As the third biggest industry in Indonesia and the biggest industry in Bali, tourism is an important industry that will definitely have such a big role in the country’s economy. There was 20% of Bali’s working population which directly involved in the tourism industry. Moreover, in 2001, there were 5.1 million tourists that visited Indonesia and most of them ended up in Bali at one stage. The importance of the tourism industry in Bali was disturbed by the first Bali bombing that happened in October 12, 2002 and causing 202 casualties which triggered a dreadful impact for tourism industry. The tragedy is called as the worst terrorist act in Indonesia’s history. It also became biggest tragedy experienced by the Bali’s provincial government since Bali had a dramatic fall in terms of international visitor numbers later on. At least 57 percent of number of tourists were decreased because the issuing of travel warning from countries such as Australia, America and also several countries in Europe. This became a huge loss for Bali since the gross regional domestic product (GRDP) in Bali is predominantly generated from tourism.
Moreover, most hotels were collapsed due to the low occupancy. The negative images and growing concerns regarding safety served to undermine the tourism industry in Bali (Kalla, 2003). The decrease in the number of tourists also had spillover effects which reducing Indonesia’s foreign exchange income that also negatively affected the Indonesia’s economic recovery. After the bombing, Indonesia’s GDP in the fourth quarter of 2002 also fell sharply to 2.61 percent compared to the previous quarter. The tourism sector was also down as much as 0.9 percent. But in early 2003, GDP had grown by 2.04 percent return, including the tourism sector grew 0.47 percent. This paper signifies the impacts regarding the first Bali bombing that happened in 2002 on international visitor arrivals in Bali. Specifically, this paper will demonstrate how terrorism act can impact the image of a tourism destination and later on affect the number of the inbound tourism.
How a terrorist act can affect an inbound tourism of a destination? In this paper, the author would use the impact of the first Bali bombing to the tourism industry in Bali as the case study.
Theoretical Framework and Methodology
According to a Gallup Poll conducted for Newsweek in April 1986, 79% of Americans said they would reject an opportunity to travel overseas because of the threat of terrorism. Based on the fact above, the author finds that the theory that is suitable to the aforementioned research question is a theory that links between terrorism and tourism. This theory had been conducted by Enders and Sandler (1991) and Enders, Sandler, and Parise (1992). Although Enders and Sandler conducted the research on the negative impact of terrorism on tourism in Spain from 1970 to 1988, the author believes that the theory can also be applied to this case. On their findings, Enders and Sandler found a significant negative impact of terrorism on tourism in Spain. Enders, Sandler, and Parise studied a large sample of European countries during the period from 1974 to 1988.
Their findings proved that terrorist act have a bad effect on tourism revenue in Europe and furthermore causing potential tourists to change their travel destination in order to feel safer and secured. To understand more about the decision-making process of a tourist, the author finds that tourists are rational consumers and move through the decision-making process by weighing benefits against costs, as shown as in the next figure. Risks from terrorism at a destination increase the level of tourists’ perceived risks and so increase the cost of the experience, which then results in the rejection of which one perceived as unsafe (Enders and Sandler, 1991; Enders, Sandler and Parise, 1992). This causes a tourist to choose a destination which doesn’t have any security risks in order to feel more secure about the travel experience.
The author will use the number of visitors as an indicator of how Bali Bomb affected Bali’s tourism. This indicator is chosen because it’s commonly referenced to determine the level of tourism development. To limit the range of the datas, the author only compares the number of tourists’ arrival, tourists’ expenditure and tourists’ length of stay from 2000 to 2006. To be added, this paper also only comprises data from secondary sources.
Tourism in Bali after the Bombings
Data from the Bali Provincial Tourism Office showed that the number of tourists arrival in Bali was dramatically decreased in 2003 because of the bombing. The interesting part is in 2004, however, the number of tourists arrival was actually higher than the number of arrivals before the bombing. To be more specific, in January 2003 (three months after the bombing), the number of visitors only reached 60,836. On the other hand in January 2004 the number increasingly reached to 104,062, an increase of 71%. In February and March 2003, the number of foreign tourists were 67,469 and 72,263 people, while in the same month in 2004 reached 84,374 and 99,826 people, or a rise of 25% in February and furthermore, 39% in March. (Dinas Pariwisata Bali, 2010)
Although the number of visitors were quickly recovered, the length of stay decreased, significantly lower than before the Bali bombing. In 2000 and 2001, the average length of stay of foreign tourists respectively reached 10.97 and 9.48 days. While the length of stay of foreign tourists after the bombing in 2003 was only about 6 days. This occurred because of a shift in the composition of foreign tourists visiting Bali as shown as the figure below. (Dinas Pariwisata Bali, 2010)
Direct Tourist Arrival to Bali from 2001 to 2005 based on Nationalities The short-stay tourists causing a lower average hotel room occupancy rate. In January, February and March 2000, the average room occupancy rate in Bali reached 46.33%. This figure significantly dropped in 2003, to 31.87%. In January 2004, the room occupancy rate is still slowly crawling to31.41%. (Dinas Pariwisata Bali, 2010) As a next variable, expenditure per tourist per day, can also describe the level of recovery of tourism in Bali. In 2001, any foreign tourists spend an average of U.S. $74.38 per day. In 2003, the expenditure per person per day decreased to U.S. $ 60.95. This figure did not seem to improve until the first three months of 2004. This phenomenon for the expenditure was also associated with the shift in the composition of the tourism market after the bombing which dominated mostly by the short-stay tourists rather than the long-stay ones. (Dinas Pariwisata Bali, 2010) Moreover, the impact of the terrorist incident also affected the accommodation sector.
All types of accommodation saw a corresponding fall in demand, and occupancy rates in larger hotels plummeted from 74.8% on 11 October to 33.4% on 19 October; figures later reached 10% in certain instances (Dinas Pariwisata Bali, 2010). Restaurants, retailers and attractions also had fewer customers and the future of small enterprises was threatened. The livelihoods of individuals such as tour guides and craftsmen were jeopardised, including members of the large informal sector of hawkers and vendors (BBC, 2002a). Not only the hotels, airlines and agents are suffering, the taxi drivers, the garment, souvenir, food industries all suffer (TTG TravelHub.Net, 2002). The World Tourism Organisation (WTO) predicted that the island could be US$4 million poorer due to the terrorist attack (BBC, 2002b). Following the first bombing, the World Bank/UNDP (2006) estimated that as many as three-quarters of those employed in the hotel sector were either working reduced shifts or had temporarily been made redundant.
There were also flow-on effects to other tourist-related industries such as transport and services. For example, market traders, beach vendors and taxi drivers reported a drop in sales revenue between 32% in Pasar Badung and 71% in Pasar Ubud (Henderson, J. ,2003). The impact of the 2002 terrorist strikes on Bali and indeed Indonesia as a whole was immense. The downturn in tourism in the country had a devastating economic impact.Other tourist related enterprises in the informal sector were much worse affected. These include many small-scale entrepreneurs who ply their wares at Bali’s beaches and temples (Baker & Coulter, 2007). However, despite all these negative effects of the attacks in Bali, the island has managed to recover immensely in later years following the event in 2002.
Although tourism fell by 28% in 2003, it actually then rose by 50% in 2004, to a new record of 1.5 million foreign tourists. However, after the two bombings, tourists were more reluctant to visit Bali. For example, in 2002 and 2003, the number of tourists visiting Bali went down by 31% and 28% respectively. This, in turn, resulted in a rise in the unemployment rate and escalated poverty. Almost immediately after the bombings, 2,000 tourists cut short their holiday in Bali (The Straits Times, 2002) and 2,833 international visitors were recorded on 15 October compared to an average of 4,650 prior to the blasts (Jakarta Post, 2006).
To sum up, the author’s analysis mostly support the findings of Enders (1992) which says terrorism really matters for tourism. It shows with the fact that Bali had a dramatic fall in terms of international visitor numbers later on in 2003. It is also in line with the theory that mostly, in the term of a tourists’ decision-making process, it will reject a travel destination of which one perceived as unsafe. However, in the case of tourism in Bali, the recovery was somehow quick since there was a big increase in the number of tourists’ arrival in 2004, even more than the number of tourists before the bombing happened. Direct impacts of the bombing are definitely the reduction in international visitor numbers and also visitors’ spending. The author also found a fact that there’s a significant shift from the long-stay tourists to short-stay tourists which visiting Bali. These direct impacts on tourism will also affect other sectors in Bali’s economy, such as foreign investment, national and regional income and also employment rate.
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