Developers shift to hospitality sector as tourism rises

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SEVERAL property developers in the country are shifting their focus to more hospitality-oriented developments after seeing recent strong growth in tourist arrivals.

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The rise in tourist arrivals is driving developers to build more hotels, KMC Mag Group managing director Michael McCullough said.

“I think if you take a look at tourism receipts in general, they’re up a lot,” McCullough said in a phone interview.

Data from the Department of Tourism (DOT) show that tourists arrivals in May this year increased by 7.61 percent to 445,449 from the 413,937 posted last year.

As a result, total earnings gained from tourism-related activities went up by 19 percent to P19.95 billion from P16.77 billion in May last year.

McCullough describes the country as a “high-rank travel market” due to the growing number foreign arrivals aside from the already strong domestic travel market.

Some property developers recently announced plans to invest more in the hospitality sector such as SM Hotel and Conventions Corporation, which is set to spend P7 billion over the next five years for five hotels, which will add around 1,000 rooms to its current hotel portfolio of 1,500 rooms.

Another is Global-Estate Resorts, Inc., the tourism and leisure subsidiary of property giant Megaworld Corporation, which recently announced that it is spending an additional P5 billion to put up four hotels as part of its P10-billion five-year capital expenditure for hotels which began in 2014.

Premier property developer Rockwell Land Corporation has also announce plans to develop Aruga Hotel, the first urban resort-themed hotel in Makati, as well as a 300-room resort in Mactan, Cebu.

Colliers International director for research and advisory Julius Guevara attributes the emerging hotel trend among developers to the country’s growing tourism market.

“I think the previous administration had a very successful marketing campaign with ‘It’s more fun in the Philippines’ [campaign theme]. So that really has raised international interest coming into the Philippines. And apart from that, a lot of our destinations have received accolades…There’s been a lot of positive press,” Guevara said in a phone interview.

From a developers’ perspective, Guevara notes that focus toward the hospitality sector is mainly driven by developers’ efforts to move into a more recurring income-based portfolio given the slower growth of the residential market.

“They’re diversifying because things are slowing down in the residential space,” Guevara said.

He said it would be more efficient for property developers to turn to the hospitality industry where they can generate recurring income than rely on just selling residential units.

“For the developers, it’s partly because of their decision to diversify into [a]more recurring income-type business model in the property industry. That’s one reason why they are now pursuing hotel developments,” Guevara concluded.

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