Philippines: Great Expectations

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Blessed with stunning landscapes, white sand beaches, rich biodiversity and wonderful hospitality, the Philippines has all the key elements of a premier tourism destination. Yet, for all these natural qualities, the country is still struggling to build the necessary infrastructure to accommodate large numbers of tourists. It seems the government has recognised the underutilisation of its chief assets and is making strides in the expansion of the sector. However, the country is likely to continue serving niche markets until its ongoing infrastructure development is completed.

Illustrating its potential, the 2009 World Economic Forum’s “Travel and Competitiveness Report” ranked the Philippines 16th in terms of price attractiveness, highlighting solid potential in human resources for the hospitality sector. In terms of its infrastructure and business environment, the country was 89th.

In an effort to reach the target of 5m visitors by 2010, the government has embarked on an infrastructure development plan that focuses on building up the Visayas island group, which it has labelled the ‘Tourism Super Region’.

By investing heavily in the upgrade of airports and roads in the central Visayas island group the current administration appears to be listening to calls from the private sector to focus its energy onto limited high-end destinations with the most potential for growth. Indeed, most industry experts have observed over the past 20 years the very broad, widespread development of tourism infrastructure as an attempt to “spread the wealth”. As a result, much of the country’s infrastructure is still in need of improvement and no truly globally identifiable tourism destination has emerged, perhaps with the exception of Boracay.

The premier destination of the Philippines, received 600,000 visitors in 2008 as it continues to grow in size and stature; however, it still pales in comparison to Indonesia’s premier destination Bali, which received nearly 2m visitors in 2008. Cebu, the Philippines’ largest destination in terms of volume, also received just under 2m visitors last year, but that still does not come close to matching Thailand’s Phuket, which receives over 5m visitors annually. In order to catch up with its neighbours the country will have to increase capacity in areas such as Boracay, while simultaneously developing the necessary infrastructure in its emerging destinations – such as Palawan.

The essential final piece of the puzzle is marketing and communication, perhaps the most difficult to tackle. All the natural attractions, first-class infrastructure and welcoming population will account for nothing if the government is not able to step up its marketing efforts.

Further dampening the growth of the industry is a tough economic climate that has severely impacted several of the Philippines’ major tourism markets, especially its three largest – Japan, South Korea and the US. All three markets have experienced negative growth figures in the first quarter of 2009 when compared to the same period in 2008.

However, overall numbers are actually climbing, as the country looks set to reach its target of 5m visitors by 2010. Even though growth of visitor arrivals in 2008 was relatively flat at 1.53%, the first quarter of 2009 has been very strong, recording 10.33% growth over the same period last year. Considering the current global appetite for tourism this represents a very strong start to 2009. Additionally, new markets such as Russia, the UAE, Vietnam, France, Norway, India, Canada and Spain all posted double-digit growth in 2008, albeit from relatively small bases.

The top-15 destinations in the country also recorded positive growth in the first quarter of 2009. Camarines Sur, an emerging haven for water-sport enthusiasts, along with Palawan, considered one of the most beautiful regions of the country, were the highlights, posting 43% and 93% growth, respectively.

Despite the challenges facing the tourism sector the good news is that the country’s potential for growth remains immense, especially as expansion in the sector is generally driven by increases in capacity – not demand. Airport upgrades are ongoing in most of the country’s regional hubs and as they are completed in varying stages frequency and capacity of flights will bring in more and more visitors, which in turn are attracting major hoteliers, such as Singapore-based Banyan Tree Holdings.

Take for example Coron, which is located in northern Palawan, part of the Tourism Gateway and home to some of the best wreck scuba diving in the world. Until recent upgrades at the local Busuanga airport, it was not financially viable for a major resort operator, such as Banyan, to even consider the location. However, recent upgrades to the Busuanga airport have increased flight frequencies and soon international connections will be possible, and as a result Banyan has already invested $70m in two Palawan resorts.

The relative newcomer status of the Philippines bodes well for the country moving forward. Countless untouched islands and impressive biodiversity (the country is part of the world-famous Coral Triangle) are huge draws for eco-tourists, scuba divers, surfers and other nature-oriented explorers. A naturally hospitable, English-speaking population also gives the country a great advantage over its competitors.

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