Colliers Philippines believes that the Philippine travel and tourism industry is starting to see a glint of optimism as economic indicators released by the Philippine Statistics Authority (PSA) point to the upside.
After a stellar economic growth of 8.3 percent in Q1 2022, Colliers believes that the country is poised for a faster GDP growth by the end of the year. In our opinion, this should enable developers, hotel operators and other tourism stakeholders to take advantage of the much-anticipated rebound in the travel and tourism sector.
Uptick in demand for hotels
According to the World Travel and Tourism Council’s (WTTC) latest report, the Philippines is on its road to recovery. Data show that total contribution of travel and tourism to the country’s economy grew to 10.4 percent in 2021 from only 4.8 percent in 2020. This is also supported by data from PSA showing that restaurants and hotels spending grew by 20.4 percent in 2021, a turnaround from the 18.2 percent contraction recoded a year ago. Recreation and culture also rose by 18.1 percent in Q1 2022 following a 34.5 percent deceleration in the same period in 2021.
Hence, we see this improvement benefitting the Philippine leisure sector.
Colliers Philippines recorded average hotel occupancies in Metro Manila increasing to 44 percent in H2 2021 from the 24 percent in H1 2021 as travel restrictions were eased and consumer confidence and spending started to pick up. The rise in demand for hotels also supported the recovery in Average Daily Rates (ADR) which grew by four percent to $63 per night in H2 2021 from $61 in H1 2021.
In our opinion, recovery in hotel occupancies and rates will still continue to be driven by Filipinos’ improving propensity to spend on leisure-related activities.
Improving domestic and foreign traffic due to pent-up demand
Tourist arrivals also continue to grow, with the Department of Tourism (DOT) reporting about 517,000 (foreign and balikbayans) arrivals (from only 46,322 arrivals in 5M 2021) in the country since reopening its borders in February 2022.
Revenge travelers also choose the Philippines as the country has one of the simplest entry processes in Southeast Asia and with the lowest number of active COVID-19 cases.
Moreover, the country will no longer require pre-departure COVID-19 tests for fully vaccinated and boosted travelers to encourage more tourists to visit the country.1
Prior to the reopening of its borders, the tourism department focused on domestic tourists. In 2019, domestic tourism expenditures accounted for 16.2 percent of the country’s economy before dropping to 3.2 percent in 2020 due to the pandemic.
Furthermore, in Q1 2022, data from the Civil Aeronautics Board (CAB) reveal that domestic passenger traffic2 reached 3.3 million, 230 percent higher than the 988,212 in Q1 2021. This is already more than half the full-year passenger traffic of 5.53 million in 2021.
During our Q4 2021 briefing survey, 47 percent of the respondents chose Palawan as their top travel destination followed by Boracay (33 percent). Meanwhile, about 57 percent of the respondents are now willing to attend a face-to-face convention. This is significant improvement from only 20 percent who responded in the affirmative in our Q2 2020 survey.
The International Air Transport Association (IATA) also reported that global passenger traffic may return to pre-COVID-19 levels3 in 2023, a year earlier than its previous forecast due to pent-up travel demand.
This despite the aviation industry facing headwinds such as inflation, labor issues, high oil prices and travel restrictions in China. Meanwhile, other countries have also opened their borders to foreign travelers. For instance, Japan is scheduled to open4 its borders in June for small tour groups before further relaxing its restrictions for general tourism.
South Korea5 also announced that it will be reinstating its tour group visa-free travel to Jeju Island, Yangyang, Gangwon and Seoul. At the moment, this scheme is only available to travelers from Vietnam, Indonesia and Philippines. Thailand has also loosened travel requirements and now only requires antigen tests6 on the fifth day of arrival.
Healthy supply pipeline from local and international brands
Colliers Philippines is also seeing more local and international hotel brands opening in the capital region. From 2022 to 2024, we project new hotel supply at annual average of 2,300 rooms, higher than our previous forecast of about 2,160 rooms per year. Most of the upcoming supply will be in Quezon City, Fort Bonifacio and the Bay Area ranging from three to five-star hotels. Some of these include the Pullman Hotel Manila, Ibis Styles Hotel, Grand Westside Hotel, Mandarin Oriental and the Lansons Place.
Tourism stakeholders’ post-pandemic innovations
While the country’s travel and tourism industry paves its way to recovery, Colliers believes that now is the opportune time for hotel operators and other tourism stakeholders to push for the approval of uniform travel protocols to bolster recovery in the hotel and tourism industry. Tourism establishments should also line up marketing initiatives to further attract domestic and international tourists. These include virtual destination videos and virtual reality (VR) tours promoting the country’s tourist spots and attractions.
The tourism department also seeks to tap the Korean travel market, the country’s largest pre-COVID-19 market, in promoting the country as a “safe and fun destination in the new normal.” 7 DOT also aims to invite international filmmakers to shoot films in the country given its wide tourism portfolio.8
Colliers Philippines is optimistic that local and global air travel will recover soon. This should result in the development of more accommodation facilities, including foreign-branded hotels across the country.
The Tourism department has lined up interesting programs which should entice more local and foreign travelers. The influx of tourists to favorite destinations such as Boracay and Palawan during the summer break indicates that more Filipinos are now raring to travel and spend. Tourism stakeholders should take advantage of Filipinos’ rising propensity to spend on travel. However, this excitement in the leisure sector must be sustained. This should be supported by continued modernization of airports across the country. Only then can we truly persuade more foreigners to throw a glance at our more than 7,100 islands and convince them that it’s more fun in the Philippines!