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Developers employ different strategies in capturing Cebu's tourism gains

The Philippine leisure sector gets a much-needed boost following the completion of the second terminal of Mactan-Cebu International Airport (MCIA). With the Department of Tourism (DOT) projecting a surge in foreign arrivals, local and national developers in Cebu have started to either bring in foreign hotel brands or to expand homegrown ones. Colliers is seeing a similar trend in Metro Manila with developers cashing in on the rising number of international visitors by building three to five-star hotels.

Colliers sees the completion of the second terminal of MCIA playing a crucial role in the country’s goal of attracting up to 12 million foreign visitors by 2022.The modernised and expanded airport can now accommodate up to 12.5 million passengers annually from 4 million previously. In our opinion, the new terminal’s completion is timely as we see more foreign and domestic tourists visiting Cebu following the national government’s order to close the popular Boracay island to pave way for rehabilitation. 

We believe that the potential surge in arrivals is enticing local and national hotel developers in Cebu to ramp up construction. While local players have been bringing in foreign hotel operators, national developers have been maximising homegrown brands. Local developer Cebu Landmasters, Inc. has partnered with Ascott and Radisson Red; AppleOne Properties with Starwood Hotels and Resorts Worldwide; Grand Land with Dusit Thani Group; and Tanchan Corporate Group with Marriott. Meanwhile, national developers are bringing their homegrown hospitality brands to Cebu with Ayala Land developing two Seda hotels, Megaworld constructing a Savoy hotel and Rockwell with its own Aruga brand.

Metro Manila posts lower hotel occupancy due to record-high supply

Overall, about 1,700 new hotel rooms were completed in Manila in just the first six months of 2018, already surpassing the 1,580 new rooms that opened in 2017. Four- and five-star hotels accounted for more than 60% of the new units that were completed in 1H 2018. For the remainder of 2018, Colliers expects the completion of about 1,100 new hotel rooms. Among the new hotels due to be completed in 2H2018 are Seda BGC Tower 2, Sheraton Hotel Manila, and Hilton Manila. Nearly half of the new hotel rooms are scheduled to be in the Newport City; about 30% in Fort Bonifacio; and the remaining 21% in Makati fringe. Barring any construction delay, Colliers expects the completion of a record-high 2,800 new hotel rooms across Metro Manila in 2018.

Despite the increase in international arrivals, average hotel occupancy across Metro Manila declined marginally from 70% in 1H2017 to 69% in 1H2018. The figure approached the upper-end of Colliers’ occupancy forecast of 65% to 68% for 2018. For the first six months of 2018 Colliers saw Makati CBD’s average occupancy drop to 67% compared to the 71% recorded in the same period in 2017. The Bay Area’s occupancy slipped from 70% to 69%. Among the sub-locations that posted higher occupancy in 1H2018 were Quezon City (66% from 62%), Pasig-Mandaluyong Area (71% from 70%), and Fort Bonifacio (79% from 77%). 

Colliers retains its occupancy forecast of between 65% and 68% for 2018 given the significant number of completions this year. From 2019 to 2021, we see average occupancy rebounding to between 68% and 70% as the delivery of new hotel rooms tapers off. The record-high take up of office space (about 641,000 sq m as of 1H2018 already breaching the 2017 total of 638,000 sq m) across Metro Manila should also contribute to higher hotel occupancy in the country’s capital over the next two to three years.

Amenities for millennial and business travelers, hostels in fringes

Colliers recommends that hotel operators offer amenities that appeal to both millennial and business travellers such as flexible workspaces, a wide selection of food and beverage outlets, club lounges, pool tables, pop-up shops, libraries, and gaming kiosks. We believe that flexible workspace is an attractive feature especially for hotels near airports.

Colliers believes that hostels that offer group packages will likely continue to be popular among ‘staycationers’, millennials, and BPO workers. Colliers recommends that developers start looking at developing hostels along the peripheries of more established business hubs such as Makati, Fort Bonifacio, and Ortigas Center.