U]might[/U][/B] remedy with a new idea and hard work, oh not to forget - money. It may not be pretty but it's truth Markit style.

Like always, sharp and direct...thanks for the honesty Markit. I have been to Bali around 6-7 times and I’m aware of complications you are mentioning above. But I can guaranty to you that if the concept is good, unique and the execution is well planned and managed, there is a good ROI...not only financial! You advices are: • Restudy the market and the competition • This line of business need a tremendous effort and hard work • Hold on issuing Hotel licenses in Badung regency is an ALARM, so maybe consider other regions • Taking over an existing property is a better option Any tips on the licence i might need to run this PMA?

Mickey

Don't know whether the policy is already being implemented or not, but you might want to check this news : Badung’s accommodation policy supported Make sure you have what it takes to survive beforedeciding to invest a lot:icon_biggrin: markit's suggestion might be the answer, but it will be better if you take over a PMA also, if it's a local and you are a PMA, there's still extra cost and legal steps to do for acquiring local business into your PMA Also the trouble of finding the right hotel for your plan is a big problem:concern:

Merci for link, Markit suggestion is a strong option that I’m considering. Taking over a PMA is a good option and it’s to consider as well. The only problem is that man needs to be vigilant about this because of the history of the PMA as you don’t know if they were paying taxes, suited in court, have debts, so the due diligence needs to be done properly. Finding a hotel/resort, guest house…is very difficult and tricky, if the hotel is doing well it WON’T be for sale ☺ only the ones that are badly performing will be on sale. Do you have experience with taking over a PMA?

balibule

Have you considered kos2an? That's a blooming market at the moment and low maintenance as it is long term rental. Also lower initial investment.

Markit

I have friends that have built a dive/surfing/luxury resort on a wonderful secluded bay on one of these wonderful islands that Indonesia has so many of and they really enjoy it immensely - alone! They are dying from loneliness as they can't get any people to come join them and pay for the pleasure - they have spread both cheeks for all the travel agents and tour operators that they can find to give comp introductory weeks holidays to. All say the same thing - "gee would be good if it was on Bali". There is still 90% of Bali that hasn't been turned into a toilet like down south and that will be the attraction in coming years. If you don't want to join the slaughter down south and would rather find something nice up by Candidasa PM me.

Mickey

spicyayam wroteI really don't think it is economically viable to start a budget type hotel/guesthouse now in the south of Bali because of the current property prices. In other areas, it is still not going to be easy. I would definitely be looking at established places and renovating. I heard there was an old hotel in Lovina that was recently leased for 30 years for 7 billion rupiah or about $700,000. It needs a lot of work and I am sure the new owners could easily spend another $300k fixing it up. How can they expect just to recover their money let alone turning a profit? I would be inclined to build just one or two really nice villas and rent them out for $200-$300 a night, rather than building a place with say 10 rooms and renting the rooms out for $20-$30 a night.

How are you, good to see you are still contributing to this forum. I will for sure consider your advice as Markit suggested. Yes breaking even in the actual market situation is absolutely longer than 5-6 years ago due to competition, raising prices, property prices, land prices...etc Questions: 1. If we build the 2 villas and rent them out, what kind of license do we need to attach to our PMA. 2. If we add, SPA, restaurant to the two villas, will it be the same license or do I need to change it? 3. What will be the occupancy rate for 2 villas (3 bedroom) in Canggu Area for example?

Mickey

CanonMan wroteI can only imagine the headaches and challenges you will be going through in the coming weeks and months. I'm fascinated as to why you think another resort catering to the surfing sector is a good way to go, you're certainly stacking up the competition chips by going that route. Please don't see this as a negative spin but hadn't you thought about setting up somewhere off the beaten path, a place that doesn't have the environmental headaches that Bali is currently facing. Problems such as sewage, trash pollution and the gridlocked roads in Summer? All of these will eat into the experiences of your guests. Now a location that is hardly surfed with a World class wave, is definitely off the beaten path and potentially self sufficient with regards to local foods and is stunningly picturesque would, in my opinion appeal more to the surfing crowd you look to attract. Cheers, and the best of luck with the project. Mark.

How are you? Thanks for commenting on my post. Your Facebook page is great! Surfing represents only 25% of the activities we are aiming to drive, as we are not only targeting surfers. We won’t be competing directly with surf camp or resorts but indirectly! If we were to focus on surfing, which islands of good potential in Indonesia do you suggest?

Mickey

balibule wroteHave you considered kos2an? That's a blooming market at the moment and low maintenance as it is long term rental. Also lower initial investment.

What is kos2an, can you give us some information please.

Mickey

Hi Mickey, Catering to surf sports I would err much more towards Kite Surfing as that caters to a clientele with a much greater disposable income, expensive gear. Within Indonesia there is one location that springs to mind that is picture postcard perfect for such an endeavor. It also has great winds and loads of local culture and appeal, Sumba (link). There is also awesome surfing, deep sea sports fishing and in my view a much more appealing natural aesthetic than Bali. A bit more isolated yes but then comes in to play your marketing effort which I think wouldn't actually be a fretting as that dealing with the competition here in Bali. Either way, just my thoughts. Cheers, Mark. PS Thanks for the kind words on the facebook page.

Hello CanonMan, Sumba is a magical place and yes affordable compared to Bali or other islands. The only problem in my point of view is what Markit exactly mentioned. Loneliness and the number of tourists visiting the island Other problems: Sumba is one of the poorer islands of Indonesia. A relatively high percentage of the population suffers from malaria. Infant mortality is high. Access to water is one of the major challenges in Sumba. During the dry season, many streams dry up and villagers must depend on wells for scarce supplies of water. Concerning Kate Surfing, in my point of view, other places in the world are for much better, think of Tarifa in Spain, Essaouira in Morocco and The Nederlands. Simply, because the trading winds are much stronger when you are 15-22 degrees above the equator. Also this target group when they come to Indonesia, they come for other reasons (Bali!) and maybe short trips to islands in close distance. another thing: Surfers and kite surfers they simply can't be in one place together :icon_razz: But it is to evaluate specially because of your experience and the places you have been, so there is something that only a CanonMan can see and it's worth to double check :)

Markit

CanonMan wroteHey Markit, if you want to point your buddies in my general direction or via the linked facebook I could possibly help them with some marketing etc. Nothing ventured nothing gained....

I will happily pass you along to them - one is Balinese and the other is Jakarta rich guy so don't hold your breath. In my experience they know it all but don't want bule help - god knows why? These are the same guys we all know that will spend thousands of $ on advertising but not ask a mother tongue English speaker to vet the grammar/spelling - go figure. "No Any Preservatives Added" - in the UK a Preservative is a condom.

joji gulapetis

[QUOTE] These are the same guys we all know that will spend thousands of $ on advertising but not ask a mother tongue English speaker to vet the grammar/spelling - go figure. "No Any Preservatives Added" - in the UK a Preservative is a condom.[/QUOTE] thats because they consider us all "bugil" mate. :topsy_turvy:

balibule

Mickey wroteWhat is kos2an, can you give us some information please.

Kos Kosan. I don't know the proper English word for that. It's housing for Indonesians, mostly non-Balinese, who work in Bali. The South of Bali is covered with these and they have a close to 100% occupancy rate. You have simple ones that go at 500k per room per month and you have the elite ones that go at 2 million per room per month. You need very little staff. No need for housekeeping. No need for linen. No need for F&B. The renters will pay electricity (the prepaid system). No cost for marketing except a sign at your frontdoor when you have an empty room. No website. You just need a good location. Glogor Carik is full of Kos2an for example.

Markit

Mark which island is that?

hinakos

Hi Canon, I've been following the struggles of Bob and Patti Arthur over there for some time now and it doesn't sound any less complicated than Bali. I'm sure the Chinese wont have anywhere near that kind of hassle with the $$ they are about to hand over. Money talks, culture walks. Sad. I'm baffled as to where the island is that is powered by wave generation though.....that's a high tech and pretty expensive way of generating power. You mean tidal? Was trying to plan a trip over there not long back but never got round to it....who knows might win one soon?

spicyayam

1. If we build the 2 villas and rent them out, what kind of license do we need to attach to our PMA. 2. If we add, SPA, restaurant to the two villas, will it be the same license or do I need to change it? 3. What will be the occupancy rate for 2 villas (3 bedroom) in Canggu Area for example?

Most people seem to get a Pondok Wisata licence. You need to check the BKPM negative investment list: http://www.bkpm.go.id/file_uploaded/PPres-36-2010.pdf Search for hotel. For 1 or 2 star hotel you can up to 51% and for 'other accommodation service' you can own up to 49%. I don't know what other accommodation is referring to, but it could be Pondok Wisata. A homestay cannot be owned by foreigners. Don't know about spas. Probably need a separate licence. Restaurant requires a separate licence as well as a bar if you plan to serve stronger alcoholic drinks than beer.

Finding a hotel/resort, guest house…is very difficult and tricky, if the hotel is doing well it WON’T be for sale ☺ only the ones that are badly performing will be on sale.

Yes, but there in lies an opportunity. Many older hotels in Bali are poorly maintained and undermarketed. They seem to just chug along and you get the feeling that the owners have lost interest in the property.

ronb

I am reading thru this, and see Canonman's suggestion for a great location (Sumba), and Mickey's response that the tourist are not there. Think of G-land in East Java (see G-Land - Wikipedia, the free encyclopedia). A location with a great surf break (I am told, since I would not know a great surf break if I saw one) in a location difficult to access and with no tourism back then when it was "discovered". What has happened since then is that they have used Kuta, Bali as the base, arranged surf safaris starting from Kuta, provide everything including the transport there, the accommodation with all meals etc. It is relatively high-priced, and from what I can see - does good business. I think if you can think outside the boundaries of what is currently being offered, you may hit gold.