Hotel market unlikely to attract new investments until travel recovers

The hotel and tourism industries are among the hardest hit by the COVID-19 pandemic and the recovery of these sectors might be slower compared to other real estate asset classes. Because of this, investors are likely to shy away from the Philippine hotel market in the midterm.

“In terms of investment, it’s not an attractive investment right now. If you’ll ask us, at least in the mid term,”Lobien Realty Group (LRG) chief executive officer Sheila Lobien said.

Lobien added that many hotels are just surviving right now, adding that many hotel facilities are repurposing use as a quarantine space or for temporary offices.

“I think the recovery will be slow, until of course the vaccine is already out there and the confidence of the market is back and travel around the world is already open,” Lobien said.

At present, international tourists are still not allowed to enter the country due to travel restrictions brought by the pandemic.

In 2020, international visitor arrivals dropped 83.97 percent to 1.3 million from 8.2 million arrivals in 2019.

This translated to an 83.12 percent drop in inbound tourism receipts for the year to P81.40 billion.

Lobien pointed out that due to the movement in the tourism industry in the last decade as well as the growth of the outsourcing and the Philippine Offshore Gaming Operators (POGO) sector, all the big five star hotel brands have already entered the country.

“But today, we don’t see that it’s not going to move back to pre-pandemic levels right away, it will take time,” Lobien added.

Colliers International Philippine said earlier that it projects the completion of about 6,100 rooms or about 2,020 rooms annually from 2020 to 2022.

“New supply is likely to pick up in 2021 and 2022 following the delayed delivery of several hotels in Metro Manila,” Colliers said.

It added that muted foreign arrivals as well as upcoming supply of rooms are seen to taper the recovery of occupancy levels of the Metro Manila hotel market this year.

“In 2021, we project occupancy rates to recover yet remain at sub-50 percent levels as foreign arrivals will likely be subdued and the substantial new supply is coming online across Metro Manila,” Colliers International Philippines said in its 2021 outlook.

“Hence, we see ADRs (Average Daily Rates) declining by about 10 percent in 2021 from the projected 30 percent drop in 2020,”it added.

Data from Colliers shows that Metro Manila hotel occupancy dropped to 25 percent in the first half of 2020 from 71 percent in the second half of 2019. This was attributed to the substantial decline in foreign arrivals due to the pandemic and global travel restrictions.