Surge in tourist arrivals straining room supply
The hotel industry may have some trouble meeting high demand this year as foreign tourist arrivals continue to outpace hotel developments, according to Leechiu Property Consultants Inc.
In its latest Property Market report, the real estate brokerage firm said tourist arrivals in the first quarter of the year reached 1.66 million, up by 18 percent year-on-year. This marked the highest single-quarter arrivals in the postpandemic stage, it added.
“The introduction of additional direct international flights and the easing of visa restrictions for certain source markets, a strategy employed by other countries to attract more foreign tourists, contributed to the increase in arrivals,” Leechiu said.
It pointed out, however, that there may be a potential shortage in hotel supply due to construction delays and high costs of funding exacerbated by the economic impact of the COVID-19 pandemic.
To recall, the Department of Tourism aims for 7.7 million tourist arrivals this year. This is expected to grow by up to 10 percent annually until 2028.
However, Alfred Lay, Leechiu head of hotels, tourism and leisure, said the projected growth in hotel keys from 2025 to 2028 was less than 1 percent.
The shortage may pull up room rates, and “it will become a more expensive pastime for us to travel locally and for foreigners to come here,” Lay explained.
Last year, the local hotel industry had an occupancy rate of 65.2 percent, still lower than the prepandemic average by 8 percentage points.
While upscale hotels in central business districts have yet to regain their prepandemic performance, upscale hotels have already shown resilience, according to Leechiu.
Complete rebound
The company expects a “complete rebound” in overall hotel performance by next year.
In the meantime, Leechiu recorded a total of 24,267 keys in the pipeline across 87 hotel projects throughout the country.
Of this, 9,668 are located in Metro Manila, while the rest are in Cebu, Bohol, Boracay, Davao and Palawan.
Leechiu also reported that the real estate sector was expected to remain resilient despite the high interest rate environment as developers continue to diversify their portfolio and achieve high yields.
It said the local property market was particularly looking forward to the potential policy rate cuts that may be implemented by the Bangko Sentral ng Pilipinas (BSP) within the year.
“On the surface, the market looks calm and steady,” said Leechiu director Tam Angel. “But actually, the whole market and everyone involved—the stakeholders, BSP, developers and consultants—are working hard to keep things afloat.”
During the Monetary Board’s April 8 meeting, it maintained the BSP’s rate at 6.5 percent to tame inflation.
Leechiu said the delay in anticipated cuts was beginning to exert pressure on the market, raising concerns on the resilience of capital values, especially in central business districts.
However, the company also pointed out that developers were now “strategically diversifying” their investments to include the industrial and tourism sectors in response to the “higher-for-longer” interest rate environment.
In turn, this investment shift could enhance yields and position for more growth opportunities.
High interest rates typically nag on the performance of property firms, as these could pull up prices and weaken demand.
Property firms are also encouraged by the International Monetary Fund’s 6.2-percent revised growth forecast for the country that was better than the 5.5-percent growth recorded last year and the 2.9-percent global average.
Still, Leechiu noted that stakeholders would monitor inflation trends and policy rate decisions to sustain market stability and growth.
