The Philippines is blessed with natural beauty, an American/Spanish colonial heritage, a fast-growing economy and a population with a grasp of English its neighbors can only envy. So why isn’t it doing better? On the other hand, the Philippines is a poor and congested archipelago with remote islands barely connected by appalling transport infrastructure, which gets flooded and blown away annually by typhoons. And half the population works overseas, sending cash home to support the ones who stayed behind. In which case, how is it doing so well?
At HICAP Singapore, the discussion panel on the Philippines took a path which was quite different from the usual slick optimism, but while initially perplexing, the realistic perspective put forward by the Filipino contingent probably inspires greater confidence than any amount of self-promotion. The issue of airport infrastructure was a perfect example, with the panel wistfully acknowledging that the country has been slow to develop its domestic network despite the lack of viable alternatives. When asked to comment on the success of Kalibo Airport, which serves the beach resort of Boracay, Jose Parreño of the Discovery Leisure Company agreed it was indeed exceptional, but then noted that as a result there were now too many tourists, which may affect the long term sustainability of the area.
One thing that does stand out from a quick perusal of the arrivals board at Kalibo, or even at the country’s main regional airport in Cebu, is the absence of connections to China. Jose suggested this might be partly down to the disputed Spratly Islands, with China discouraging its citizens from visiting the Philippines, but added that the tourism authorities in the Philippines might be looking at Chinese social media as a way to address the very low numbers from the Chinese mainland. One reason for optimism, however, is that Emirates will be flying daily to Cebu and Clark from March 2016, adding flights in response to market conditions where they had earlier sought to cut capacity.
The opportunity to enter the Philippines without passing through Manila is important, because Manila’s congestion can act as a deterrent for visitors. As Amorita Resort CEO, Luca Niccolo Miclat Cauton III, pointed out, Manila has one road, EDSA, which everyone is obliged to use in order to get anywhere at all. Or as The Economist put it, “Manila’s transport plans have been among the most foolish of any large city; it has the traffic jams it deserves.”
Nevertheless, there are certainly positives, with all of the panelists running successful operations, although it seems an acceptance of the local quirks is a prerequisite for any operator. At present, local travelers account for 60% of the market in an economy which is growing at 6-7% and is creating a strong middle class. In the residential sector, Alan James Montenegro of Chroma Hospitality pointed out that while many of his units were sold to foreigners, the vast majority were those who had close family ties to the Philippines. In the hotel sector, while international brands would be attractive for Filipinos according to Jose, domestic brands currently hold sway.
This is not necessarily a disadvantage, because as Lucas explained, foreign visitors want a sense of place when they travel, so a local brand which brings out the differences between destinations such as Bohol and Palawan can provide the authentic experience they’re looking for.
The operating environment still poses certain challenges, with land acquisition problematic because of a lack of certainty in documentation and rights, while the issue of staffing in the Philippines presents its own unique twist. Many Filipinos prefer to work overseas if the opportunity arises, so as Lyba Godio, COO of One Of Collection explained, her own company trains local staff only to inevitably lose them, because local salaries simply cannot compete with what is on offer abroad.
The overall impression is one of a country whose people have the resilience to make things work, but have been let down by successive governments which have underachieved. Investors seeking an emerging market would be wise, however, to note the views expressed by Clarence Tan of IHG during HICAP, who singled out the Philippines as a destination currently attracting considerable attention. On the evidence presented, that interest is wholly justified.