PH boom fuels resurgence in luxury hotel market

Having the second fastest growing economy in Asia and a stable political environment, the Philippines experienced a surge in investments, particularly in the high end luxury sector of its hospitality market, according to a report by C9 Hotelworks.

In a recent report, the hotel industry consulting firm noted that escalating room rates and strong occupancy rates are also setting the stage for “dramatic future growth” of the sector.

“Step back in time three decades and hotel headlines would be surprisingly similar to those today,” C9 Hotelworks managing director Bill Barnett said in an interview. “Manila Bay is asserting itself as a tourism hub in Metro Manila, [while] a new business district flexes its muscles within the competitive hotel landscape.”

He noted, however, some key differences between the hotel boom of the present day and that of the past.

“This time around it is Manila Bay, featuring the evolution of Pagcor Entertainment City and Resorts World, while the new central business district is not Makati, but neighboring Bonifacio City,” he said. “This is the new storyboard of Mega Manila.”

With a gross domestic product growth rate of 7.1 percent in the third quarter, the Philippines is “enjoying a fast-tracked journey back to the future,” Barnett said, noting that the hospitality sector is one of the frontline beneficiaries.

C9 Hotelworks’ report points to an aggressive pipeline of growth and investment in the luxury sector, with a total of 5,797 rooms opening in the upper tier of the market over the next five years. This represents a growth of 37 percent to existing supply.

These new hotels will include the introduction, expansion or return of internationally renowned brands such as Raffles, Fairmont, Grand Hyatt, Shangri-La, Sheraton and Westin.

As an early indication of future trends, C9 Hotelworks’ hospitality research noted that overall average room rates already rose 6 percent in 2011, while occupancy of luxury accommodation stood at 72 percent during the same period.

In 2011, Metro Manila had a total of 15,567 hotel rooms, with 57 percent of these being in the upscale tier.

“Suddenly, there is now significant movement at the top end of the market where luxury supply grew at only 3.2 percent between 2004 to 2011,” the report pointed out.

Barnett said that the Aquino administration and the private sector could be credited with much of the growth by executing a coordinated and effective strategy of selecting a limited number of massive infrastructure projects to focus on. This strategy, in turn, has created major demand for luxury accommodation.

“Present day trading remains strongly leveraged with corporate travelers who, combined with the meeting and incentive segment, command 78 percent of total hotel room nights,” Barnett said.

Looking forward to 2013 and beyond, he added the urban spread of Metro Manila into new areas—such as Ayala Land’s acquisition of the sprawling Foot Terminal Inc. property in Taguig City—would create new hotel micromarkets, which could be good news for the hospitality sector overall.

“In the new Asian age, when the East is now embracing a rising and increasingly affluent middle class, even Donald Trump has come to the table with his luxury namesake brand in the new Mega Manila,” Barnett said.