Colliers Quarterly MANILA | HOTEL 8 February 2018 Forecast at a glance Record-high Demand We expect foreign arrivals to grow by between 10%and 15% in 2018, to reach arrivals sustain 7.3-7.6 million due to sustained demand from traditional visitor markets such as Korea, Japan and China. Over the next two to three years, the demand for two occupancy and three star hotels will continue to be driven by Asian and domestic tourists Joey Roi Bondoc Research Manager | Manila while demand for four and five star hotels should be propelled by expanding Foreign arrivals to the Philippines reached a record- activities in key business districts. high in 2017 and this sustained hotel occupancy rates across Metro Manila. We believe that continued Supply arrivals from the country’s major sources of visitors Colliers sees at least 3,400 new rooms coupled with the improvement of the country’s being completed this year. From 2019 to infrastructure backbone and aggressive 2021, we see an annual increase of implementation of tourism marketing programmes about 1,900 units to Metro Manila’s should play a key role in attracting more tourists in stock. More than half of the new rooms 2018. Given the profiles of the country’s traditional will be in the Manila Bay Area. visitors and emerging tourist markets, we Vacancy rate recommend that operators continue developing two We project a lower occupancy rate of and three star hotels in fringe locations and four and 65- 68% this year due to the significant five star accommodation in key business districts. number of new rooms projected to open, With the ongoing improvement of the country’s especially in the Manila Bay Area. transport infrastructure, we encourage firms to Colliers sees occupancy rebounding to consider developing hotels near transport terminals 65-70% in 2019 to 2020 as delivery of including the proposed subways and airports and new rooms tapers off. diversify outside Metro Manila. Developers and operators should emphasise cultural and historical Rent Colliers expects average rates across aspects of old buildings that could be redeveloped Metro Manila to grow by 2% to 3% into accommodation facilities. To encourage similar annually over the next two to three Contributors: projects, local and national governments should years. For more information: consider granting attractive incentives to potential developers. Market Contact Name Market Contact Name Market Contact Name Market Contact Name Title | Market Title | Market Title | Market Title | Market +1 00 000 0000 +1 00 000 0000 [email protected] [email protected] Market Contact Name Market Contact Name Title | Market Title | Market Copyright © 2015 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed businesses. The fourth quarter is a traditionally strong Record-high visitors period for the hospitality sector primarily buoyed by ‘staycationing’ Manila residents, and foreigners and International arrivals reached a record-high 6.62 million Overseas Filipinos Workers (OFWs) who spend holidays in 2017. The figure is 11% higher than the 5.97 million in the Philippines. international visitors recorded in 2016. The figure is in line with Colliers' projections for 2017. The Hotels and Restaurant subsector continues to drive consumer spending in the country, rising by 9.7% in Visitors from neighbouring countries continue to 2017 from 8.1% recorded a year ago. It has been dominate arrivals. Data from the Tourism department growing by an average of 8% since 2010, faster than the show that in 2017, 1.61 million Koreans visited the country’s GDP growth. This indicates that Filipinos country followed by Chinese and Japanese tourists. The continue to allot a significant portion of their disposable three markets accounted for 45% of total visitors during incomes to restaurants, hotels, and other leisure-related the year. Meanwhile, arrivals from the USA, another key activities. This is shown by the growing number of visitor-generating market, reached 957,813. Other major domestic tourists, most of whom are millennials and sources of international visitors were Australia, Taiwan, employees who are encouraged to travel throughout the Canada, the UK, Singapore, Malaysia, and India. country due to cheaper airfares. Visitor Arrivals Hotel occupancy stable at 70% 7 80% Overall hotel occupancy in Metro Manila stood at 69% 70% 6 for the second half of 2017. Overall occupancy rate for 60% 5 2017 was 70% factoring in the 71% occupancy recorded 50% from January to June. The overall occupancy rate for 4 40% 2017 is at the high end of the 65-70% occupancy rate 3 projected by Colliers. 30% 2 20% We project a lower occupancy rate of 65-68% in 2018 1 10% due to the significant number of new rooms projected to open especially in the Manila Bay Area. Colliers sees 0 0% occupancy rebounding to 65-70% in 2019 to 2020 as the Visitor Arrivals millions) Arrivals Visitor (in 2007 2002 2003 2004 2005 2006 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2001 completion of new rooms tapers off. Visitor Arrivals (LHS) Average Occupancy (RHS) 2017 Arrivals per month Sources: Colliers International Philippines Research; Department of 700 Tourism (DOT) 600 Colliers is optimistic that foreign arrivals will continue to rise over the next three years given the sustained 500 interest from Chinese, Japanese, Korean, and American tourists as well as the rising arrivals from the Philippines' 400 emerging tourist markets such as Indonesia, Vietnam, France, Germany, and the UK. Coupled with the 300 improvement of the country’s infrastructure backbone 200 and aggressive implementation of the Tourism (in thousands) Arrivals department's cruise tourism, homestay and “Invite Home 100 A Friend” programmes, Colliers is optimistic that foreign arrivals will grow by a faster 10-15% this year. 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Hotel occupancy rates surged in November and December. We attribute this strength to the country’s Source: Department of Tourism hosting of the regional summit from November 11 to 14 and the holiday-induced spending on hotel More than half of rooms that opened in 2H 2017 are two accommodation, restaurant and other related and three-star hotels with average daily rates ranging from USD30 to USD120. Among these are Tryp by 2 Colliers Quarterly | 8 February 2018 | MANILA | HOTEL | Colliers International Wyndham hotel located in the Mall of Asia complex. The New Hotel Room Supply hotel is Tryp’s first in Southeast Asia and offers 195 rooms. 4 Other hotels that opened during H2 are the 144-room 3.5 Hop Inn Hotel in Makati fringe and 150-room Red Planet 3 Hotel in the Manila Bay Area. 2.5 Most of the hotels that opened from July to December 2 2017 are budget hotels that primarily cater to Chinese, Koreans and Japanese tourists as well as millennials 1.5 who are ‘staycationing’ in Metro Manila. 1 Close to 1,600 new hotel rooms were completed last 0.5 year, lower than the 1,660 delivered in 2016. Hotel Room Suppy Suppy (in Hotel thousands) Room 0 Metro Manila Hotel Room Stock 2016 2017 2018F 2019F 2020F 45 40% 40 35% Sources: Colliers International Philippines Research 30% 35 25% Red Planet will open two new hotels in 1H. These are 30 20% the 170-room Red Planet in Binondo, Manila and the 25 15% 167-room Red Planet in Aurora in Quezon City. 20 10% 15 5% The southeast Asian brand Lub d is opening a 230-room 0% hotel in Makati fringe. Some 90 rooms will be completed 10 -5% in February. Hotel Stock Hotel ('000) Room 5 -10% - -15% We see an average of 1,900 rooms being completed annually between 2019 and 2021. Among the major 2013 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2014 2015 2016 2017 2020F 2019F 2018F ones in the pipeline are Seda hotels in City Gate Makati, Number of Hotel Rooms (LHS) YoY Change (RHS) Arca South, and Manila Bay Area; as well as Rockwell’s Aruga hotel and the new Mandarin Oriental in Makati Sources: Colliers International Philippines Research CBD. Fort Bonifacio and budget hotels to Growth of hotel rates slows to 1.1% drive 2018 completions In Metro Manila, average hotel room rates rose by a We still expect two and three star hotels to play a major slower 1.1% to USD91. Rates in 1H 2017 grew by 2%. role in driving hotel room completion in Metro Manila this Average rates in Manila Bay Area hotels declined by year. However, more than 10% of projected new supply 0.4% due to the significant number of available rooms in in 2018 will come from a five-star hotel in Fort Bonifacio - the casino-hotels in the area. Grand Hyatt Manila – due to be completed in 1Q. This hotel will offer 461 guestrooms and a 1,190 sq m (12,810 Average Room Rates sq ft) Grand Ballroom. The second tower of Ayala’s Seda BGC Hotel (342 rooms) is projected to open in 2H as Location 1H2017 2H2017 Growth Rate well as Dusit D2 the Fort (125 rooms). Once completed, Alabang/Muntinlupa 80.5 81.8 1.6% the three new hotels will account for close to 30% of the Manila Bay Area 94.6 95.0 0.4% new hotel rooms projected to be completed this year. Makati 93.5 98.2 5.0% Downtown Manila 59.4 62.4 5.0% Pasig/Mandaluyong 84.7 85.8 1.3% Quezon City 62.3 63.7 2.3% Sources: Colliers International Philippines Research 3 Colliers Quarterly | 8 February 2018 | MANILA | HOTEL | Colliers International Hotel rates in the Fort Bonifacio area rose by an average 160,000 passengers daily.