Four major Indonesian companies have signed a Memorandum of Understanding (MoU) for a new holding company, which will consolidate existing state-owned subsidiaries into one cohesive group. This conglomerate, named Wijaya Karya (Wika) Realty, is set to become the largest hotel chain in Indonesia, with 22 units already folded into the agreement. There are also suggestions the move will lead to the creation of a new flagship hotel chain within the next four years.
The deal represents a number of Indonesia’s most powerful corporations, drawing together several major existing hotels and crossing the divide between sectors. For example, the agreement for a new holding group was signed by Garuda Indonesia (airlines), which already owns Aero Wisata Hotels and Hotel Indonesia Natour (HIN); Pertamina (oil and gas), which is the holding company of Patra Jasa; Wijaya Karya (contractor), as shareholder of Wijaya Karya Realty; and Pegadaian (pawn shops), which is Pesonna Hotels’ current holding company.
The move comes as Indonesian business leaders and government officials look to consolidate their interests and sure up the flagging tourism sector, following extensive disruption caused by Covid-19 restrictions. Kartika Wirjoatmodjo is deputy minister of State-owned Enterprises (BUMN), and has confirmed that BUMN plans to consolidate subsidiary businesses under one holding company, in a bid to revive their prospects and gain a competitive edge through a collaborative network of partners.
The holding consolidation scheme uses a share swap or inbreng shares system, for which the share ownership value to be taken by Wika Realty is currently being determined by extensive audits and investment feasibility analysis. “We are still conducting investment and assets feasibility analysis, explains Prata Kadir, who is director of technics and development at Wika. Additional subsidiaries and operators are expected to be added into the new holding group by the end of the year.
BUMN minister Erick Thohir has instructed a total of 104 state-owned hotels to join the BUMN holding company. “The target is that by early 2021, we can start doing business development, including renovating hotels,” he explained. When this has been completed, the group expects to pool its resources and create a new flagship brand, which will conform to the highest international standards.
Members of the group have expressed optimism about the merger, noting its potential for the industry, but also the benefits it can offer to returning travellers. “Merging state-owned hotels will not only restore the glory of Hotel Indonesia’s flagship, but will give tourists more choices of international-standard accommodation in Indonesia,” explains Budijanto Ardiansjah, who is president director of My Duta Tour; an operator already included in the new holding company.
According to Kartika Wirjoatmodjo, “it is very possible that these state-owned hotels will be the pride of Indonesia.”