Overtourism and Bali’s Infrastructure Challenges in the Future

so this might or might not be a real infrastructure issue the infrastructure of bringing water down from bully is no problem while he gets plenty of rainfall while he collects a lot of water up here in the Northern Area this flows through rivers and is collected over here in this this ER iner cuta and then from there it can be distributed down all right welcome again to Market insights by Jing I'm here infor California today back in where it was originally born but I'm speaking hopefully intelligently about baling Market insights from here in this position

now recently we've realized that there's been a shortage of good questions to actually answer on Market Insight so the team at book of Vista has gone through and done a little bit of research so they plugged in a few they first of all they went to chat GPT and they went through this new part where you can do research and so through this deep research what they've been able to do is to collect some of the most pressing and difficult questions found anywhere on the internet and assemble them and put in front of me to

try to answer right now so I'm going against an AI now to try to answer essentially what are some of the most difficult and complex questions to answer about the Bali property and tourism marketplace now I've had to do some research to actually be able to answer these questions really well but we'll start one at a time the first question is is something I'm sure that's on everybody's mind it's related to the infrastructure development that we see here in B the question is how does over tourism influence B's infrastructure and how might this influence long-term

property Investments I have actually a pretty interesting piece of data that I'd like to show everybody to talk about a general Trend and an Insight that I've seen during my 20 years in Bal I have this memo right here let's go over here to take a look at it and see what it is right we can probably share a screen later on this but I have a letter over here on this screen that's pretty interesting it's an International Bank for reconstruction and development and this was issued as an executive order from Washington DC and the

World Bank and it was done in June 6 1974 and so the World Bank in 1974 issued $48 million for Indonesian Railways to be constructed and it issued $6.5 million to develop Indonesian fisheries and then surprisingly enough it issued $15 million to be developed for Indonesian tourism now what was essentially happening at the time that led to this particular progression of developing These funds from the World Bank in Bali I'll go back to the infrastructure part and try to connect the dots in my first years when I first came to Indonesia my very first trip

to Bali I was actually stunned at how welldeveloped the infrastructure was and I'll tell you why so my first trip to Indonesia was in 2004 whereupon I arrived just about a week after the second Bali bomb this was a terrorist act that was essentially spread this was the second time that a major terrorist act had affected Bali what had happened was a sequence of bombs had blown up near the American Consulate some in jimon beach and another one in couta but what had happened was essentially all the appetite all of a sudden for going to

B had evaporated overnight so I was on and Cathy Pacific all Asia pass where I got to experience 16 different locations across Asia and my final stop was in Bali so I had to go through b in order to fly back to California so this is what happened that was pretty interesting I had the entire jumbo jet from curtain curtain all to myself and number one I was rather surprised that there were jumbo Jets going to Bali previous Island destinations I had gone to had been accessible through smaller more compact Jets I was relatively surprised

that Bal would be able to even receive something of this s of an international heavyweight jumbo jet and then when I got to Bal I realized that the airport was fairly large it was not a small simple airport like kosui or other the small Islands in Thailand perhaps Fiji or even Maui in Hawaii which was also a small airport this was a fairly large airport I left the airport and I was shocked that there was highways in B I was shocked that there was six Lanes of Highways going from the airport to nadua and and

up to ca and Sak so in regards to the actual picture of infrastructure this is one consistent thing that we've seen the plan infrastructure for B has always been quite welld designed if you don't believe me then all you need to do is actually to go ahead and take a look at the map of Bali and what you'll find is that if you go to Bali and you go directly from the airport to the one region in which the actual area for tourism was design here in nadua you'll find that there's actually no potential at

all for any traffic and that's because as soon as you arrive to the airport you have a uninterrupted passageway that has a bypass essentially every particular there's nothing to turn on this side so there's no obstructions you you can get yourself over to nusadua no problem at all so what happened what's strange about living in Indonesia is this Whenever there is a plan for infrastructure nobody really goes there to develop and whenever there is no plan for any development that's where everybody goes to develop so what do we mean by that Dua was probably the

first and most successful large scale project in buly but this was done back like in the 60s and 70s right so over along this Coastline as you'll see numerous hotels decided to build up and they attain management contracts from all these different Western European hotels such as Hilton hayatt one of clubm some Spanish brands in there Sophie of course Aur properties so they developed very well over on this side and everything went very smoothly but over time what happened was that they got into a bit of a monopoly and then the rates were what international

rates charging let's say the equivalent two 300 to $500 a night similar to prices of what you would experience in North America Europe anywhere International but this come on this was this is B this is Indonesia this is a developing Nation outside people they live for almost what guest would live for in a day they live for a month on the same salary so inevitably what you keep on seeing in Bay this is the conundrum that essentially the government businesses and everybody still haven't worked out yet is that the spread of development went elsewhere the

spread of development went over to couta then to seak then to changu and then to ubba as well now all of these particular areas have never really been designated as primary tourism destinations so therefore over time they have been essentially you would call overdeveloped and I'll explain why that happens and how that happens too very clearly what happens is usually an innovation and it's not a bad thing to have Innovations especially in developing countries it's considered a good thing but what happens next is that it's a little bit like a tragedy of the commons race

to the bottom nobody wants to clean up of the party everybody just wants to go to the party so in each particular case couta and SE and changu what happened was essentially somebody figured out a new way to draw tourists to their part of Bali and by doing so what they were doing was they would build accommodations they build social infrastructure and they build and build all the end points of what was a perfect guest experience so you would build the Hotel first and then you would think about the road you would build the let's

say the the swimming pool first and then you'd think about how to get the water actually into it so the challenge and the problem over time was how would that infrastructure ever keep up with this particular amount of growth and the answer is it hasn't been able to it hasn't been able to because the endpoint growth has always exceeded the supporting growth that actually leads to the end points so chungu is a pretty good example of how growth went a little bit too quickly chungo grew primarily because of the Advent of Internet and mobile travel

options so what happened was this essentially the internet cycle of positive feedback happens much faster than any other type of positive feedback cycle in the world if you currently use a mobile app to make any particular decisions about who you date where you buy food how to get Transportation how you find a house how you find a job then you probably already know what I mean this particular adoption of mobile applications to actually make decisions extremely accelerated the bur of chongu and we all know what these mobile apps were they were essentially Airbnb travaloka booking.com

Agoda so these became essentially very positive flywheel effects that led to the super growth of regions like changu now changu is come on let's face it if you go and you want to understand what changu is all you have to do is to go out west you see what a traditional balones rice farming Village looks like and let's be honest a rice farming Village is not a place that is built up to take industrial capacity for traffic it's not a place that has ready to take industrial capacity for construction it is just a simple place

that is beautiful to look at very tranquil very pastoral moves like maybe a few bushels of rice a day out on motorbikes but now instead of actually having the right infrastructure for that we have essentially overloaded a village infrastructure for what is exactly a city this leads to further complications of now that infrastructure is following after development what are we prepared to demolish in order to improve the infrastructure do we need to demolish all the existing roads and make them wider good luck with that that's a political Challenge and anybody who's willing to essentially give

back their land for the benefit of all the people in the community well that's going to be a challenging ask okay number two should you install more electricity more Wi-Fi these are also being done as quickly as possible in an ad hoc way if you've ever seen blackouts or essentially Wi-Fi coverage go on and off you see these guys with collapsable ladders in the back of their motorbike they're doing their best to actually keep up with the growth of also the let's say the electricity and also the information needs of a population all right but

the most critical ones now do not actually Ur to let's say electricity and Wi-Fi those pieces of infrastructure are surprisingly getting more and more Superior to even options here in North America over here I am using a cable Co axle internet whereas in Bali the common default standard is actually fiber optic Wi-Fi the two most critical problems that we see throughout the area are number one water water is a big constraint in the southern part of Bali especially on the Limestone Plateau called the bkit that's this entire area that is sou of the airport now

this entire area has been geologically formed over eons it's been pushed out of the ocean as a big Limestone Coral Plateau so people have been actually mining this coral and bringing it over here up here to chanu for quite some time to actually give a stable Foundation to the rice patties which are all mud and so they use the compressible highly condensed blocks of limestone to actually produce foundations for Villas but as a result also of limestone it is not very that's not a very good retainer of water and so as a result also there's

no Hills and no mountains here so there's no way for let's say mountains to capture water and bring Rivers here this part of Bali is extremely dry so the primary way in which people try to access water is they try to drill down to the Limestone and then tap into pockets of water that they can find but it's expensive and it's not always a hit the other really really terrible way is this actually so there are actually pipelines of water coming to this area but unfortunately there is a water cartel that watches over the distribution

of water in this area so what do they do this water cartel has been essentially haunting the southern part of B for quite some time now I know about them because I used to work at Aman and we were building a hotel over here in nadua and our MEP Engineers that's the mechanical electrical Plumbing Engineers talked about eons of problems that they had dealing with the little water cels along the southern coast so when they were building hotels all along this way what the little water cartels would do is that they would always disrupt the

flow of Water by puncturing water pipes along the Route as the government was trying to bring pipes in why would they do that you ask because they controlled the trucks that then brought in the water and so as long as the trucks were bringing in water the trucks were able to pay off and essentially control over this area so this might or might not be a real infrastructure issue the infrastructure of bringing water down from bul is no problem while he gets plenty of rainfall while he collects a lot of water up here in the

Northern Area this flows through rivers and is collected over here in this this era near cuta and then from there it can be distributed down but there is no cooperation between the local inhabitants who control the water supply and what the provincial government has actually inted this is an unfortunate consequence not of infrastructure but of let's just say bad cooperation between the global and the local politics here in Bali so that's a constraint but it's probably a fixable constraint the other constraint is related to congestion and traffic so we can zoom in over here on

this particular graph and take a look at it or I can probably even use this as a I can probably bring up a 3D map and we can take a look at this right so I'm going to show a 3D spatial map of Bali and it's based on essentially data that we've gathered across on Airbnb that gives us an idea of the density of popular spots across Bali so what you'll see here if I can bring up this map in a second is this bam all right we're taking a look and we're looking at all

the density of different spots in terms of their popularity going from the airport north to other regions here is cuta seyc and changu what you'll notice is this particular pattern it's very fascinating in fact the pattern is this the pattern is that as time moves along you're going to see more and more popular areas along the coastline those are the first regions in that usually get the first tourists and they will vote up those places and you'll see tall green bars in terms of favorable reviews and satisfaction but what's interesting is this is a pattern

we've been noticing every year that instead of actually seeing a progression of green bars along the coastline further up to the West you see right here is where it ends right here essentially along the line of pronut is where fewer people are actually expanding to the West which is what you would normally expect but more are actually expanding and turning Inland this is chuk Bayou which is a new area that's a little bit east of changu so what this pattern starts looking like is this starts looking like actually a city it's a localized region instead

of a linear region and I'll show you what a linear region looks like okay a linear region looks more like here this is sonor as you can see here in sonor most of the activity sonur has far less vacation rentals than over in CA seac and changu but what you see here is also something fairly interesting you see a lot less actual movement inl that's because most people who when they visit let's say a Beach town community they want to be within walking distance of the beach so therefore most of the development and the popular

regions will be closer to the beach you get some exceptions like these over here but that's normal so you develop this way now what is that say about the infrastructure here in chungo it says that essentially our hypothesis is that the congestion going this way has now made it unfavorable to develop any further west why would that be a problem because this simply because the danger is if you move any further west then all of these people who are below ow you to the airport only add more traffic to your guest who is trying to

get to your region all right so if you're located way out here your arrival times might start going from 2 hours to 4 hours to 5 hours to who knows right as essentially more and more development is built up here the actual possibility of this affecting an arrival time to a property further west just gets greater and greater as you can see so this is another taxing infrastructure that is specific to let's say this part of SE and chungu what about Ubud seems to actually be the most balanced and well-managed region that I've seen here

in Bali and it's probably because there is a strong culture of sustainability there's a strong culture of being aware and there's a strong let's say definition of what is allowable what is not allowable uood for example doesn't have McDonald's it has very few department stores UB for the most part keeps its particular direction as an area that encourages small and medium-sized businesses I know this because I know the Starbucks which is right outside the palace newwood had to plea on hands and knees in order to get let's say the permission to open a Starbucks so

close to the center of the palace you'll see that there is not so much a let's say a accumulation of large businesses there and that has actually a few really good effects on infrastructure number one it keeps the ability for a single player let's say a large hotel or a large employer from getting too powerful and then being able to change the politics to change essentially the rules and the landscape so that part is working pretty well for ubot the second thing is I think ubot is still for more or less a lot of the

land is owned by the royal family and they are quite good at essentially maintaining the long-term vision of what they want their Community to be like so we see that because we see trails such as the Champa TR this is a really interesting opportunity I think this speaks a lot to the long-term vision of ubot so this Trail is probably worth oh I don't know Chum one Trail in uood oh sorry I got this in Arkansas okay this is now one of the most popular ridg lines in uwood and this is actually undeveloped and you

wonder why because it's actually perfect for development you have essentially a ridge where both sides have rainforest view both both sides have River Valley it would be perfect to actually allow for development and sell this land for what 3040 $50 million probably but this is actually owned by the royal family of UT and they've managed to essentially say no they don't want any more further development on this and so that also is preserving almost like a national park way of looking at this particular piece of land now that's not to say that there is infrastructure

problems in ubot if you go there at any given day you'll see that ubot is fairly jammed and if you take a look at let's say this particular map it doesn't it's not too hard to see why right you have this huge density of options around this area and this everybody wants to go to the center of ubot to experience the town life all right so let's get back to the actual question then let's summarize how does over tourism influence bali's infrastructure and how might this influence long-term property investment I would say this idea of

over tourism is highly dependent on the region if you look at certain regions such as let's say the popular and fast growing regions semak changu couta yes this is not very good you have an imbalance in the number of people coming in versus the amount of infrastructure that's built up for it but let's say even the specific example of seak ca changu ca does not have an infrastructure problem anymore it used to when it was in its Heyday and a lot of people were going to ca couta has the opposite problem of an infrastructure problem

CA has a demand constraint problem not enough people are going to ca so in a strange way that problem in couta is resolving itself you're not having any lack of infrastructure what you have is a lack of people willing to go there now if CA actually retained or even grew the number of guests that went there that would reduce a lot of the infrastructure problems over here in Chu wouldn't it because instead of making these long trips on traffic all the way out for 2 3 4 hours to get to per and changu people could

just go directly from the airport directly to couta so then boom infrastructure problem solved traffic problem solved and everything would be great but you can be sure as hell that the people over here in changu and per would not want that outcome so is it actually a lack of infrastructure or is it imbalance in the way the infrastructure serves it's probably the second part now let's say we were the government and we were going to try to fix this the only way to fix it is you probably have to build flyovers and highways actually that

go over the existing highways already which is bizarre because how would that even happen right it would be very expensive and essentially they would essentially fly over the existing traffic over to other regions now this as a solution has not been well accepted by The Bolognese Community they cite religious examples of how highways cannot be elevated over temples although I see a lot of other compromises in how the religion in this practice somehow that one is not being compromised but that would be a possible solution to overcome this particular congestion solution here okay the other

solution is how can you get more water down over in this particular area there is no water shortage the water can be brought all the way from the north to the bouet area so the main reason why this is not working is once again because of the local politics okay end to end question is thereaction infrastructure problem Bali I would dare to say there is not an infrastructure problem the problem is there's more of a political problem the politics of each particular region forall the advancement of projects that everybody already has or already knows a

solution to but it's the sort of the disunified nature of how the island is actually working at this point such that the common interests are not align and special interests are essentially pulling let's say development either this way to deny are this way to deny growth in CA this is more of the fundamental problem that we're facing here in Bali all right this is jingle again from Market insights and hopefully this gives a fresh and newer perspective on why we're seeing this particular tax on the infrastructure and if you agree or don't agree with me

that's fine but be sure to engage comment or follow and prove that I'm wrong tell me something that I don't know and educate me on History I'm open to have conversation to try to ensure that Bali is a more inspirational more delightful place for one and all see you next time [Music]