Metro Manila Seen Still Offering Pockets of Opportunity for new Hotels

LOCAL DEVELOPERS are finding pockets of opportunity to build new hotels in Metro Manila on the strength of strong economic activity despite concerns of a glut.

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The hotel room inventory in Metro Manila will shoot up in the next three to four years, adding roughly 11,000 rooms to around 35,000 from the current 24,000, Julius M. Guevara, head of advisory services at Colliers Philippines, said in a recent mobile phone message. To be sure, bulk of the new supply will come from gaming districts that have recently shown signs of slowing demand, Mr. Guevara said.

While growth of this sector is expected to be sustained in the near term, there are challenges in the medium term, among them being the lack of airports -- the biggest obstacle to increasing foreign tourists who in turn drive demand for hotel rooms, Claro dG. Cordero, Jr., head of research and valuation at Jones Lang LaSalle, said in a separate text message.

“As a result of slower to no growth in tourist arrivals due to lack of new facilities, the new developments will add further supply and will displace the old developments,” Mr. Cordero said.

“This will likely result in an oversupply scenario that may also adversely affect the revenue and baseline of operators and developers.”

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Despite the “staggering” number of fresh supply coming into the market, Mr. Guevara said business and budget hotels will continue to enjoy “high demand” in central business districts, buoyed by robust economic activity.

Real estate behemoths Ayala Land, Inc.; Robinsons Land Corp. and SM Prime Holdings, Inc. are keen on taking advantage of this opportunity.

“Makati can still absorb hotels. It really depends on the area. I don’t think there’s an oversupply in Metro Manila. There’s still room. There’s still upside,” Ayala Land Hotels and Resorts Corp. (AHRC) Chief Operating Officer Michael Alexis C. Legaspi said in an interview.

AHRC is building hotels to complement developments within Ayala Land’s mixed-use projects nationwide. It is currently building 10 different hotels, one of which is the new 275-room Mandarin Oriental at the tip of the Ayala Triangle Gardens in Makati City.

Likewise, Robinsons Land is developing the Westin Residences in Ortigas Center, a 500-room hotel residences project at the former Medical City compound which the Gokongwei-led firm has turned to its luxury Sonata Private Residences project.

“We had an opening of Marco Polo in Ortigas, but that didn’t hurt us at all. I can’t think of oversupply because as we build more offices and Ortigas continues to develop, demand will grow,” said Ricardo A. Gutierrez, owners’ representative of Robinsons Land’s hotel division.

Robinsons Land currently has three hotels in the Ortigas central business district: Crowne Plaza Manila Galleria, Holiday Inn Manila Galleria and value service brand Go Hotel.

For its part, SM Prime is set to unveil this year the 347-room Conrad Hotel located at the Mall of Asia Complex sitting beside the Entertainment City where the perceived oversupply is.

“Maybe the entertainment sector might have reached its capacity, but some people don’t necessarily stay there for business. It’s just policy,” said Peggy E. Angeles, senior vice-president for operations at SM Prime unit SM Hotels & Conventions Corp.

With two hotels in Cebu and Boracay, Movenpick Hotels and Resorts aims to establish its presence in the Philippine capital, Movenpick Senior Vice-President for Asia Andrew Langdon said. The hotel operator has struck a deal with Picar Development, Inc. -- the real estate arm of the AMA Group of Companies -- to run a hotel in its Picar Place property in Makati. While the project is currently on hold, the agreement has yet to be terminated, Mr. Langdon said.

“We are not worried about the perceived supply issue, the reason being we see this as a short-term event. When we manage a hotel, it’s a long-term relationship with the hotel operator and the developer,” Mr. Langdon said.