Hotels next to surge in Philippines after BPO offices, condos

May. 28, 2007

MANILA, Philippines — In a recent public disclosure of the Philippine Travel Agencies Association (PTAA), the Philippines diverted over 500,000 foreign visitors to other destinations in 2006 due to lack of accommodation facilities in most of the key tourists spots in the country. This resulted to income loss amounting to about US$400 million due to lack of hotel rooms and flights into the tourist destinations of the Philippines.

According to reports, the accommodation capacity of Boracay and Cebu are already maximized, which has become a constraint to growth and is contrary to the goals of government to increase the tourist arrivals both from foreign travellers and local tourists.

Foreign Travellers grew at a compounded annual rate of 20.8% from 2000 to 2006. Tourist arrival in 2006 reached 2.84 million, up by 8.4 percent versus the 2.62 million in 2005. Koreans topped the list of foreign visitors to the country last year, overtaking the Americans and the Japanese. According to reports, the number of direct flights from Seoul to the Philippines averages between 22 and 30 per week.

In terms of number of hotel rooms, the Philippines posted a record 13,939 rooms in 2006, a 9.9% increase from the 12,683 recorded in 2005. However, these additional hotel rooms are still not enough to meet the growing demand.

Last year was a good year for Philippine Tourism and the steadily upbeat performance since 2004 must be sustained through the upgrading of infrastructure, tourism facilities and services in main tourism destinations (e.g. Boracay, Cebu City, and Palawan) as well as increasing the number of hotel and resort facilities.

With this positive development, the Philippines is getting a lot of investments for new hotel development. Ayala Hotels, a subsidiary of Ayala Land, partnered with Kingdom Hotels for a US$153 million hotel complex within the Ayala Center. This is equivalent to 300-rooms (for Fairmont Hotel), 30 suites (for Raffles Hotel) and 189 Raffles-branded private residences to service the Makati CBD market.

Meanwhile, SM Investments is also pursuing two hotel developments in the Bay Area and Cebu City together with Carlson Hotel Asia Pacific and Accor to develop an aggregate of 350 and 400 hotel rooms for Manila and Cebu respectively.

For the emerging business district of Alabang, the success of Bellevue Manila Hotel in Northgate Cyberzone prompted its owners to build a third 25-storey tower that will provide an additional 198 deluxe rooms, at a project cost of PhP1.05 billion.

Other hotel projects in the pipeline are the Eastwood Park Hotel & Residential Suites, a 38-storey hotel and condotel project on top of a mall complex at the heart of Eastwood City, and the proposed Shangri-La Hotels and Resorts six-star hotel on the 1.2-hectare property of BCDA in the Fort Bonifacio Global City. And because of the marked increase in tourist arrivals in the Visayas, three international hotel and resort chains are planning to set up facilities in the region, namely, Banyan Tree Hotels and Resorts, Raffles Hotels and Resorts, and Four Seasons Hotels and Resorts. Future hotel developments also include the 616-room Imperial Palace Waterpark Resort and Spa, a Korean-Filipino venture which broke ground in July 2006 in Maribago, Lapu-Lapu City, Cebu.

According to Trent Frankum, General Manager of CBRE Philippines, We are getting a lot of investment inquiries for hotels, resorts and even golf courses from European, Middle Eastern and Korean investors. This is a clear indication of pent-up demand for investment-grade tourism-related projects such as hotels and resorts. The Philippine archipelago has a lot to offer to these foreign tourist and investors. The challenge for the property industry is to be able to present to these investors various options which meet their investment criteria.

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