The Philippine hospitality sector is making a huge comeback. Beyond mere recovery, the challenge now is to sustain gains in occupancies and daily rates and drum up interest from stakeholders, from local and foreign travelers to hotel developers and operators.
Foreign arrivals in 2023 breached the Tourism Department’s target – 5.45 million versus 4.8 million set by the DOT and more than double the 2.65 million in international visitors registered in 2022. What’s interesting is that more foreign brands are planning to enter the Philippines as they intend to take advantage of the vast opportunities that the local sector presents and score a bigger slice of the burgeoning tourism pie. The development and modernization of more airports as well as the pavement of more roads including those in missionary routes should further stoke the tourism segment which is considered by analysts as a key job-generating sector of the Philippine economy.
Riding on DOT’s initiatives
Colliers Philippines believes that the sector has vast growth potential; in-person events are proliferating and this has been driving the take up of convention centers and function rooms in key destinations in the Philippines. The millennial staycation market, severely depleted by the pandemic, is expanding once again, and has been instrumental in fueling occupancies and daily rates of two to three-star hotels.
Business travels are coming back, thanks to outsourcing firms, multinational companies, multilateral aid agencies, and foreign infrastructure firms conducting due diligence. These also help lift the demand for serviced apartments. More optimistic business sentiment and increasing foreign investment pledges should continue lifting demand for business hotels.
More than 7,600 reasons to love the Philippines
There’s a gamut of reasons to love the Philippines. Beyond the beaches and friendly smiles that locals flash, there’s definitely more that the Philippines can offer to locals and foreigners alike. Hotel developers and operators can take advantage of these by being more strategic with their expansion plans. The key question is – should they build a hotel with a homegrown Filipino brand or acquire a foreign brand already recognized by international travelers? Should they carve out a bigger dining space and complement their accommodation facilities with convention centers and function rooms?
What I have been seeing on social media over the past few months is that hotel developers are aggressively marketing their facilities as leisure hotels – where guests can mix business and leisure. New hotels sprouting in Metro Manila are offering introductory discounts to guests while operators with hotels outside Metro Manila are highlighting their partnerships with foreign brands, especially the condotel and serviced apartment developers.
MICE segment is roaring back – and hotel players are cashing in
We are now seeing more in-person events organized by property firms, manpower agencies, pharmaceutical companies, and bazaar organizers and these have been raising the demand for convention centers, function rooms, and similar facilities. Colliers believes that hotel developers and operators should assess the future demand for MICE facilities given the segment’s potential for a strong rebound. Tied to this is the Tourism Department’s thrust of priming the Philippines as a major MICE destination, and this should enable the country to corner major global MICE events that will further boost tourist arrivals and spending across the archipelago.
Developing large convention centers near the newly modernized and expanded airports should also be explored by property firms. Colliers believes that the need for MICE facilities will only expand moving forward. As Colliers’ Executive Director for Asia Hotels and Leisure Govinda Singh stressed in a report entitled “MICE – see how they run,” the ‘human need for social and in-person interaction far outweighs the impersonal technology medium.” I couldn’t agree more and this is particularly true for Filipinos who value social connection.
Philippine hotel sector looking forward
Near-term challenges for the sector include still elevated levels of inflation (6 percent in 2023) as well as potential tapering off of the revenge travel phenomenon. But with the Philippines projected to be one of the fastest growing economies in Southeast Asia in 2024, along with improving employment situation, and a rise in Filipino travelers’ disposable incomes, Colliers believes that the Philippine hotel sector will continue to see brisk levels of activities over the next 12 months. These include the acquisition of old properties to be redeveloped into hotels as well as local players’ aggressive partnerships with foreign operators.
Overall, Colliers Philippines still sees bright prospects for the hospitality sector. This is shown by the record number of new rooms that will open in Metro Manila this year – more than 5,100 – with about 42 percent of which has foreign brands. The next 12 months will be exciting for Philippine hospitality! More reasons to love the Philippines!
Image by DC Studio on Freepik