Bernardo M. Villegas
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Bright Prospects for Hotel Industry (Part 1)

          Once again there is evidence that the Philippine tourism industry is way below its potentials.  Its ASEAN neighbors like Thailand, Malaysia and Singapore have foreign tourist arrivals three to six times the Philippines but our country, with its 7,100 islands, have many more objectively attractive destinations than its ASEAN peers.  The greatest hindrance to attracting foreign tourists to the Philippines is the very poor state of infrastructures, which the Duterte Administration is addressing aggressively through the Build! Build! Build! program.  Just recently, the US magazine Travel and Leisure rated Palawan as the Best Island in the World.  Third best was Boracay.  Among the top ten there was not a single country in Southeast Asia.  Among the top ten were the Hilton Head Island in South Carolina, Galapagos Island in Ecuador, Santorini in Greece, Maui and Kawai in Hawaii and Ischia in Italy.

         The Duterte Administration is deadly serious in addressing the obstacles to the development of the tourism industry.  Almost immediately after the new Government was installed on June 30, 2016, among the infrastructure projects that were approved by the investment committee were the international airports in Bohol, Bacolod, Iloilo, Cagayan de Oro and Davao.  Originally planned as projects under the Private Public Partnership (PPP) program, these were later subsumed under the so-called “hybrid” model in which the Government will finance and implement the construction, using ODA funding if necessary, and then assigning the operations and maintenance to the private sector.  Although there have been critical comments about this change of mind from some private sector representatives, I am willing to give the Government the benefit of the doubt that they can overcome the usual slowness and ineffectiveness of the Government in implementing infrastructure projects.  If things turn out differently, there is always time to revert to the original PPP model.

         There is general consensus that the tourism and hotel sectors are powerful catalysts for inclusive and regional growth in the country.  Tourism-related industries, as reported in a study of the University of Asia and the Pacific, accounted for 8.2% of the country’s GDP (in current prices) in 2015.  The Philippines has a plethora of destinations in almost every region that can attract tourists, both foreign and domestic.   The National Tourism Development Plan (NTDP) 2016 to 2022 of the Department of Tourism projects 12 million foreign tourists (economists from the think tank CLSA in Hong Kong project 16 million) by 2022.  In the same year, domestic travelers are estimated to reach close to 90 million. The NTDP likewise estimates an accommodation backlog ranging from 73,483 rooms (based on the initial presentation to the Philippine Hotel Owners Association —PHOA) to at least 100,000 rooms.

         As mentioned above, the Philippines lags so far behind its neighbors in attracting foreign tourist arrivals, especially from non-ASEAN markets such as East Asia, South Asia, the Middle East, and Europe.  Among ASEAN neighbors, Thailand and Malaysia had already approached close to 30 million arrivals by 2015.  Emerging countries like Laos, Myanmar and Cambodia had also approximated the Philippines’ five million arrivals in the same period.  The Philippines’ compounded annual growth rate of 9% pales in comparison to these three less developed countries, with 13.5%, 42.5% and 13.9%, respectively.  In terms of per capita tourist population, the Philippines also suffers from comparison at 0.05 per capita as against Malaysia’s 0.85, Thailand’s 0.44, and Singapore’s 2.74 tourist per capita levels.   These figures may be considered as measures of the potentials of the Philippine tourism industry.

         The UA&P study identifies the factors that account for the large volumes of international arrivals in other ASEAN countries:

         --All ASEAN countries, except the Philippines, have land borders with one or more ASEAN country, and three of them share land borders with China

         --The Philippines is located well to the east of the population center (central axis of population) of ASEAN that runs more or less north between Singapore and Malaysia.  Moreover, the transportation infrastructure cost per head of population of the other ASEAN countries is significantly lower than that of the Philippines.  Thus, the Philippines is the most expensive ASEAN country to reach from other ASEAN markets.

         --In 2014, almost 47% of total international arrivals to other ASEAN countries came from within ASEAN itself—compared to the Philippines with 9.5% of total arrivals coming from the ASEAN.  A significant portion of the other ASEAN countries’ international arrivals are mostly by land, i.e. to Malaysia from Indonesia, Singapore, Brunei and Thailand (74.25% of total arrivals); to Lao PDR from Thailand, Vietnam, Cambodia and Myanmar (77.53%); to Thailand from Malaysia, Myanmar, Cambodia, Lao PDR and Vietnam (40.5%); to Indonesia from Malaysia and Brunei and by one to two hour sea ferry from Singapore, Malaysia and Southern Thailand (39.04%).  It is clear from these data that a significant increase in interconnectivity through more efficient air and sea travel to the Philippines can enable our country to catch up with foreign tourist arrivals enjoyed by our ASEAN neighbors. In addition to better infrastructures, there should also be the development of a regional network of urban and non-urban destinations offering good quality accommodations at all levels, including bed and breakfast facilities, especially in the more rural destinations.  To be continued.