HOTEL room rates in the Philippines are likely go down this year as a large amount of supply has come into the market, which should put downward pressure on prices, a real estate analyst said.
In a recent interview with The Manila Times, KMC Mag Group head of research Antton Norberg said the country’s hotel sector looks to be slowing down as its supply cycle has come to an end.
KMC Mag Group is the local associate of London-based real estate advisor Savills.
“The hotel sector is also like the residential sector. I think the supply cycle has come to an end now,” Norberg said.
He noted that the new supply of hotel rooms entering the market this year will put downward pressure on hotel room rates.
“There’s a lot of hotel rooms coming up in Manila, which means that the room rates should go down a little bit. There’s pressure for rates to go down,” Norberg said.
“For investors, the hotel sector is slowing down a little bit, but for consumers it’s better” because that it would make hotel stays more affordable, Nordberg said.
A report by Jones Lang Lasalle noted that around 2,450 new hotel rooms were added in Manila in 2015. The fresh supply includes 480 rooms from Newport Belmont Hotel, 438 rooms from Grand Hyatt Manila, 401 rooms from Novotel Manila Araneta and 189 rooms from Red Planet Amorsolo.
JLL noted that for 2016, several new hotels are set to open. Shangri-La at the Fort Manila recently opened this month, while Movenpick Hotel Makati, Conrad Manila and Sheraton Manila are expected to follow suit also this year.
“The supply pipeline in Manila is expected to show significant growth with numerous brands planning openings in the city,” JLL noted.
The report also highlighted that several brands are looking into expanding their hotel portfolios in the next few years, such as Mövenpick Hotels, which aims to triple its presence in the Philippines over the next five to seven years.
Robinsons Land also plans to increase its portfolio by 86 percent in 2020 from the current 2,200 rooms to some 4,100 rooms.
“The company has identified four sites in Metro Manila for expansion of its Go Hotels brand. SM Hotels and Conventions Corp. is also hoping to break ground on a new Park Inn in 2016,” the report said.
JLL noted that international visitor arrivals to the Philippines increased 10.9 percent year-on-year in 2015, with Manila receiving an estimated 70 percent of those arrivals.
“The biggest growth in arrivals was registered in September 2015, with an increase of 19.6 percent, due to the positioning of major events and several public holidays,” JLL said.
Aside from increased tourist arrivals, JLL said it is the strong economy and new developments in the gaming industry that are also creating demand for the hotel sector.
Meanwhile, JLL head of research and consultancy Claro Cordero Jr. said in a text message that the robust offshoring and outsourcing (O&O) sector is also influencing demand for the hotel market.
“The O&O industry creates demand for hotels by housing several expatriate executives who are in the country for a short stay only,” Cordero said. “These expatriate executives are usually on a short-term engagement.”
Nordberg echoes this view, saying that most business process outsourcing (BPO) firms are foreign, which require executives to come in and out of the country.
“A lot of these BPOs are foreign companies, so they are constantly flying their executives to the Asia Pacific teams,” Norberg said.
Cordero believes that the BPO market may serve as a catalyst for the growth of the hotel sector.
“As the BPO market continues to grow in the Philippines in the succeeding years, the demand coming from this segment is also expected to grow and will be one of the catalysts of growth for the hotel industry,” Cordero said.