Hotel Sector: Pressing on Amid the Crisis

by PRIME Philippines Research & Advisory  May 20, 2020

The tourism industry started its year with an 8.8% YOY growth for the month of January, but the new coronavirus (COVID-19) began to take its toll on the industry after the travel ban in February and the enhanced community quarantine (ECQ) in March. Tourist arrivals in the country started to decrease, recording a 45% and 70% YOY drop in February and March, respectively. 

 

Without a doubt, tourism is one of the greatly affected sectors by COVID-19, both locally and globally. With its current situation, how is the hotel sector doing? What actions has it taken to keep the business alive amid the global pandemic? Below are the things that have helped the industry to run despite the growing crisis.   

 

Reduced room rates 

Before the implementation of ECQ, hotels started to lower their rates in hopes of improving domestic tourism and boosting occupancy in local hotels. With how things are currently going, the Philippine hotel industry is seen to continue the cutting of room rates even after the pandemic, and is also expected to rely on locals in reviving the industry as arrivals of international tourists remain to be uncertain. Some hotels cut off rates by 10% to 20% of the posted rate, while others reduced their rates by 30% to 70%, as suggested by the tourism department. 

 

Corporate leasing and lodging

Due to the travel restrictions and ECQ, the demand from tourism and meetings, incentives, conferences, and exhibitions (MICE) markets weakened. The hotel sector is currently dependent on corporate leases to keep the business moving. Some hotels are booked by companies, such as BPOs and banks, to be used by their employees, while other hotel rooms are occupied by health workers. In addition, a number of hotel rooms are also secured by the tourism department to house the returning Overseas Filipino Workers (OFWs) and foreign tourists who were stranded in Metro Manila. 

 

Government aid   

With the current struggles of the tourism industry, the DOT pledged to support the hotel sector by providing incentives and financial assistance. Among these pledges are: (1) suspension on the collection of accreditation fees from new and renewing applicants from tourism—and tourism-related businesses for 2020; (2) waving of participation fees in international fairs and exhibitions until 2021; and (3) arrangement of financial programs like interest loans from the Development Bank of the Philippines (DBP) and Land Bank of the Philippines. Moreover, the proposed Bayanihan 2 bill is set to help micro, small, and medium enterprises (MSMEs), and stakeholders in the tourism and transportation industry. 

  

Despite the hotel sector’s initiatives to keep it thriving, it is no secret that it has been severely affected by the pandemic. Industry-wise, the average occupancy rate of hotels decreased by 30% to 50%, depending on target markets, which also resulted in revenue loss. Once the ECQ has been lifted, domestic travel is seen to jumpstart the country’s tourism industry, but this will not be enough to cover the industry’s losses from the foreign market. 

 

Unlike other industries, which are expected to bounce back in less than a year after the COVID-19 outbreak, tourism-related businesses are expected to fully recover in a year or two. Tourism-related enterprises will definitely survive this crisis, but it will take some time to recover and adjust to the new normal.  

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