With 12 million foreign tourists by 2028, does PH have enough hotel rooms to accommodate them?

The Philippines is projected to receive 10 million to 12 million foreign travelers in 2028, which means the country will need over 456,000 hotel rooms for them to check into.

“We have some catching up to do,” remarked Tourism Secretary Christina Garcia Frasco, when her agency recently launched the Philippine Hotel Industry Strategic Action Plan (Phisap) for 2023-2028.

Drawn up by the Department of Tourism (DOT) in collaboration with the Philippine Hotel Owners Association (PHOA), Phisap showed we would still need 120,463 rooms to meet the travelers’ demand in 2028. Based on DOT data, there are currently 335,592 keys in accommodation establishments (AEs) — both accredited and not accredited with the agency.

But Frasco said, “I’m very glad that with the aggressive investment of our hotel owners, as well as our partners in the tourism industry, we are well on our way to meeting that demand.”

A recent report by the PHOA and Leechiu Property Consultants (LPC) estimated some P250 billion investments in 158 AEs, accounting for 40,084 keys in the pipeline in the next few years. (These investments are only from PHOA members, who are mainly local hotel developers.)

The DOT chief described Phisap as “more than just a road map—it is a bold vision for a thriving, sustainable, and inclusive future for Philippine tourism, outlining the pathways to develop world-class accommodations, while ensuring that facilities are accessible to a broad spectrum of travelers.”

Incentives for developers 

Tourism Secretary Christina Garcia Frasco discusses the Phisap with Robinsons Hotels and Resorts Business Unit Manager Barun Jolly (left) and PHOA Executive Director Benito C. Bengzon Jr. (DOT photo)

Under Phisap, the DOT will review the current economic environment that may be holding back investors from developing more AEs in the country. These include fiscal incentives that are available to developers. “Incentives have been the subject of very lengthy discussions,” said PHOA Executive Director Benito C. Bengzon Jr. in an interview with reporters, following the roadmap’s launch. “We have already conveyed to the DOT and other government agencies the types of incentives that we feel will encourage even more investments. These basically revolve around enhanced income-tax holidays and also a review of the projects that will qualify for incentives,” he stressed.

At present, hotel developers can register with several investment promotion agencies like the Tourism Infrastructure and Enterprise Zone Authority (Tieza), and location-specific economic zones (Clark, Subic, Aurora, and the like) to avail of  tax and non-tax incentives. Available incentives include four to seven years income-tax holidays, duty-free importation of capital equipment, value-added tax exemption on importation, to name a few.

Under government’s Strategic Investment Priority Plan of 2022, Tieza, a government firm overseen by the DOT, “has shifted towards the registration of stand-alone tourism enterprises as identified by SIPP as priority activities,” said Tieza Chief Operating Officer Mark T. Lapid. Aside from AEs, these include tourist transport services (airport, seaport); MICE (Meetings, Incentives, Conventions, Exhibitions); amusement parks; adventure and eco-tourism facilities; sports and recreational centers; health and wellness; farm tourism; and tourism training centers and institutes. He noted that from 2022 to 2024, Tieza has committed investments of some P2.6 billion from registered business enterprises.

Among these enterprises are Kip & Kin, a brand of Discovery Hospitality Corp., in El Nido; La Jolla Luxury Beach Resort in Bataan; Hotel Elizabeth in San Vicente; and Oceanview Suites, an expansion of Club Paradise (also a Discovery brand), in Coron.

‘Last-mile connectivity’

Robinsons Hotels and Resorts (RHR) has taken advantage of many of these incentives, enabling it to expand its network of hospitality establishments to 30 properties in 20 cities and municipalities in the country.

Barun Jolly, RHR Business Unit General Manager, said the firm “is committed to providing excellence of Filipino hospitality to the travelers coming to various regions of Philippines and hence, we will continue to grow our footprint across various locations of Philippines and also contribute to DOT vision of increased rooms in the country.”

Forecast room demand to accommodate 10 to 12 million foreign tourists by 2028, and destinations in most need of hotel rooms (DOT/Phisap)

Still, he pointed out, “the government can continue to encourage the hospitality sector by providing more tax incentives for building new hotels as capital cost of  hotels is quite high.” RHR is one of the top hotel investors in the country, according to a separate report from LPC, and just this month, announced a P10-billion investment that will add 990 room keys to its upscale and ultra-luxury portfolio in the next few years — or a cost of P10.1 million per room!

Jolly also emphasized the need for “improving last-mile connectivity in Class 1 cities (those that earn P400 million or more) and municipalities [to] encourage more accommodation facilities to be built in those areas.” Last-mile connection refers to the final segment of a person’s travel from the main transit system (i.e., public transport) to his final destination, in this case, the tourist spot or possible location of an AE.

New roads, more airports and flights urged

To reach that last destination, however, needs a lot of investments in roads and  fast-tracking the expansion of other infrastructure like bridges, airports, and seaports. The DOT currently has a convergence program with the Department of Public Works and Highways (DPWH) for the latter to build new tourism roads in key destinations. Next year, however, there will be no new tourism roads built, because the DPWH wants to focus on its mandate to construct national roads.

Secretary Frasco (4th from left) and representatives of the hotel industry: Cathy Turvill of Nurture Wellness Village, Atty. Karen Sarinas Baydo of Tieza,PHOA President Arthur Lopez, Francis Gotianun of Filinvest Hotels and Resorts, PHOA Executive Director Benito C. Bengzon Jr., Barun Jolly of Robinsons Hotels and Resorts, Cathy Hidalgo Nepomuceno of SM Hotels and Conventions Corp., and Claire Bernabe of Megaworld Hotels & Resorts.

In a recent hearing, Senator Loren Legarda, who heard the presentation of the DOT’s budget for 2025, is looking to amend the latter and allow the possible allocation of infrastructure funds in the agency, or Tieza, which can then be released to the DPWH to construct the necessary roads to tourism destinations.

Aside from roads and bridges, more airports have to be constructed or improved to be able to fly in international travelers to key destinations in the country. Tourism Congress of the Philippines president James Montenegro said, “We can build all the rooms, but if there’s no accessibility, there won’t be tourists. So accessibility means the airports are nearby, there are bigger aircraft and [airports that] can accommodate international flights, then we can have international tourists to those destinations.”

He acknowledged the importance of drawing up the Phisap, the hotel industry development roadmap. “At least now there’s a proper plan and direction for [the  industry]. Hopefully we can get our number of rooms up. Now it’s really up to the DOTr (Department of Transportation) to open the international airports faster, that can accommodate bigger aircraft to go to those key destinations like Boracay, Palawan, and even other upcoming destinations.”

Where rooms are most needed

With more hotel rooms in key and upcoming destinations, the average room rate is also projected to stabilize.

Under the Phisap, areas that have been identified where the most number of rooms are needed include: Central Luzon, which has a 22,327-room gap; Cavite-Laguna-Batangas-Quezon at 16,738; Davao Gulf and Coast at 12,321; and the Bicol Region at 11,597. “[These areas] require strategic and significant interventions, targeted enabling policies, and close coordination between government and private sectors to facilitate growth and accommodate the projected room demand,” said the document.

Areas with a projected medium-room demand are: Cotobato-Saranggani with a 7,819 room gap by 2028; Metro Manila and Rizal 7,242; Surigao-Dinagat Islands 7,068; and the Cagayan de Oro Coast and Hinterland 6,967.

Current room supply in the Philippines in DOT-accredited and non-accredited accommodation establishments (DOT/Phisap)

With more hotel rooms, hopefully, the average room rate will also stabilize. Often, travel agencies and tour operators have complained of high room rates in local hotels, especially during the peak holiday seasons — a reason many Filipinos have been flying out to vacation abroad. During the last Holy Week holiday, the Philippine Tour Operators Association said they were able to book clients on an all-inclusive flight-hotel-meals package of just P20,000 per person in some Asean countries.

“We have to understand that the availability of the rooms also dictates the price, and with a very robust domestic market, [rooms are] always in high demand,” explained Frasco, even as she cited PHOA data that showed “our average US$100 per night is actually lower than the average price of hotels in the Asean region.”

The construction of new hotel rooms as well as “increasing the number of flights into the country,” she said, will hopefully ease the rise in room rates. She said the Philippines currently “ranks sixth” in Asean, in terms of international flight connectivity.

The new lifestyle.