Philippines hotel market needs to lure more investors

MANILA, Philippines — The Philippines needs to find more ways to encourage more investments into the tourism sector, a property consultancy firm said.

“Hotels is the lowest yielding around the world so we have to find a way to encourage them to invest,” Leechiu Property Consultants chief executive officer David Leechiu said.

Asked if the implementation of the Service Charge Law would  further dampen the attractiveness of the hotel market, Leechiu said this would  be offset by the country’s growing visitor arrivals.

Data from the Department of Tourism (DOT) showed that foreign arrivals grew 15 percent to 6.8 million from January to October.

Philippine Hotel Owners Association (PHOA) president Arthur Lopez earlier said the Service Charge Law would result in higher costs of doing business, which could  lead to hotel investors having second thoughts about visiting the country.

“Well, they will still invest but they will have second thoughts,” he said.

“The Philippines still has very good tourism potential. We haven’t even scratched the surface yet,” he said.

In August, President Duterte signed the Service Charge Law, which provides for the service charges collected to be distributed in full or 100 percent to all covered employees.

Prior to the signing of the law, 85 percent of the collected service charge goes to the employees, while 15 percent is for losses, pilferage, breakage of hotel supplies and equipment, and at the discretion of management, for distribution to the supervisors and managers.

In line with encouraging more investors into the hotel market, Leechiu identified the granting of incentives to tourism enterprise zones (TEZs) as a move that could offset the risks hotel developers incur in building projects across the country.

Earlier this year, Republic Act 11262, which extends the grant of incentives to TEZs for another 10 years or until 2029 by the Tourism Infrastructure and Enterprise Zone Authority (TIEZA) was signed into law.

Among the incentives to be granted to TEZ developers and tourism enterprises include a six-year income tax holiday that may be extended for another six years, a five percent preferential tax on gross income in lieu of national taxes except for real property tax and fees of TIEZA, a net operating loss carry over scheme, import tax exemptions for capital goods and equipment needed for TIEZA-registered activities, and import tax exemptions for transport equipment and spare parts needed for TIEZA-registered activities.