Tourism Takes Off

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With booming numbers of tourists pouring into the country, the Philippines is keen to exploit this sector further to create jobs and revenue.

Tourism has been growing steadily in recent years with the record-breaking 2.8m tourist arrivals in 2006 representing an 8.4% increase on 2005. This year the target is 3m, according to Rolando Cañizal, director of the office of tourism.

Cañizal told OBG that a number of initiatives and factors were responsible for the recent boom. These include focused marketing, familiarisation trips, stronger links with travel agents and wholesalers in source markets as well as increased flight frequencies from those regions. The government is also trying to have stronger collaboration with tour operators, hotels and other tourism entities in the Philippines in developing tour packages as well as participating in travel fairs and sales missions.

Visitor arrivals are projected to grow to 5m by 2010 while visitor receipts are projected to rise to $4.59bn in the same year. According to the office of tourism, the average spending of foreign tourists in the Philippines is estimated at $1,200, higher than the country's average per capita gross domestic product of about $1,100.

Tourism is a major pillar of the government's five-year development plan and it is hoped that increased investment in the sector will generate billions of dollars in investments and millions of jobs. After the elections in May, President Gloria Macapagal-Arroyo issued priority instructions to fast-track nine airport projects due to finish this year.

Besides government investment in infrastructure, the tourism sector needs further private investment to increase room capacity.

"At present, hotel rooms are running short as demand for accommodation from both foreign and domestic tourists is increasing," said Cañizal. "There are 11,614 rooms in Cebu City and Mactan, Palawan has 2396 rooms, Boracay has 4054 rooms and Bohol has 2691 rooms. Some 3000 rooms are currently being built in these destinations."

Interest from investors is on the upswing. One of the Philippines' largest conglomerates, SM Investments Corporation (SMIC), recently launched Hamilo Coast, a 5700 ha eco-tourism resort in the Batangas province to be built in phases. The company operates in retail merchandising, shopping and entertainment malls, financial services and real estate. Its growing interest in the tourism sector is based on what it describes as its "huge potential".

Last month the conglomerate signed a memorandum of understanding (MoU) with two international hotel firms to develop and manage planned SMIC properties. Carlson Hotels Asia Pacific will oversee the 350-room SM BayCity in Metro Manila and Accor will oversee a 400-room hotel in Cebu City, beside the SM City Cebu Mall.

In April Saudi Prince Alwaleed bin Talal bin Abdulaziz announced he would invest over $153m in a joint venture with the Ayala group to develop a luxury hotel complex in Ayala Center in Makati City, the Philippines' business district. the deal is between Kingdom Hotel Investments, which was founded and chaired by Prince Alwaleed and Ayala Land, the real estate arm of Ayala Corporation, one of the Philippines' largest business conglomerates.

While the supply of rooms is seen as a potential obstacle to growth, another is the capacity of airline seats. "The biggest roadblock to the improvement of the tourism industry right now is airline access," said Economic Planning Secretary Romulo Neri. "Many tourists want to fly to the country, but there simply aren't enough available flights."

In January 2006, the government established an open skies policy giving foreign airlines unlimited access to the Diosdado Macapagal International Airport in the Clark Special Economic Zone, which is two hours from Manila. Several months later, a new executive order was signed that essentially rescinded this decision. Currently, business and government leaders are working to have the open skies policy put back in place to allow more access to foreign airlines.

Subic Clark Alliance for Development Secretary Edgardo Pamintuan said tourist arrivals to the Philippines are behind neighboring countries such as Vietnam, Thailand, Malaysia and Singapore because the government needs to enact the executive order that would allow more foreign airlines to operate at the airport.

"The benefits of a liberalised and competitive regime have already been proven in many industrial and economic sectors. Our local airline industry is an example. It thrived when it opened up to competition," said Pamintuan.

Singapore-based budget airline Tiger Airways announced earlier this year that it would cut its weekly flights between Singapore and the Diosdado Macapagal International Airport in Pampanga from 14 flights to just 9 starting 25 March.

The airline's CEO, Tony Davis, said the reduction in flights is due to the continued uncertainty in Philippine air policy and regulations, particularly for the Clark airport.

Neri said that the implementation of a more open policy is ready to be signed.

"We must cut loose from policies that distort market competition. They simply raise the cost of doing business and deter investments and job creation," Neri told media.

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