Post-pandemic recovery of hotels in Metro Manila is accelerating, with 4 million tourist arrivals in the first nine months of 2023. This is nearly double the 2.65 million tourist arrivals from February to December 2022, and near the Department of Tourism (DOT) year-end target of 4.8 million. Tourism Secretary Christina Frasco stated that these arrivals have already contributed PHP 316 billion (USD 5.7 billion) to the economy.

Amid a lean season, Q3 2023 hotel occupancy levels saw a slight decline of -6 bps q-o-q to 70.3%, while room prices had incrementally increased. On the supply side, Hotel stock is seen to drastically expand with an additional 6,400 rooms by 2026, most of which are housed in Quezon City and Pasay City.

Although prices remain below pre-pandemic levels and supply expansion is in motion, government initiatives and good economic performance in cities that house a significant share of future supply may boost occupancy levels and demand.

Factors buffering high vacancy levels from supply expansion beyond Q3 2023

With relaxed restrictions on public activities, occupancy rate for economy, midscale, and upscale hotels has been consistently above 60% since Q4 2021. Collectively, these segments take up 64.8% of future stock. Meanwhile, luxury hotels, with a 12.5% share in the pipeline stock, recorded occupancy levels above 70%. As the COVID-19 pandemic subsided, events in retail establishments, convention centres, and casinos have resumed, opening doors for non-locals to avail hotel accommodations.

Figure 1: Metro Manila hotels occupancy rate per year

Source: JLL Philippines, 3Q23

Quezon City and Pasay City, accounting for 33% and 15% of the future supply, respectively, recorded relatively high occupancy above 60% since Q4 2021, despite the volatile demand influenced by upscale hotels as these dominate both districts.

Figure 2: 4Q23E-2026E Metro Manila future supply

Source: JLL Philippines, 3Q23

In October 2022, the DOT replaced the One Health Pass (OHP), an entry requirement for inbound travellers to the Philippines, with the e-Arrival Card system to ease arrival protocols. The browser-based system does not require a mobile app to register and has fewer information fields compared to the OHP. Furthermore, by 2024, the government is set to implement the Value Added Tax (VAT) Refund Programme that allows foreign visitors to receive a VAT refund on goods taken out of the Philippines, aiming to encourage tourists to visit the country.

DOT initiated the “Tourism Champions Challenge”, allotting a PHP 180 million (USD 3.2 million) fund to incentivise tourism development for selected cities and municipalities. Overseas Filipino Workers (OFWs), who can invite foreign tourists into the country, receive incentives in the form of prizes through a raffle under the promotional campaign “Bisita, Be My Guest”.

Room rates continue to progress to pre-pandemic levels as hotels remain cautious of economic headwinds. In Q3 2023, room rates increased by 1.9% q-o-q, averaging PHP 7,680 (USD 138) per room per night, which is still below pre-pandemic rates of PHP 9,100 (USD 164) per room per night. Meanwhile, hotels are seen to provide seasonal promotions and discounts to cushion price upticks.

The outlook on the hospitality sector’s recovery remains optimistic as hotels slowly regain momentum with promotions, government initiatives, and increased tourist arrivals.

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