Hotel rates seen to drop by 30%

MANILA, Philippines — Average daily rates (ADR) of hotels in Metro Manila are expected to drop by 30 percent by the end of the year due to lower occupancy levels as the leisure sector continues to feel the impact of the pandemic,Colliers International Philippines said.

In its first half 2020 hotel report, Colliers said it expects Metro Manila ADR to drop by 30 percent this year to $55, as average daily rates have already declined by 16 percent in the first half to $66 due to lower occupancy.

“We do not see a pickup in ADR over the next 18 to 24 months as the leisure sector continues to suffer from the global economic crunch and limited spending of local tourists,”Colliers said.

Hotel occupancy levels have already plunged to 25 percent in the first half – significantly lower than the 74 percent occupancy rate in the same period last year.

Colliers sees occupancy to reach 30 percent by the end of this year, lower than the 72 percent occupancy posted last year due to the substantial drop in foreign arrivals.

Latest data from the Department of Tourism(DOT) shows that international visitor arrivals from January to June have dropped 68 percent to 1.3 million.

In addition, estimated inbound tourism revenues for the first half of the year plunged 66.7 percent to P81.05 billion from P243 billion in the same period last year, as travel restrictions remain in place amid the pandemic.

“Occupancy will likely remain below 50 percent up to 2021 as local and foreign air travel continue to be disrupted,”Colliers said.

In terms of classification,the five-star hotel segment posted the largest decline in occupancy in the first half of the year at 13 percent from 77 percent in the second half of 2019.

Colliers International Philippines research manager Joey Roi Bondoc pointed out that two-star and three-star hotels have posted better occupancy levels at 31 percent and 33 percent, respectively, as these hotels catered to health workers, OFWs, Filipino repatriates and even some business process outsourcing (BPO) employees that need halfway houses.

Meanwhile, Colliers also recommended that hotel operators must be cautious in dropping their rates.

“Colliers believes that hotels should thoroughly consider decisions to immediately lower rates at this point as these are unlikely to prop up occupancies given the significant drop in foreign and domestic tourists,” the property services firm said.

It added that it does not see international and local air travel reverting to pre-pandemic levels in 2020.

“We encourage operators to closely monitor indicators including foreign and domestic tourist arrivals, leisure spending as a percentage of personal consumption, allowed domestic and international flights, and overall growth of the country’s gross domestic product and factor these into their pricing strategies starting Q1 2021,” Colliers said.

Moreover, Colliers said the Metro Manila hotel market expects to see subdued delivery of new hotel rooms up to 2022 as developers take a wait and see stance.

Colliers said it has downgraded its initial forecast of 3,100 rooms to be completed this year to only 1,725 hotel rooms, as only around 375 rooms were completed in the first half of the year.

It added that the projected delivery for 2020 is less than the average of 2,000 new hotel rooms completed from 2010 to 2019.

“As the leisure market still reels from the adverse impacts of the global recession brought about by the pandemic and lockdowns, Colliers sees the delayed delivery of several hotel projects across Metro Manila,”the property services firm said.