Higher foreign arrivals to improve hotel rates

The projected growth of foreign arrivals in the coming years may help improve the Average Daily Rates (ADR) in the Metro Manila hotel market, a property services firm said.

“Manila continues to lag behind its Asian neighbors in terms of tourist arrivals and ADR, but the push to attract more leisure investments by improving infrastructure and implementing sustainability programs should support arrival growth and sustain healthy hotel occupancy and ADR growth from 2019 to 2021,” Colliers International Philippines said.

Based on Colliers’ latest quarterly report, hotels across Metro Manila sub-locations recorded mixed results in the second half of 2018.

Hotels in Quezon City posted ADR growth of three percent for three-star hotels and one percent for four-star hotels.

Colliers reported that Fort Bonifacio hotels’ ADR rose between one percent and four percent during the period while three- and five-star hotels in Makati CBD posted flattish growth.

In contrast, hotels in the Manila Bay Area decelerated by about two percent and three percent.

Colliers said rates of foreign branded hotels in Manila continue to lag behind their counterparts in other Asian economies, mainly due to the relatively lower number of foreign arrivals in the Philippines compared to its neighbors.

“This results in the Philippines receiving the least amount of tourism receipts versus other comparable Asian countries,” Colliers said.

Meanwhile, the property services firm said it sees Metro Manila’s daily rates rising two percent per year over the next two to three years as the completion of new hotel rooms tapers off. This is faster than the flattish growth recorded in 2018.

“We do not see a substantial increase in rates over the next three years as aside from the additional hotel rooms, existing hotels in Metro Manila are likely to face greater competition from new rooms due to be completed in key areas such as Clark in Pampanga,” Colliers said.

“This could affect the number of foreign travelers that pass through Metro Manila given the regional airports’ accommodation of more international flights,” it added.

Colliers said the new rooms in the pipeline are likely to put ADR and occupancy rates under pressure over the next two to three years.

A total of 1,800 rooms is expected to be completed annually from 2019 to 2021.

“This, however, should partially be offset by the projected rise in foreign visitors by the tourism department,” it said.

Tourism Secretary Bernadette Romulo-Puyat earlier expressed confidence in hitting the 8.2 million foreign arrivals target for this year. This is about 15 percent higher than the 7.1 million foreign arrivals registered in 2018.

This will be driven by the opening of more airports and the launch of a refreshed tourism campaign.

“Colliers is optimistic that foreign arrivals will continue to rise over the next three years given the sustained interest from markets such as China, Japan, Korea, US, Australia, and Taiwan,” the property services firm said.