Build it and they will come

(First of two parts)

A government directive to smile more was issued in Singapore about a decade ago to appear more welcoming to foreign summit delegates and tourists. Well, no problems there for Filipinos because we smile so naturally without need of official encouragement (or sometimes, without need of reason).

Unadulterated smiles is the tip of the iceberg of Filipino hospitality – very tourism-friendly, in fact. But in Southeast Asia, Singapore had three times the number of visitors to the Philippines and almost twice the revenue from the same tourists. Based on a World Bank report, in 2015, Singapore had over 15 million visitors versus the Philippines’ only more than five million. Wait – that’s not the story. If the World Bank data is reliable (which it normally is), and from the latest official data available, the per capita consumption of a visitor to the Philippines in 2015 is 50 percent more than the average spending of a visitor in Singapore. Can you believe that?

Let’s say the World Bank data is a bit inaccurate and the average spending of a tourist in our country is just as much as a tourist in Singapore (at about $1,450 per head). Then that would still be tons of reasons to be happy about. Note that Singapore is a fantastic retail place for luxury goods and branded items, they have great theme parks, and their infrastructure is world-class. And our country – what do we have to fight with? Our beaches and natural attractions, our limited hotels or whatever lodgings that are available, our humble and friendly service, and smiles as warm as our tropical climate.

There is so much promise because based on data, tourists spend on the average about 10 days in the Philippines. They make it a point to stay longer here. With infrastructure wanting, insufficient accommodation, and many tourist attractions that are tough to get into, tourism still contributes 10 percent of the country’s GDP. Just to get you excited, Thailand has five times more tourist visitors compared to us, and their tourism industry gave them 20 percent of their GDP.

The Department of Tourism (DOT) organized what was perhaps the first tourism investment conference in the Philippines called “Invest Tourism Philippines: The Next Big Thing in Southeast Asia”, with PwC serving as Knowledge Partner. This conference, attended by decision makers and representatives from the government and private sectors, aimed at encouraging tourism investment, active participation, and sharing of best practices. Here are some of the game changers pointed out by the CEOs we talked to.

Low interest rates mean more hotels. Mr. Fernando Zobel de Ayala intimated that hotel investment became feasible because of low interest rates that allowed sufficient margins. In the past, commercial interest rates at 10 percent would not leave adequate returns. This means a lot to developers like them whose business model is not just to erect new hotels but develop new hotel destinations.

We need 128,000 more rooms over the next five years. According to Undersecretary Rolando Canizal of the DOT, the ambitious target is to grow tourist arrivals to more than 85 million by 2022. To accommodate these tourists, their math tells them that we need 128,000 new rooms (maybe more), which would be a combination of five-star, four-star, and three-star hotels, and lodgings with breakfast to cater to different types of tourists.

The increase in the number of Chinese tourists is a game changer. The DOT shared that the number of Chinese visitors increased by 100 percent last year, such that of the 6.63 million arrivals, about a million are Chinese. In fact, visitors from China overtook those from the US and Japan and are beaten in number only by Korea. It may not be off to credit it to the initiatives taken by President Duterte to be friends with China, which made the latter commit to encourage Chinese tourists to come to the country. (Of course, whether the South China Sea is West Philippine Sea is another matter, but a connected matter.)

Adventurous tourists thrive in digital platform. Mr. Adam Laker of Sofitel observes that the average tourist has become more adventurous and outgoing – and they do a lot of research. This behavior helps in discovering places that are unique or less known. And there are many such places in the Philippines. Millennials, especially, don’t only look for destinations. They look for experience.

Having more direct flights brings more Philippine tourists. Adam also perceptively added that another game changer is that more direct flights are now being offered by Philippine carriers. Tourists prefer direct flights, which is a vast improvement in travel experience versus flights that connect through a hub in Hong Kong or Singapore, for instance. These direct flights to UK and Australia, for example, bring more English and Australian tourists to the country. It really makes sense. Want to bring them here? Fetch them there.

(To be continued next week)

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Alexander B. Cabrera is the chairman and senior partner of Isla Lipana & Co./PwC Philippines. He is the chairman of the Tax Committee, and the vice chairman of EMERGE (Educated Marginalized Entrepreneurs Resource Generation) program, of the Management Association of the Philippines (MAP). Email your comments and questions to [email protected]. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.