Demand for branded hotels in the Philippines is still strong, despite the emergence of lower-end accommodation providers, largely due to the growing influx of foreign tourists, according to a real estate services group.
“There is still a demand for branded accommodations not only in Metro Manila but also in prime tourist destinations outside Metro Manila,” Real estate services firm Jones Lang Lasalle said in a report.
JLL noted that both international and local operators have been expanding their reach across the country, driven by strong tourist arrivals in the Philippines.
Data from the country’s tourism department shows international tourist arrivals are projected to hit six million by end-2016.
JLL said real estate developers have recognized the opportunities presented by the growth in tourist arrivals, with several developers diversifying from the residential and other commercials segments into the hospitality industry.
“International brands such as Dusit International and Hilton Hotels and Resorts, and local hotel operators such as Go Hotels are expanding to address increasing demand while some local real estate developers such as Century Properties Group, Inc. and Vista Land and Lifescapes Inc. are planning to enter the hospitality industry either through making their own brands, or by partnering with known brands in the industry,” JLL said.
Aside from demand coming in from inbound tourism, JLL noted that the rising spending power of Filipinos is also creating demand for the country’s hotel industry.
“Rising household incomes due to improving economic conditions in the country are likely to fuel further demand for branded accommodation not only in Metro Manila but also in prime tourist destinations outside Metro Manila,” the report said.
JLL Philippines Head of Research, Consultancy and Valuation Claro Cordero Jr. earlier noted the higher spending power of Filipinos is creating demand for hotels in the 3-star category.
“The 3-star and middle-income hotel developments will still likely post higher occupancy in the short to medium term due to the wealth effect, which leads to more domestic travel,” Cordero said.
He noted that the rising spending power of Filipinos is driven by the growth of the Business Process Outsourcing (BPO) industry and the flow of remittances from overseas-based Filipinos.
KMC Mag Group Managing Director Michael McCullough echoed Cordero’s sentiments that the growing middle class is driving more tourism in the country.
“If you look at the two and three-star hotels, it’s mostly driven by local tourism in the country. The local market is really quite strong, they have a lot cash, they do look for a value,” McCullough said.
JLL said that developers are expected to add more accommodation supply to the existing stock in the next couple of years in order to address growing demand.
It noted that approximately 11,300 hotel rooms are projected to enter the market by 2020.
“The majority of the existing stock is in Makati CBD, Ortigas CBD and the Manila Bay Area; however, the majority of the upcoming hotel rooms will be in Makati CBD and Bay City in anticipation of an increased demand for hotel accommodation due to the gaming industry,” the report said.