The latest statistics paint a bright outlook for the Philippine tourism industry, despite some setbacks because of terrorism. From January to May 2017, the Philippines maintained a “consistent growth” in tourist arrivals, according to the Department of Tourism. Inbound tourist volume grew by 14.4 percent to 2.5 million, with the biggest volume recorded in January and the fastest growth seen in April.
In May 2017 alone, tourist arrivals hit 532,757, up by nearly 20 percent year on year. And for the first time, tourist arrivals in May surpassed 500,000, the Tourism department said.
In its report on the tourist and travel industry’s performance for the January to May period, the Tourism department attributed the double-digit growth to “aggressive marketing efforts and international events,” including the country’s hosting of meetings of the Association of Southeast Asian Nations.
More than 60 percent of inbound tourists came from Asia while 30 percent came from the Americas and Europe, government statistics showed.
Upgrading through leasing
The Philippines’ emergence as a hub for international events and as a magnet for foreign tourists has huge implications on the tourism sector. To be able to host international meetings and conferences as well as draw more foreign tourists, tourist facilities need to be upgraded continually to be at par with those of global tourist hotspots.
While Manila still commands the highest share of tourist volumes by port of arrival at more than 60 percent, other local tourist destinations are growing in significance. Cebu accounts for about a fifth of arrivals, followed by Kalibo, Aklan at around a tenth and Clark at about 3 percent.
Leasing can help boost the sector by providing an alternative way of financing the acquisition of capital-intensive equipment.
BDO Leasing and Finance Inc., one of the industry’s top players, serves both the Cebu and Bohol tourist markets from a branch in Cebu City.
“Tourism is one of the top five industries we’re now in,” says Roberto Lapid, vice chairman and president of BDO Leasing.
On its own, BDO Leasing can finance the acquisition of hotel vehicles and other equipment like air conditioners, generator sets and elevators, Lapid says in an interview.
But Tourism investors may also take advantage of the synergies between BDO Leasing and its parent, BDO Unibank.
If the construction of a new building is involved, BDO can provide project financing for the structure and civil works, while BDO Leasing can finance the acquisition of equipment.
As previously discussed, financial leasing is just like taking out bank loan wherein there are monthly amortizations. The difference is that ownership stays with the lessor until the end of the term. At the end of the term, ownership is transferred to the lessee through a deed of sale.
“Normally [BDO’s terms] will come in seven to 10 years, and BDO Leasing comes in five years,” Lapid explains. “At the end of the day, you cannot foreclose an elevator; it won’t stand alone; but if the building is [financed by]BDO then we can do it.”
BDO Leasing can finance up to 90 percent of loan values, depending on the client’s creditworthiness.
For tourist businesses up for expansion, the firm looks at the company’s three-year financial record, and examines if current cash flows can finance lease payments.
“We are very conservative in BDO, we look at the track record for the last three years…we would like to know if the existing business can also absorb the expansion expenses,” Lapid says.