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Open skies: Quicker pace of leisure sector recovery in the offing

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The Philippines is starting to welcome more foreign travelers while domestic tourists are driving hotel occupancy and leisure-related spending across the country. The tourism sector’s share to economic output and total employment is beginning to improve, supporting industry analysts’ projection of a quicker pace of recovery.

Colliers Philippines believes that this growth trajectory will benefit developers that have hospitality footprint. This optimism should also entice more foreign leisure players to invest in the Philippines and take advantage of opportunities postpandemic.

Gradual reopening of MICE facilities

Results from our Q4 2021 briefing survey showed that 57 percent of respondents are willing to attend a face-to-face event, an improvement from only 20 percent who responded in the affirmative in Q2 2021. This further improved to 72 percent from our last briefing held in July.

In our opinion, hotels should start the gradual reopening of Meetings, Incentives, Conferences and Exhibition (MICE) facilities especially now that private firms and government agencies are starting to implement in-person events. Hotels should also offer flexible MICE packages to corporate clients.

Maximize public and private sector initiatives

The Department of Tourism (DOT) is now looking at promoting Mindanao and other destinations, and work with local government units (LGUs) in building infrastructure to improve connectivity to emerging tourist spots.

We encourage developers to look at the viability of building hotels and MICE facilities in these destinations. For instance, the new SMX Convention Center in Clark, Pampanga, is likely to benefit from the new terminal of the Clark International Airport. The construction and modernization of more airports across the country should also boost leisure-related investments.

Foreign arrivals up 1,300%

Data from DOT showed that foreign arrivals rose 1,299 percent to 814,144 in the first half compared to the same period last year. This surge was due to the easing of travel restrictions for foreigners starting Feb. 10, including the dropping of the COVID-19 test requirement. For 2022, the DOT sees foreign arrivals reaching 2 million—still far from the peak of 8.2 million arrivals in 2019 but an improvement nonetheless.

Meanwhile, the share of tourism to the country’s economy also showed signs of optimism. Data from the Philippine Statistics Authority (PSA) showed that the sector’s contribution to GDP reached 5.2 percent last year. Tourism-related employment reached 4.9 million in 2021, accounting for 11.1 percent of total employment in the country. Further growth in the sector should result in more job opportunities especially in the countryside.

The International Air Transport Association (IATA) projects that global passenger traffic may likely return to pre-COVID-19 levels by 2023, or a year earlier than its previous forecast, due to pent-up travel demand. Meanwhile, the Philippine Hotel Owners Association (PHOA) said demand is likely to revert to pre-pandemic levels by 2024, stressing that the “next year and a half will be crucial.”

Occupancy nears 50% mark

In H1 2022, average hotel occupancy in Metro Manila reached 47 percent, up from 44 percent in H2 2021. We attribute the improvement to the gradual return of business travel especially among investors conducting due diligence; local guests’ growing propensity to spend on leisure, likely supported by a rise in demand from the staycation market from April to June; and a slight rebound in foreign arrivals due to relaxation of entry restrictions.

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