Luxury driving big Manila expansion

The second fastest growing economy in Asia and a stable political environment are combining to fuel a surging Manila hospitality market, particularly in the high-end luxury sector, with escalating room rates and strong occupancies setting the stage for dramatic future growth for the sector.

With an economy growing at 7.1% last quarter, just a few points behind China, the Philippines is enjoying a fast tracked journey back to the future – and the hospitality sector is a front line beneficiary, according to the Manila Hotel Market Update report released Wednesday by hospitality consulting firm C9 Hotelworks.

The report points to an aggressive pipeline of growth and investment in the luxury sector with 5,797 rooms opening in the upper tier of the market over the next five years, representing a 37% growth to existing supply. These will include the introduction of internationally renowned brands such as Raffles, Fairmont, Grand Hyatt, Shangri-La, Sheraton and Westin.

As an early indication of what’s to come, C9’s hospitality research details a rise in overall average room rates of 6% and occupancy in luxury accommodation of 72%.

“Step back in time three decades and hotel headlines would be surprisingly similar to those today,” said C9 Hotelworks Managing Director Bill Barnett. “Manila Bay asserting itself as a tourism hub in Metro Manila, and a new business district flexing its muscles within the competitive hotel landscape.

“But this time around it is Manila Bay featuring the evolution of Pagcor Entertainment City and Resorts World, while the new CBD is not Makati but neighboring Bonifacio City. This is the new storyboard of Mega Manila.”

According to Barnett, the government led by President Benigno Aquino III and the private sector can be credited with much of the growth by executing a coordinated and effective strategy of selecting a limited number of massive infrastructure projects to focus on – which has created major demand.

At the end of last year Manila played home to 15,567 hotel rooms with 57% of these being in the upscale tier. But suddenly there is now significant movement at the top end of the market where luxury supply grew at only 3.2% between 2004 to 2011.

Commenting on the shift up, Barnett said, “Present day trading remains strongly leveraged with corporate travelers, who combined with the meeting and incentive segment command 78% of total hotel room nights.”

Looking forward to 2013 and beyond, Barnett added that an interesting dynamic was forming. “The urban spread of Mega Manila into new areas – such as leading Philippine developer Ayala’s FTI acquisition in Taguig – is expected to create new hotel micro markets and this is only good news for the hospitality sector overall,” he said. “In the new Asian age when the East is now embracing a rising and increasingly affluent middle class even Donald Trump has come to the table with his luxury namesake brand in the new Mega Manila.”