Is the Renaissance period for RP tourism coming to an end?

Tourism industry in the Philippines has entered a Renaissance period in the past four years, in the words of Tourism Secretary Ace Durano. But the question is, has this period of growth in tourist arrivals, hotel investments and tourism receipts abruptly come to an end amid the global economic downturn?

International movement of tourists across countries slowed in the second half of 2008, as the global financial markets deteriorated, according to the World Tourism Organization, an agency under the United Nations.

"Tourism demand slowed significantly through the year under the influence of an extremely volatile world economy (financial crisis, commodity and oil price rises, sharp exchange rate fluctuations), undermining both consumer and business confidence and resulting in the current global economic recession," the World Tourism Organization says.

It says that in 2008, international tourist arrivals grew by only 2 percent to 924 million, mainly because of the 5 percent growth in the first half. "The second half of the year showed an abrupt shift in trend with international tourist arrivals flat or showing negative growth in each of the last six months of 2008. Overall, the 5 percent growth between January and June gave way to a 1 percent decline in the second half of the year," it says.

For 2009, the UN agency forecasts that international tourism would stagnate or even decline by 2 percent. "But, there is still a high degree of uncertainty and much will depend on the evolving economic conditions. If the economy starts to show signs of an earlier recovery, international tourism might grow slightly in 2009 but, if the economy deteriorates further, then the current forecast might be revised downwards," it says.

In the Philippines, there were signs that growth in tourism has been slowing. Occupancy rate at 79 Metro Manila hotels monitored by the Tourism Department fell to 71.07 percent in the January-November period in 2008 from 73.50 percent a year ago. At the same time, the overall average length of stay of hotel guests in Metro Manila became shorter to about 2.44 nights in 2008 from 2.45 nights in 2007.

Jose Clemente, a former president of the association, and head of Rajah Tours Philippines Inc., and former president of the Philippine Travel Agencies Association, claims that some hotels and resorts in the country have started dropping their rates by 20 to 30 percent to entice guests.

Paz Alberto, the new president of the Philippine Travel Agencies Association and president of Ark Travel Express Inc., also notes that hotels in other Asian countries have reduced their rates and offered attractive packages to stay competitive.

Tourism Secretary Ace Durano also appeals to hotels, resorts, spas, tour operators, and transportation stakeholders to create more options and flexible packages, as he admits that the growth in international visitor arrivals is foreseen to be tempered this year.

"We are confident we can hurdle the expected slow down in foreign arrivals especially if the whole nation contributes through domestic tourism. We can all enjoy our holiday while helping out our economy," Durano says.

Despite the economic downturn, international visitor arrivals to the Philippines managed to grow 1.5 percent to a new record of 3.14 million in 2008 from 3.09 million in 2007 and 2.8 million in 2006. "The last four years has been the Renaissance period of Philippines tourism," says Durano. "But the best has yet to come for Philippines tourism."

He says the next growth spurt for Philippine tourism is when the markets rebound from recession. "The moment the market bounces back, automatically, we will achieve the next growth spurt," he adds.

Durano says the decline in arrivals from the country's three main markets of the United States (negative 0.4 percent), Korea (negative 4.9 percent) and Japan (negative 7.4 percent) were offset by remarkable increases in arrivals from the European markets.

Arrivals from Russia posted a growth of 34 percent; France, 19 percent; United Kingdom, 10 percent; Finland, 19 percent; Norway, 16 percent; and Sweden, 6 percent.

Clemente and his association recommend that the Philippines focus more on short-haul to mid-haul markets to bridge the effects of global economic crisis, referring to countries in the Asia-Pacific region. By doing this, he says, the industry can come out well of the crisis.

For this year, the Tourism Department says international visitor arrivals are likely to grow by a tempered 2 percent. "We feel that we can manage to outperform the market this year," Durano says.

In terms of employment, Durano says new jobs abound in the local tourism sector. "Unlike some countries where there are no new hiring in tourism, our tourism industry is hiring," he says. About 3,000 jobs reportedly await tourism graduates at hotels and resorts in the country this year. "For this year, our conservative estimate is that there will be at least 3,000 new hires, not to mention the fact that airlines continue to expand," he says.

Some 2,000 rooms are expected to add to the list of the existing 34,000 hotel and resort rooms in the country this year. Based on the number of new hotels opening, a room creates one direct employment. The 2,000 rooms, therefore, will translate to 2,000 direct employment, and another 1,000 will be created by the expansion of existing hotels and resorts in Bohol and Boracay and the expansion of airlines.

"We will see more hiring in tourism in the country than overseas," Durano says.

In 2008, Durano says Singapore and Macau hotels were expanding and hiring from the Philippines, but because of the global economic downturn, many tourism projects abroad were put on hold. In the Philippines, he says even land transport services are expanding to service the destinations.

As of 2007, direct employment in tourism was estimated at 3.25 million, representing 9.7 percent of total employment, according to Durano.

Apart from direct jobs being created, entrepreneurial jobs and opportunities also abound in tour guiding, tour packaging, events organizing, and souvenir product manufacturing and trading, he says.

He says the target is to keep international visitor arrivals at a level of 3 million to 4 million in 2009 and 2010. "As long as we sustain the level of tourism traffic, and there is no reversal, we will be okay," he says.

To ensure these targets are met, the Tourism Department has partnered with airlines and hotels to cut by half the cost of tour packages aimed at the US and Japanese markets, in what was described as a stimulus plan to insulate the tourism industry from the impact of the global financial meltdown.

"We are introducing stimulus packages for the US and Japan, which are depressed markets," says Durano. Airlines and hotels, which partnered with the department, would offer discounts to the target markets.

Durano's optimism emanates from the new hotel and resort developments in the country. "The expansion of tourism sector continues. This year alone, conservatively, there are 2,000 new hotel and resort rooms that will open, and in 2010, it will be the same," he says.

In April this year, the largest hotel in Visayas, Imperial Palace Waterpark Resort and Spa built by Korean firm Phil BXT Corp. on a 7.5-hectare beachfront property in Maribago, Lapu Lapu City at a cost of over P4 billion will be finally opened. Some 2,000 Filipinos were employed during the construction phase of the project for more than two years, and now the hotel is hiring more than 1,000 as a part of their regular staff. The Tourism Department and the Philippine Economic Zone Authority declared the facility as a special economic zone, eligible for fiscal incentives.

"This is one of the highlights of my time as secretary of tourism," Durano says, when he visits the major Korean investment in Cebu.

More hotels and resorts are in fact seeking economic zone status from the government. These include EDSA Shangri-La Hotel & Resort, Inc. for its new 100-room tower; the Marriot Hotel & Resort in Newport City near the Terminal 3 in Pasay City; Grand Hyatt Hotel and Casino in Manila; Raffles Hotel in Makati City; Radisson Hotel in Cebu of SM Investments; and Seascape Resort Town of Filinvest in Mactan, Cebu.

On the resort island of Boracay, those who were applying for fiscal incentives include Shangri La Boracay Resort; Alta Vista de Boracay; Fairways and Bluewater Boracay Resort; and Alyssa Boracay Beach Resort.

Under Republic Act No. 7916, as amended by RA 8748, tourism development zones/tourism estates may be granted special economic zone status upon registration to PEZA and issuance of the required Presidential Proclamation. PEZA however will only consider proposed development tourism zones endorsed by the Tourism Department.

Eduardo Jarque, Jr., Undersecretary for Tourism Planning and Promotions, says these tourism investments will spur growth in the economy. "Tourist arrivals are expected to rise with people preferring inexpensive destinations. We are gearing up for this influx by aggressively promoting tourism investments to foreign stakeholders," says Jarque.

Victoria Jasmin, DOT Director of Office of Tourism Standards, says the department has also been closely working with the government in tapping alternative sectors such as the baby-boomers in Singapore, Japan, and Korea who are looking for second homes in countries with lower living costs.

Durano says another strategy is to expand the seat capacity of airlines connecting the Philippines to other countries. He notes that the Philippine air negotiating panel has recently forged expanded air services agreements with Qatar and the United Arab Emirates that will increase flights of Middle Eastern carriers to the country. Most European tourists fly to the Philippines via Qatar Airlines and Emirates.

The tourism chief says local carriers such as Philippine Airlines and Cebu Pacific are also acquiring new planes and adding flights. "The competition in our domestic airline industry is very healthy," he says.

For one, budget carrier Cebu Pacific says it will take delivery of six new planes that will enable it to fly 9.3 million passengers this year. In 2008, its passenger volume rose 23 percent to 6.7 million, despite the impact of the global economic downturn. The airline says it will use the six new planes to expand its route network in the country and in Asia.

The World Tourism Organization says the present economic downturn is the first time of a global nature, affecting both emerging and mature tourist destinations, and its impact is probable to last longer. "But, history shows that the return of economic growth will also lead to the recovery of tourism. And the sector can, and should, play a key role in any global response plan," it says.

"In these times of such significant uncertainty and volatility, both public and private tourism stakeholders have a responsibility to continue and even reinforce the efforts towards a more sustainable tourism development," says Taleb Rifai, deputy secretary general of the organization.

Durano, for his part, says tourism will be one of the strongest propellers of the economy for the years ahead. "Together with the government, we seek to intensify the impact of this industry on the economy, particularly by encouraging investments and creating opportunities for tourism economic zones," he says.

 

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