Hotel developers urged:Take advantage of REITs

CEBU, Philippines —  As the tourism sector is now starting to recover, hotel developers should take advantage of the Real Estate Investment Trusts (REITs) to expand their ventures.

According to Colliers Philippines, REIT proceeds from hotel assets can be used by developers to acquire foreign brands or expand their business.

“The development and modernization of more international airports across the Philippines should further raise the attractiveness of hotel REITs, with the leisure sector being a major beneficiary of the Philippines’ improving air transport infrastructure,” Colliers said.

More modern and expansive airports should attract more tourists and boost the capacities of air transport facilities across the country, it said.

REIT is a stock corporation established in accordance with the corporation code of the Philippines and rules of the Securities and Exchange Commission (SEC). It is organized under the laws of a foreign country principally for the purpose of owning income-generating real estate assets and securities.

The Philippine government enacted the REIT law in 2009 with the goal of democratizing wealth and attracting more foreign investment into the property sector. But the launch of REITs was stalled by a number of regulatory roadblocks, including taxation issues and a high public ownership requirement. REITs are now likely to be implemented this year as the government has agreed to relax the law’s restrictive rules.

The SEC has relaxed the minimum public ownership (MPO) requirement to 33 percent from the previous IRR’s requirement of 40 percent. Most Asian economies have minimal MPO requirements and countries such as Japan, Singapore, and Malaysia have MPOs of between 20 percent and 30 percent.

Funds raised from REITs are also mandated to be reinvested in the domestic market.

Meanwhile, the Department of Tourism (DOT) reported that tourist arrivals reached

2.65 million in 2022, up 1,519 percent from the 163,879 visitors recorded in 2021. This also breached the department’s projection of 1.7 million arrivals for the year.

Among the top source markets in 2022 include the United States, South Korea, and Australia. In October 2022, the government dropped the mandatory wearing of facemask to support the tourism sector’s recovery. In 2023, DOT projects foreign arrivals to reach 4.8 million, still lower than the record-high 8.2 million arrivals in 2019.

The International Air Transport Association (IATA) noted that global air traffic continues to recover, with October 2022 passenger traffic now at 74.2 percent of the October 2019 level. Despite global economic and geopolitical headwinds, IATA is still optimistic about a return to pre-Covid traffic by 2024.

The country’s business groups also see tourism as among the sectors that will drive economic recovery in 2023.