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Manila Market Intelligence: March 3, 2021

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Tourism arrivals, revenues sink; midterm plan reviewed

NEWS

Department of Tourism (DOT) Secretary Bernadette Romulo-Puyat said that foreign visitors in the country only reached 1.3 million in 2020, down 84% from 8.26 million in 2019. Total receipts generated during the year also declined by 83% to PHP81.4 billion (USD1.7 billion) from PHP482.16 billion (USD10 billion) in 2019. Secretary Romulo-Puyat added that the agency will review the National Tourism Development Plan 2016-2022 this Q1 2021 to include demand forecasts and the results of their survey on consumer sentiments. The agency hopes that the country will be able to implement international travel bubbles this 2021. Given the impact of the pandemic on foreign visitors, DOT will continue to focus on domestic tourism as part of its strategy to help jumpstart the recovery of the sector.

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RESEARCH VIEW

The country’s leisure sector continues to reel from the impact of pandemic and the imposition of travel restrictions. In 2020, Colliers saw hotel occupancy dropping to 20% from 72% in 2019. We only see occupancy reaching below 30% by the end of 2021 as tourists and other leisure stakeholders remain wary of travelling due to the pandemic. In our opinion, the recovery should be supported by the DOT’s aggressive domestic tourism campaign and the implementation of travel bubbles between COVID-19 free countries in Asia. Colliers encourages hotel operators to continue utilizing technology such as 24/7 mobile connectivity, smart room controls and keyless check-ins to enhance customer experience. Operators should also consider introducing self-cleaning robots and contactless payment channels to minimize physical contact and raise sanitation standards.

PEZA eyes P100B in pledges this year

NEWS

The Philippine Economic Zone Authority (PEZA) is targeting to attract more than PHP100 billion (USD2.1 billion) investment pledges in 2021. Pledges posted by the agency in 2020 decline by almost 20% YOY to PHP95.03 billion (USD2.0 billion), behind its PHP100 billion (USD2.1 billion) target for the year. Foreign investments contributed PHP59.73 billion (USD1.2 billion) to total investments during the period, up 21% YOY. On the other hand, local investments decline by 48% to PHP35.3 billion (USD735.5 million) in 2020. Out of the 326 approved projects in 2020, 217 projects came from the manufacturing sector with the rest from the outsourcing industry. Most of the investments during the year came from the United States, Europe, and selected Asian countries.

 

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RESEARCH VIEW

In our opinion, the pandemic and the pending Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) will likely compel occupiers to take a wait-and-see stance. We believe that these concerns are likely to affect office and industrial space take-up. Data from the Bangko Sentral ng Pilipinas (BSP) or the central bank show that Foreign Direct Investments (FDI) inflows as of the end of November 2020 reached USD5.8 billion (PHP284 billion), down 10.7% compared to the USD6.5 billion (PHP318 billion) in 11M 2019. Most of the investments were channeled into the financial and insurance, real estate and manufacturing sectors. In 2020, Colliers saw subdued office deals across Metro Manila as well as lower local and foreign investments due to delays in the passage of CREATE. Lower manufacturing investments should also result in dampened absorption of industrial spaces and warehouses. Economic analysts and credit rating firms are projecting an economic rebound of between 5.9% to 9.6% and this should partly help revive the demand for office and industrial spaces in 2021.

FedEx positions Clark for surge in e-commerce

 

NEWS

Logistics provider FedEx is ready to address the surge in e-commerce with its new sorting facility in Clark, Pampanga. The new Clark Gateway is three times the capacity of the Manila Gateway and is a state-of the art facility scheduled to be completed by June 2021. This will increase the facility’s sorting capabilities to 9,000 documents and parcels per hour. In 2020, FedEx saw robust business and added freight capacities across operations, including the Philippines, amid the pandemic and lockdowns. FedEx believes that the new facility will increase flexibility and efficiency of businesses as deliveries to Northern Luzon will likely now be reduced by two hours on average.

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RESEARCH VIEW

In 2020, the warehousing sector contributed 31% to gross value added in transport and storage, an all-time high. In comparison, the annual average share of the sector was 23% from 2016 to 2019. We expect the warehousing industry to further grow driven by e-commerce and an economy that is primarily household-spending driven. In 2020, personal consumption expenditure accounted for 74% of the Philippines’ Gross Domestic Product (GDP). We recommend that retailers firm up partnerships with logistics providers and warehouse developers. This should ensure fulfillment of last-mile delivery schedules especially with the rising popularity of same-day deliveries. On the other hand, logistics providers should equip their facilities with state-of-the-art technologies to improve sorting capabilities and keep up with demand. 

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Joey Bondoc

Associate Director

Research

Manila

Prior to joining Colliers in March 2016, Joey worked as a Research Manager for a research and consutancy firm where he handled business, political, and macroeconomic analysis. He took part in a number of consultancy projects with multilateral agencies and provided research support and policy recommendations to key government officials and top executives of MNCs in the Philippines.

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