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Second-tier cities rise up in Indonesia

Following in the footsteps of India and China, Indonesia’s second-tier cities are becoming attractive investment destinations. What is holding them back from realizing their full potential?

French hotel group Accor has recently opened a perfectly formed, modern Novotel near the airport in Banjarmasin, the capital of South Kalimantan on the island of Borneo. The hotel adds a little bit of European-style luxury to the developing city, boasting a restaurant that serves international cuisine, a fully stocked, modern bar and an outdoor swimming pool.

Still a new addition to the various offerings in Banjarmasin, the Novotel hasn’t yet filled its 198 rooms, but it’s getting there. The hotel is busy in the evenings, with a variety of customers from families to businessmen enjoying the facilities.

"As people in Indonesia become wealthier they are also beginning to look for quality," says Gérard Guillouet, senior vice-president of Accor in Indonesia, Malaysia and Singapore, from his office in Jakarta. "And the opportunities for us are not just focused on Jakarta anymore."

When Guillouet moved to Indonesia in 1993 from stints with Accor in Thailand and Malaysia, the hotel group had only just opened its representative office in Jakarta. In three years, Accor had built just three hotels in the country, in Jakarta; Balikpapan, a sea-port city in East Kalimantan; and Surabaya, Indonesia’s second-largest city, in East Java.

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