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Rise in the Hotel Industry, What it Means for Real Estate Investors
January 23, 2023 by Brianna Yparraguirre
The hotel industry is currently experiencing a recovery after the strict precautions during the pandemic. Many businesses faced recession during the COVID-19 surge which mostly affected the tourism industry. The hotel rooms were utilized as quarantine facilities for travelers and Overseas Filipino Workers who went back to their designated provinces (hometowns) in the Philippines.
As everything is gradually going back to normal, investment in the hotel industry experiences an optimistic projection in the next few years. As much as the optimism for hotels, good investment opportunities shall be met for the condominium units as a form of real estate investment plan. With new trends entering the hospitality industry, such as condo for sale being used as investments as Airbnb, real estate investors must also adapt to advancements.
Hotel industry in the Philippines
The Philippines is classified as one of the most visited countries and a tourist attraction for local and foreign tourists. The beauty of the serene environment, landscape, and beaches are captivating and alluring which attracts travelers to stay and witness what the Philippines has to offer. Aside from the dazzling nature of the Pearl of the Orient, Filipinos' hospitability and a warm welcome to foreign tourists sure have a massive impact on why they choose to come back to the country. Foreigners, when they hear of the “Philippines”, immediately associate or describe the country with its beauty and welcoming people. Moreover, the arrival of foreign tourists in the provinces of the Philippines also helps the local communities in terms of showcasing their local delicacies, and culture, and selling souvenirs. With many tourist spots to visit in the Philippines, the hospitality industries are catching up to accommodate with the demand of tourists. They want to bring out the best of their experience during travelers’ stay at the tourist spots.
The hotel industry in the Philippines is diverse as well, there are hotel establishments that are dedicated to accentuating the tourist spots. Like beaches in La Union or Boracay. The same goes for serene landscapes in areas like Tagaytay. However, most of the well-known hotel in the Philippines is located in Manila since most foreign tourists will arrive in the capital.
Hotel industry during the Pandemic
The Philippines' economy relies on the tourism sector. With the data reported by Caynila et al (2022), tourism in the Philippines is the biggest employer of the country since it was able to employ approximately 5.7 million employees or 13.6% of the Philippines' total employment last 2019.
The hospitality businesses were optimistic about the arrival of a new decade since 2020 was initially perceived as a decade of a new beginning. However, the hotel industry's projection experienced a massive impediment last 2020 due to the discovery of the unknown virus. With the mandatory implementation of worldwide quarantine, business operations halted, including traveling to tourist destinations.
Hotel rooms as Quarantine Facilities
With the existence of the travel ban, tourism activities experienced a total suspension of business operations. In other words, it delivered a massive impact since tourists cannot enter Philippine premises and use hotel accommodations. With strict travel operations, the government allowed international or domestic flights for people who are seeking to go home with their families. However, before they can arrive in their own homes, they must undergo 2 weeks of self-quarantine. The hotels served as quarantine facilities for Overseas Filipino Workers, and Filipinos going back to their provinces.
The Covid lockdown also meant reducing hotel staff for safety precautions. Unfortunately, other hotels needed to offload due to the economic impact of the virus. This was the worst nightmare that everyone had experienced in the past 3 years.
Southeast Asia's tourism bouncing back
The Philippines is located in Southeast Asia. The region of Asia is well-known as a tropical tourist attraction. Classified as the world's best vacation spot, Southeast Asia is known for its gorgeous islands, boundless beaches, a variety of resorts, delectable cuisine, top-notch restaurants, and unique cultures.
The same goes with the Philippines' neighboring countries like Malaysia, Singapore, Vietnam, Indonesia, and Thailand, many foreigners from cooler countries love to spend their holidays and leisure activities in a tropical country as they perceived it as an escape world from their usual residency.
The year 2021, experienced a slight improvement in the hotel industry. The introduction of the Covid vaccine was a beacon of hope for everyone. Strict regulations were gradually lifted. The progression continued in 2022. Fortunately, the mandatory masks and limited seating in public spaces were officially uplifted. Moreover, the head of San Lazaro Hospital's Adult Infectious Diseases and Tropical Medicine, Dr. Rontgene Solante added that Covid in the Philippines may experience endemicity. In other words, the threat of the deadly virus has officially yet gradually diminished. This is good news mostly in Southeast Asia's tourism. Data from the Department of Tourism (DoT) showed that for the first ten months of 2022, it recorded 1.9 million foreign arrivals, already exceeding its full-year target of 1.7 million. This indicates that foreign tourists are still coming to the Philippines and that there is still a high demand for hotels, according to Research Associate Director Joey Bondoc.
Since everything is gradually going back to normal, tourism is optimistic to go back to its business operations with health regulations. According to Nikkei Asia, after governments started loosening COVID-19 rules, the hospitality sector in Southeast Asia is experiencing a comeback. High-end hotel owners have started building new amenities and investing as the demand for travel and leisure has increased. Moreover, according to the World Travel & Tourism Council, over the course of the next ten years, the rebound in travel demand will contribute to the creation of 126 million jobs worldwide, with more than 60% of those jobs being located in the Asia-Pacific area. The Federation of Filipino Chinese Chambers of Commerce and Industry, Inc. (FFCCCII), mentioned that tourist arrivals from China are expected to contribute to a 6.5 to 7.5 % increase in Philippine economic growth in the year 2023.
Based on the report of the Business World, According to major mall developers, consumer traffic has increased from barely 40% a year ago to between 85% and 95% of pre-COVID levels in the third quarter of 2022. Hotel occupancy rates in the capital region increased to 47% in H1 2022 from 44% in H2 2021 as a result of the restoration of MICE activities and the return of business travel. The DoT also stated that visitor expenditure from February to September 2022 was P100.7 billion ($1.7 billion), up from P4.94 billion ($8.4 million) the previous year.
Owning and managing properties
Purchasing and selling real estate properties is a safer gamble compared to keeping money in the bank. Moreover, owning real estate properties is a good investment opportunity since real estate values tend to increase value over time. In short real estate investing is a great idea because owning real estate is a great asset.
Despite the surge in the inflation rates, the buying power becomes weaker. However, it is a good business opportunity for steady cash flow to ease with rising inflation. Global Real Estate management company, the Colliers is advising developers to plan a variety of hotel projects in order to take advantage of the increase in domestic and international travelers.
But experts highly suggest that it is preferable to own a hospitality company for business meeting conferences in the capital (Manila). In the capital region, it could be anticipated that more properties which is the completion of 2,650 hotel rooms yearly on average from 2022 to 2024, up from the average of 930 rooms provided annually from 2019 to 2021. According to CPGI President Marco Antonio, the hotel's proximity to Makati and Bonifacio Global City makes it a prime location for multinational corporations to host their meetings and other agendas. Additionally, given the rise in demand for real estate in the Philippines, hotel developers ought to look at expanding into outlying places.
With a great projection with real estate investments, theCrown Asia Pinevalecondominium in Tagaytay is a great condominium investment opportunity. The architecture of the real estate features Danish-inspired architecture. Moreover, the 2.9-hectare residential masterpieces also feature a smart home for a more comfortable and advanced home experience. Investing in condominiums is becoming the latest trend, especially since they can be converted as ready-to-occupy spaces for tourists as an Airbnb. Many foreign business meetings are held in a cool and serene environment since they tend to also relax during their foreign stay. Tagaytay is a great location to experience unwinding and organize business meetings. With the captivating and serene landscape, it features. Many business travelers have the opportunity to think clearly and relax their minds. It is healthy for their mind to have a glimpse of relaxation so that they can perform much better. Tagaytay also offers a cooler climate so the breeze can accentuate their relaxation time. Of course, work and life balance can be met during their stay in Tagaytay. For example, after executing their business conferences, they can explore the magnificent nature of Tagaytay. The province is also the home of Taal Vista, which guarantees high-class accommodation. Moreover, Pinevaleis near dining choices such as; Chateau Hestia, Caffe Sant'Antonio, Hidden Charm Cafe, and Coffee and Dreams Cafe.
New trends in the hospitality industry
Hotel industries are gradually bouncing back from the Covid pandemic. With the challenges that the tourism industries faced during Covid, the management learned to adapt to the safety regulations needed. Technological advancement also made it easier to comply with potential customers. With the surge of new technologies, there is a positive relationship between technology and the hospitality trend. Additionally, new demands from customers can be observed. Since most hotels will comprise of same services. The existence of new technological influences guarantees more opportunities for a certain hotel company. Hence, higher cash flow for them.
Here are the latest trends that hospitality companies need to look at:
Since all business operations, and even classes were forced to implement online, the digital environment also met massive growth in recent years. Although some of these technologies existed way before the pandemic, they were highly utilized and relied on during the Covid lockdown. The hospitality industry needs to look forward to these rising technological trends as these may dominate the industry in the near future.
As the name implies, contactless payments are a form of transaction with the absence of physical cash or credit card transfer. Wireless transfer can be perceived as a convenient or hassle-free transaction. Covid-19 boosted the usage of contactless payments to utilize a safe and virus-free payment. Moreover, the payment method guarantees a fast and secure transaction that guests will expect from hotels.
Virtual and Augmented reality
This software development is beneficiary for potential guests as they can navigate the hotel premises virtually. They can look at the accommodations in their own homes anytime. Unlike the pictures on hotel websites, virtual and augmented reality guarantees a more concise experience.
AI powered chatbots
Artificial Intelligent Chatbots can accommodate customers' queries 24/7. The chatbots can filter out questions with similar context to their engagement. Potential hotel guests can click their questions and the AI will assist them.
Interactive Tourist Information Maps
Interactive tourist maps provide a virtual experience with hotel facilities, rooms, and the geographical landscape of a specific destination. The map also gives information about the approximate price and possible routes to the premises. Interactive maps accentuate the guests' hotel experience.
With the safety precautions implemented during the Covid surge, robot staff was highly utilized to assist guests. Countries like Singapore and South Korea utilized robot staff in their hospital, airports, and hotels. While other robot staff can travel freely throughout a restaurant, some are attached to a system of tracks. Both have the ability to take orders and deliver food to guests. These techniques can assist hotel management in lowering labor expenses while maintaining high levels of client satisfaction.
Related Blog: The Best Hotels in Las Pinas for You to Stay In