Sofitel closure to further hike room rates in 5-star hotels
THE closure of the 48-yearold Sofitel Philippine Plaza will likely compound the increase in room rates of hotels in its category, many of which are already charging higher than prepandemic rates.
In a Viber message to the B - M , Leechiu Property Consultants (LPC) Director for Hotels, Tourism & Leisure Alfred Lay lamented the closure of the iconic leisure property by the bay, once popular for its spectacular views of the sunset over Manila Bay. “It’s sad to hear of the closure of such a prominent property in the Metro Manila landscape. This will exacerbate the increase in room rates across both the upscale and luxury hotel markets, specifically for the luxury segment in Metro Manila, which had already logged 21-percent increased room rates in 2023 versus 2019.”
As per LPC research, the average daily rate (ADR) of luxury hotels in Metro Manila outpaced all hotel segments, reaching P10,264 per night in 2023 from P8,429 in prepandemic 2019, despite a dip in their average occupancy rate to 69 percent from 71 percent in 2019. The ADR of upper upscale hotels rose to P6,945 per night last year, from P6,354 in 2019, and registered higher average occupancy at 75 percent in 2023 from 65 percent in 2019.
Philippine Plaza Holdings Inc., owner of Sofitel Manila, has said it is closing the property for safety reasons, and is studying its possible renovation, estimated to cost roughly P8.6 billion.
The company is currently negotiating with the Government Service Insurance System, its landlord, for an extension on its lease contract for another 25 years, after its expiration in 2041, the outcome of which will determine whether the hotel’s closure is temporary or permanent. (See, “Sof itel Philippine Plaza workers will get nearly P300 million in separation benefits—hotel owner,” in the BM , May 10, 2024.)
DOLE assistance
THIS developed as Labor Secretary Bienvenido Laguesma said his agency “will be ready to provide assistance to Sofitel Manila’s workers as we have done in the past and in similar situations. Among possible interventions will be job facilitation/referrals in other hotels through the Philippine Hotel Owners Association/conduct of job fair/livelihood assistance.” During the pandemic, the Department of Labor and Employment (DOLE) paid out emergency cash benefits to tourism workers who had lost their jobs due to the widespread closure of the industry.
He told this paper the hotel’s labor union has not filed any case with DOLE arising from the closure: “Probably they are still in discussion with management.” DOLE met with Sofitel Manila management “sometime last week,” and were informed that the closure was “due to safety issues/concerns, which they have to totally address,” he added.
Significant impact
THE loss of some 600 rooms from Sofitel Manila’s closure will be significant as new properties in its category will be coming onstream only in 2026. LPC’S Lay noted, “Room rates for luxury hotels are expected to grow well into 2026 as there is little new supply coming down the pipeline. This segment will be Banyan Tree Manila Bay, expected in 2025/2026, and the Mandarin Oriental Manila in 2026.” Both hotels will be adding just 238 rooms and 276 rooms, respectively, to the luxury hotel segment.
The Hotel Sales and Marketing Association and PHOA have declined to comment on the impact of Sofitel Manila’s closure on their industry. The Department of Tourism, likewise, has yet to issue any statement on the matter.
Earlier, LPC projected a hotel shortage in the medium term, which will push up ADRS and possibly affect the country’s ability to attract some 12 million international travelers by 2028. (See, “‘KEYS MUNA’ | Imminent hotel room shortage—and resulting higher room rates—could derail PHL’S ambition to lure more visitors ,” in the BM, April 20,2024.)