Q: Sofyan Hotels is Indonesia’s leading shariah compliant hospitality service provider well known for its active role in encouraging the growth of this niche industry. What can you tell us about your company’s background and history?
A: My father established the company in the early 1970s. We began as a property developer for residential housing and after the 1970s we had the opportunity to build and develop a hotel in Jakarta and then concentrated on developing as well as running hotels. In 1989 we went public and the IPO was subscribed by 300%, this provided the opportunity to streamline the management and operational system in order to professionalise and prepare for our further growth. In 1992 the company reached a stage of maturity in that we took stock of our growth so far and strategies for sustainability and we came to the conclusion that we should adopt shariah principles as the guidelines for our future strategy. Following on from this we received accreditation from the national Ulema council in 2003 and we were the first in the real sector to be certified as a shariah compliant business entity in Indonesia.
Q: As President Commissioner of Sofyan Hotel’s holding company, Arva Corporation, you oversee the group’s operations in a number of different industries. What are your current strategies in approaching these industries going forward?
Our core business is in property, which includes office blocks and townhouses and also encompasses the hotels. Education is another very important aspect of what we do as the hotel and property business both rely on human resources. So the three sectors that we focus on are commercial property, hotels and education. Our strategy is concentrated on the hotels to develop the Sofyan Hotels brand equity.
We are also focused on increasing the returns from our property, improving our operations and management in property management and capitalising on this to move into franchising.
Brand equity building is crucial in the property business as it is what differentiates you in the market as all physical property attributes can be replicated. Within property management it is all about the character and this will give you your competitive edge.
Applying shariah principles in your business involves discarding any unethical elements and this holds appeal for both Muslims and non-Muslim consumers. It therefore offers huge potential; there are 1.6 billion Muslims with 40-50% of those in South Asia. Moreover, 60% of Muslims live in countries that are rich in natural resources, which makes this a very interesting market.
Also, the halal food market is worth 4 trillion USD, impressive considering that the global tourism industry is valued at 6 trillion USD. This is only the captive market so the opportunities are vast in the shariah compliant market. This is why the decision was taken to focus on shariah compliant business activities.
Q: How can Indonesia and its local hospitality businesses best prepare for the global rise in the number of Muslim tourists?
A: The Islamic tourism market is valued at 126 billion USD based on spending in 2012 which compares favourably to the Chinese tourism market in 2011 which stood at 65 billion USD. To tap into the potential of the local and global tourism market, Indonesia must better communicate its Islamic heritage in terms of lifestyle and history.
Currently, shariah compliant businesses in Indonesia do not coordinate with each other in order to promote these attributes.
We have been working with the Ministry of Tourism and Creative Economy to develop our Islamic brand within the hospitality sector, which has already been done successfully in Malaysia for example. I am also part of the task force to enhance Indonesia’s Islamic tourism industry.
Q: Does Sofyan Hotels have any plans to diversify its comprehensive portfolio of services?
A: We are now looking to diversify into areas that relate to our core business. One such area is in education and the other is in IT to develop hotel web based systems for property management as well as for tour operators. While travel agents and tourism operators is a competitive business, these fields in Islamic tourism have not really been explored yet. Another area is within shariah compliant healthcare; Bangkok has the most widely recognised shariah compliant hospitals and this has contributed to its success in appealing to the Islamic tourism market.
Food products are another area of interest as halal food products account for around 70% of the entire Islamic market. Thailand has concentrated on this and is now one of the largest halal food producers in Asia so Indonesia has an opportunity here given the correct merchandising and branding strategy. At the moment halal brands are only being marketed to Muslims but it can be marketed to non-Muslims as well.
Q: How is Sofyan Hotels positioned towards working with foreign partners looking to enter Indonesia’s hospitality industry?
A: We are open to working with international investors seeking to invest in shariah compliant business. As part of our expansion, we are interested in equity investment and profit sharing therefore we invite investors to take equity as well as to be our partners for new ventures. Strategic partnerships are of particular interest as in the Indonesian market you need to understand the local market characteristics and the business risks; this can be done effectively with the right local partner.
If we can synergise our management skills with that of our potential partner then this would be a field of interest for us in order to improve the management systems within shariah compliant hotels. Marketing and networking is a further area of interest to us for establishing partnerships. We are already working with travel consultants in Singapore for the rating of Islamic lifestyle facilities.
Q: As a final message, what would you like our readers to remember about Indonesia?
A: Indonesia holds great potential with so many untapped opportunities that can be explored further by new investors. The country has not promoted itself well to investors but those that are willing to look at the fundamentals of Indonesia can see that there are a lot of opportunities here as the largest market in the ASEAN. The risks and challenges can be managed if you work with the right partner.