Dusit Thani Residence Davao | PHOTO: DUSIT.COM
The Philippine hotel sector is definitely back on track.
The government is reporting an increase in foreign and local tourists and this is indicative of a local leisure sector that is well on its way to recovery. Actual arrivals and receipts are breaching the targets of the Department of Tourism (DOT), while average daily rates (ADR) and occupancies are picking up.
In our view, the construction and modernization of more airports; improvement of other tourism infrastructure; development of new hotels and meetings, incentives, conventions and exhibitions (MICE) facilities within and outside Metro Manila; the DOT’s refreshed branding and overall strategy; as well as the return of business travelers and in-person corporate events should further boost the sector, raise its competitiveness, and sustain its luster. The hotel segment will also likely be buoyed by revenge travel, spending and dining, which continue to fuel the personal consumption-driven Philippine economy.
Opportunities definitely abound for property firms with leisure foothold. We see the reinvigorated hotel sector remaining one of the most vibrant property segments in the country and this trend is likely to extend beyond 2023.
More hotels outside Metro Manila
Developers have been building new hotels in key locations outside the capital region as they capitalize on pent-up travel demand from local and foreign tourists. Some of the new hotels in the pipeline include those in Mactan in Cebu, Bacolod in Negros Occidental, Boracay in Aklan, Davao, Bohol, Palawan, and Clark in Pampanga.
In our opinion, hotel operators should also monitor the construction and upgrading of airports across the country. These projects should provide the impetus for developers to expand their leisure presence.
Brittany Hotel in BGC | PHOTO: THEBRITTANYHOTELS.COM
Construction of more MICE facilities
People are now more willing to attend face-to-face meetings. Corporations, business groups, and even families have been holding in-person events especially after the government removed restrictions and dropped mask mandates.
Colliers believes that hotel developers and operators should assess the future demand for MICE facilities given the segment’s potential for a strong rebound. This should be aligned with the government’s thrust of modernizing existing and building new airports across the country.
The DOT is also priming the Philippines as a major MICE destination, and this should enable the country to corner major global MICE events and further boost tourist arrivals and spending across the archipelago.
Occupancies nearing pre-covid level
In H1 2023, average hotel occupancies in Metro Manila reached 61 percent, higher than the 55 percent recorded in H2 2022. Colliers attributes the increase in occupancy to the continued rise in foreign tourists, return of in-person events, and sustained demand from the local staycation market.
By the end of 2023, Colliers projects average occupancy in the capital region to reach 65 percent partly driven by holiday spending as well as yearend MICE activities. This will be near pre-pandemic levels as average occupancy peaked at 70 percent in 2019 before plummeting to 20 percent in 2020 due to the COVID-19 induced mobility restrictions and travel bans.
Maximize initiatives to lure back tourists
The DOT is now looking at promoting Mindanao and other destinations across the country. It also intends to work with various local government units (LGUs) to build infrastructure that will improve connectivity to emerging tourist spots.
We encourage developers to look at the viability of building hotels and MICE facilities in these destinations. For instance, the new SMX Convention Center in Clark is likely to benefit from the modernization and expansion of the new Clark International Airport.
Meanwhile, hotel operators and other industry groups should capitalize on government programs to lure travelers from the Philippines’ traditional tourism markets including Japan, South Korea and China, which accounted for 52 percent of total foreign arrivals from 2017 to 2019. Hotel operators should also mount partnerships with international airlines planning to resume or increase flights to the Philippines.