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High rates seen to weigh on growth

Customers shop for school supplies and uniforms at Ilaya, Divisoria in Manila, July 6, 2024. — PHILIPPINE STAR/RYAN BALDEMOR

By Luisa Maria Jacinta C. Jocson, Reporter

METROPOLITAN Bank & Trust Co. (Metrobank) Research trimmed its gross domestic product (GDP) forecast for the Philippines this year as elevated interest rates continue to crimp domestic demand.

“We continue to believe that the country’s economic growth should remain robust, albeit at a moderated pace as investment momentum remains constrained by tight monetary policy, making it harder for businesses to invest and expand,” it said in a report.

Metrobank Research sees the economy growing by 5.7% this year, lower than its previous 6% forecast.

If realized, this would fall short of the government’s 6-7% growth target this year, but slightly faster than the 5.5% GDP expansion in 2023.

Metrobank noted that “additional efforts” would be needed to reach the government’s goal.

In the first quarter, GDP expanded by 5.7%. Second-quarter GDP data will be released on Aug. 8.

Metrobank also noted that many Filipinos are not spending as much as before amid higher borrowing costs.

“Some households have also incurred more debt. Despite these challenges, the economy continues to move forward, just at a more measured pace than initially hoped,” it said.

In June, the Bangko Sentral ng Pilipinas (BSP) kept its key rate steady at 6.5%, the highest in over 17 years.

The Monetary Board has raised borrowing costs by a cumulative 450 basis points (bps) from May 2022 to October 2023.

For 2025, economic growth is seen to average 6%. This would also miss the government’s 6.5-7.5% target range.

Meanwhile, Metrobank Research said it expects inflation to settle within the BSP’s 2-4% target this year and in 2025.

“The price of rice, which has been a major reason for rising costs in the Philippines, is expected to go down. This should help keep overall prices more stable. We agree with the BSP that inflation will stay within acceptable levels this year and next.”

For this year, it sees inflation averaging 3.3%, and 3.1% in 2025, in line with the BSP’s baseline forecasts.

Headline inflation eased to 3.7% in June, marking the seventh straight month that it settled within the BSP’s 2-4% target band.

Rice inflation eased to 22.5% in June from 23% a month ago. This marked the third straight month of slower rice inflation.

“However, some challenges loom ahead. A strong La Niña weather event could affect crop production and prices,” Metrobank Research said.

“Also, geopolitical events could affect supply chains and push prices up as well. While the future looks promising for stable prices, our outlook may change.”

Meanwhile, Metrobank Research sees the central bank possibly delivering up to three rate cuts this year.

“We believe the BSP might lower rates twice this year, with a possible third cut in December if prices remain stable and the financial markets stay calm,” it said.

BSP Governor Eli M. Remolona, Jr. has previously signaled that they are on track to begin policy easing by August. He earlier said the central bank can cut by up to 50 bps this year.

If the BSP reduces rates in August, this would be the first rate cut since November 2020.

“However, these decisions are also dependent on what the United States Federal Reserve does with its own interest rates. The BSP will keep a close eye on how quickly the US lowers its rates, as this can affect the Philippine economy and the value of the peso,” it said.

The peso is also seen to rebound by yearend, settling at around P57.20 against the dollar, according to the report.

The Development Budget Coordination Committee expects the peso to range from P56 to P58 per dollar this year.

The peso closed at P58.35 per dollar on Friday, strengthening by 8.5 centavos from its P58.435 finish on Tuesday.

In May, the local currency sank to the P58-per-dollar level for the first time since November 2022.

“The US dollar’s strength is expected to wane when the Fed lowers interest rates. Meanwhile, the Philippine central bank is also likely to reduce its rates, which could increase imports as the economy grows,” Metrobank Research said.

Markets are currently pricing in a near-certainty that the Fed will begin cutting interest rates at its September meeting and expect 66 bps in total cuts by the end of the year, according to CME’s FedWatch Tool, Reuters reported.

“Looking ahead, a wider current account, where the Philippines buys more from other countries than it sells, could also establish a new baseline for the peso’s value,” Metrobank added.

Gov’t urged to look for new sources of revenue

TAXPAYERS line up at the Bureau of Internal Revenue office in Intramuros, Manila, April 18, 2022. — PHILIPPINE STAR/RUSSELL PALMA

By Kenneth Christiane L. Basilio

THE NATIONAL GOVERNMENT (NG) should look for new sources of revenues and improve tax administration, as it seeks to reduce dependence on borrowings to fund the national budget, lawmakers and analysts said over the weekend.

The Department of Budget and Management (DBM) on Monday will hand over to Congress the proposed P6.352-trillion National Expenditure Program for 2025, which is equivalent to 22% of the gross domestic product (GDP). This is also 10.1% higher than this year’s P5.768-trillion budget.

“[The] increase in budget is determined by the taxes we collect. We can’t spend too much, more than our means, a reason why we only increased the budget by 10%,” Finance Secretary Ralph G. Recto told BusinessWorld on July 22 in mixed English and Filipino.

“We are not maximizing the Philippine national credit card. We cannot loan too much [from domestic and multilateral lenders], only what is well within the means of what we can repay,” he added.

However, the government faces pressure to generate fresh revenues amid the ban on Philippine Offshore Gaming Operators (POGOs). Philippine Amusement and Gaming Corp. earlier estimated it will lose between P7 billion and P7.5 billion in annual revenue due to the closure of POGOs.

“There’s some pressure to generate new sources due to the POGO ban,” Albay Rep. Jose Ma. Clemente S. Salceda, Ways and Means Committee chairman, said in a Viber message, adding that he will discuss this matter with his Senate counterpart Senator Sherwin T. Gatchalian and Mr. Recto.

“[The POGO ban] has become an opportunity… We now have a basis to go after other taxes.”

Mr. Salceda said the government should resume reclamation projects along the Manila Bay, which will generate much-needed tax revenues.

“I continue to be a strong advocate of allowing the validly permitted Manila Bay reclamation projects to continue,” he said. “No reason why they shouldn’t be allowed to resume operations.”

In 2023, Mr. Marcos ordered the suspension of reclamation projects in Manila Bay, citing the need to conduct an environmental assessment. Mr. Salceda last year said the government could lose up to P432 billion in tax revenues from the suspension.

While he previously said there will be no new taxes, Mr. Recto said the Finance department is pushing for the approval of priority bills such as the proposed reform of the mining fiscal regime, excise tax on single use plastics and the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy bill.

Party-list Rep. Marissa P. Magsino, a member of the House Appropriations and Ways and Means committees, said pending tax measures in Congress could generate up to P135.9 billion in revenues.

“Strict implementation of our existing revenue policies is the key in sustaining our funding needs,” Party-list Rep. Joseph Stephen S. Paduano, a member of the House Appropriations Committee, said in a Viber message.

He said “some entities” are using tax loopholes to evade obligations, harming the country’s fiscal stability. “We in Congress should also see to it that policy gaps in our tax system are minimized, if not eliminated.”

BORROWINGS
“Based on the revised medium-term fiscal program of the Marcos administration, the deficit will be higher next year despite higher tax revenues,” Zy-za Nadine M. Suzara, a public budget analyst and former executive director of policy think tank Institute for Leadership, Empowerment, and Democracy, said in a Viber message. “That means higher borrowing is inevitable to finance the national budget for 2025.”

For next year, the Development Budget Coordination Committee has set a P4.644-trillion revenue collection target, while spending is set at P6.182 trillion. Next year’s budget deficit ceiling is set at P1.537 trillion, equivalent to 5.3% of GDP.

The NG borrows from both foreign and domestic lenders to fund its budget deficit as it spends more than its revenues.

“With such liberal economic assumptions and limited actual revenues, it is almost a certainty that the government will undertake domestic and foreign borrowing to fund next year’s budget,” Terry L. Ridon, a public investment analyst and convener of think tank InfraWatch PH, said in a Viber message.

As the NG outstanding debt hit a fresh high of P15.35 trillion as of end-May, Mr. Ridon said it is critical for the government to keep a manageable debt-to-GDP ratio.

The NG’s debt as a share of the GDP stood at 60.2% as of the end of the first quarter. The government is targeting a 60.3% debt-to-GDP ratio by yearend, slightly above the 60% threshold deemed manageable for developing economies.

CASH SWEEP
Meanwhile, a provision in the 2024 budget authorizing the government to do cash sweeps of unutilized funds from government-owned and -controlled corporations (GOCCs) will not be included in the 2025 budget proposal, Mr. Recto said.

The insertion of the provision was at the behest of Congress, he added, noting that the clause is justifiable as money parked at GOCCs could be used to fund projects that could spur the economy.

“We just followed the instruction of Congress,” he said in Filipino. “The instruction is with merit because the money left sleeping in GOCCs could be used to grow the economy and create more jobs.”

Remittances by GOCCs to the government should be strictly limited to “unused and idle” funds so they may still perform its mandates, said Mr. Paduano.

According to Ms. Suzara, letting the government sweep unused GOCC funds should not be continued as it could lead to corruption.

PRIORITIES
As for the priorities in next year’s budget, the government has allocated at least a trillion for the funding of education and infrastructure agencies in next year’s budget, according to Mr. Recto.

“More or less… It’s about one trillion [each] for education and infrastructure,” he said.

Aside from increasing funding, there is also a need to improve resource utilization in the education sector to enhance the quality of Philippine education, said Ms. Magsino.

“Benchmarking against targets and comparison with other countries’ indicators show that there are significant gaps in the provision of school infrastructure in the Philippines, including instructional materials, water, school sanitation and hygiene facilities,” she said.

“We also emphasize that Philippine expenditure on education as a percentage of national GDP is not as high as our neighboring countries,” she added.

The Philippines only allocated 3.6% of its GDP to education in 2022 according to World Bank data, below the 4-6% benchmark set by the Incheon Declaration.

The Department of Education should involve teachers in assessing issues hounding schools to come up with holistic solutions, Jose Enrique A. Africa, executive director of think tank IBON Foundation, said in a Viber message.

On infrastructure, the government should continue funding “secondary and farm-to-market roads” to spur economic growth in provinces, said Mr. Ridon.

Banks maintain lending standards in 2nd quarter

PHILIPPINE BANKS continued to maintain tighter credit standards in the second quarter, a Bangko Sentral ng Pilipinas (BSP) survey showed.

The BSP’s latest Senior Bank Loan Officers’ Survey (SLOS) published late on Friday showed most respondent banks maintained their lending standards for both enterprises and households, based on the modal approach.

Based on the diffusion index (DI), the study showed there was a net tightening of credit standards imposed for businesses, while lending standards were unchanged for households in the April-June period.

By using the modal approach, the results of the survey are analyzed by looking at the option (tightening, easing, or unchanged) with the highest share of responses.

Under the DI approach, a positive DI for credit standards indicates that the number of banks that have tightened their credit standards exceeds those that eased (net tightening), while a negative DI indicates the opposite (net easing). Unchanged means the number of banks that have tightened is equal to those that eased their credit standards. 

“Most survey participants (87%) retained credit standards for businesses based on the modal approach. The share of banks that reported unchanged credit standards in Q2 2024 was slightly higher than in Q1 2024 (86.3%),” the central bank said.

The BSP said the net tightening of credit standards in the second quarter was also due to the “deterioration of borrowers’ profiles and profitability of banks’ portfolios.”

Meanwhile, more banks likewise maintained their credit standards for household loans in the second quarter (84.2%) versus the previous quarter (77.1%).

The BSP attributed this to “stable profiles of borrowers and banks’ unchanged tolerance for risk.”

For the next quarter, banks are expected to keep their lending standards for businesses generally unchanged.

“However, DI results showed banks’ anticipation of a net tightening in credit standards given the deterioration in borrowers’ profiles and in the profitability and liquidity of banks’ portfolios,” the BSP said.

Meanwhile, most bank respondents also expect unchanged household loan standards.

“The DI method revealed banks’ expectations of a net easing of lending standards due to banks’ higher risk tolerance and improvement in the profitability of banks’ loan portfolios as well as a less uncertain economic outlook.”

LOAN DEMAND
Based on the DI approach, loan demand from businesses grew in the second quarter due to “increased inventory and accounts receivable financing needs, as well as an improvement in economic outlook.”

For the third quarter, banks see “broadly steady” loan demand from enterprises.

“DI results showed that bank participants anticipate a net rise in credit demand from businesses in Q3 2024 given firms’ higher inventory and accounts receivable financing needs.”

Meanwhile, an increase in loan demand from retail borrowers was seen in the second quarter amid attractive financing terms and a rise in consumption and investment.

“For the next quarter, modal results indicated that most respondent banks (60.5%) anticipate steady demand for loans to households,” the central bank said.

“On one hand, DI results showed an expected net increase in household loan demand driven by rising household consumption and banks’ more attractive lending terms.”

The SLOS is a quarterly survey conducted by the BSP to gather qualitative information on lending conditions and demand from businesses and consumers.

For this round of the SLOS, the BSP sent questions to 60 banks, but only 55 lenders were able to respond. This is equivalent to a response rate of 91.7%. Information was gathered from May 29 to July 10. — Luisa Maria Jacinta C. Jocson

Tourism excellence through property management

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By Jomarc Angelo M. Corpuz, Special Features and Content Writer

The Philippines is known for its beautiful beaches, rich culture, and hospitable citizens. These features have made the country a hot spot for international tourists looking for a tropical paradise. Due to its natural landscape, tourism has become an integral part of the Philippine economy contributing 8.6% to its gross domestic product.

Meanwhile, the real estate market in the Philippines is projected to reach a value of more than $6 trillion in 2024. This is partly due to more Filipinos realizing the value of investing in properties, a surge in demand for affordable housing due to increasing urbanization, and a growing middle class.

Converging these two important sectors is an emerging industry called property management that benefits not only Filipinos looking to make a profit on their real estate investments but also tourists searching for accommodation during their stay in the country.

Property managers provide daily supervision of residential, commercial, or industrial real estate by a third-party contractor. Working for the owners of these investments, they manage and screen potential tenants, maintain their properties, as well as market and advertise to possible lessees.

In an email interview with BusinessWorld, Filipino hospitality group Discovery Hospitality’s Senior Vice-President and Head of Sales and Operations Lynette Ermac gave an overview of the present state of tourism-focused property developments in the country.

“Property developments in the Philippines are very promising. Despite the challenges posed by the pandemic, the industry continues to improve. The insights from that experience have provided us with a multitude of inspirations that have prompted new local management companies to develop new hospitality concepts and boutique properties,” she said.

Ms. Ermac also noted that while the influx of these new players benefits the industry and communities by enhancing tourist experiences and building sustainable developments, eventually they may outnumber big names, which can affect international travelers who are less adventurous when it comes to accommodation.

The COVID-19 pandemic adversely affected tourism in the Philippines, ending 11 years of consecutive growth when it broke out, slashing the country’s revenue from the industry by more than 61% from P2.5 trillion in 2019 to barely over P970 billion in 2020. This decline was felt in multiple sectors including property management and its effects are seen in the industry to this day.

“The property management industry has demonstrated resilience and innovation by adapting services to meet the diverse needs of tourists. For Discovery Hospitality, we have always curated experiences that would be of interest to our guests, and the recent global challenge has only encouraged us to reinforce this through digital transformation, strengthened personalized experiences, and diversified immersive travel offerings,” Ms. Ermac said.

Another way that Discovery Hospitality has adapted to the pandemic is by pivoting its organization to various allied businesses and shared services such as analytics, industry insights, and its celebrated thought leadership to help investors build life-changing brands.

Ms. Ermac also mentioned that government policies and regulations have helped shape the tourism property development landscape in the country.

“Quality and sustainable development have been fostered by initiatives such as the Tourism Infrastructure and Enterprise Zone Authority (TIEZA) and the Department of Tourism’s accreditation standards. Both have guaranteed the safety and quality of our local tourism products, thereby bolstering the country’s tourism credibility,” she said.

Despite these initiatives, Ms. Ermac also stated areas of improvement where local governments and other agencies can help propagate the growth of the property management industry.

“There is a challenge with different local government units having different policies and fees that could affect the progression of these developments. Streamlining systems like new development processes, green building policies, and improving infrastructure connectivity in less accessible tourist destinations could also further develop the industry,” she said.

With a portfolio of properties in Boracay, Palawan, Samal, Makati, and Ortigas, Discovery Hospitality’s group of hotels and resorts provides authentic experiences unique to the destination and balances preserving local culture and catering to international tourists.

“As a Filipino homegrown brand, it is our purpose to be the iconic symbol of Filipino hospitality and to be a key player in the industry globally. With this comes the balance of preserving local culture at our core. In all of our products and experiences, we make sure to incorporate and highlight local traditions, craftsmanship, and cuisine to foster authentic connections with the community,” Ms. Ermac said.

She also assured potential clients that their developments are woven together with the cultural and environmental context of each destination by cultivating relationships with local communities and stakeholders. Ms. Ermac also emphasized the importance of their staff, whom she recognized as ambassadors of the local way of life.

The company’s developments have more than just given tourists a comfortable stay in their destinations; they have also provided employment opportunities, stimulated local economies, and helped promote infrastructure development in the area.

“At Discovery Hospitality, ensuring the development of our communities is part of our corporate values. All of our actions and business decisions, from supporting local businesses to conducting training and development programs, and participating in community service initiatives contribute to the responsible and inclusive growth of the region,” Ms. Ermac said.

Aside from the local community, Discovery Hospitality is mindful of the environment as well. Eco-friendly actions such as single-use plastic consumption, constructing a desalination plant for alternative water supply, and protecting the marine sanctuary through various initiatives were taken by the company to preserve local communities’ homes and the surrounding nature reserve.

With the country offering an abundance of beautiful and vibrant cultures for exploration, there is cause for optimism about the future of tourism-focused property developments in the Philippines. In this regard, Ms. Ermac shared some of the challenges and opportunities that await the industry.

“There are numerous opportunities ahead that we can seize to showcase our renowned Filipino hospitality. The challenge is to ensure that every development prioritizes environmental sustainability at all times, thereby preserving our customs, traditions, and the beauty of these destinations. In addition, we can simplify local government unit policies to improve business efficiency and facilitate the ease of implementing activities that improve the overall tourism experience,” she expressed.

Driven by the country’s beauty and its constantly growing real estate segment, property management in the Philippines presents a promising avenue for growth in local communities and the economy in general. As the new industry continues to expand, both the tourism and real estate sectors are poised to thrive and contribute to the nation’s economic and cultural vitality.

Pushing sustainability goals forward through CSR

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With mounting global pressures, there is a growing need to adopt a more sustainable and responsible path to development. Today, many businesses are working towards being more socially responsible towards the environment, as well as helping and developing communities.

The business sector is among those at the forefront of addressing sustainable development, in response to calls to apply socially responsible practices in their operations. Among various means, corporate social responsibility (CSR), is one of the tools businesses use to fulfill its social, environmental, and economic responsibilities. Through CSR, businesses are increasing awareness, targeting eco-conscious markets, and helping achieve sustainable development goals (SDGs) towards addressing global issues such as hunger, health gaps, and climate change. There are various ways for companies to practice CSR. Some well-known initiatives include reducing carbon footprints, volunteering to communities, innovating eco-friendly products, and practicing socially responsible investing.

With the future of the planet at stake, it is clear that establishing sustainable businesses is more important than ever to create a long-lasting and meaningful impact for future generations. The United Nations’ SDGs, for example, sets a road map that leads to the building of a better and more sustainable world for people to live in.

These SDGs are crafted with a wide range of targets aimed to be achieved by 2030, in hopes of ensuring a better future for the planet. These provide the business sector the means to harness their influence in contributing to global goals.

While the Philippines saw substantial economic growth and resilience in the face of a complex global economic landscape, it encountered difficulties in making significant advancements towards achieving SDGs.

According to the most recent Sustainable Development Report, the Philippines moved up to 92nd place out of 167 countries, placing sixth among ASEAN countries in attaining SDGs.

The report showed the Philippines is on track in meeting targets related to no poverty (SDG 1); zero hunger (SDG 2); decent work and economic growth (SDG 8); industry, innovation, and infrastructure (SDG 9); reduced inequalities (SDG 10); life below water (SDG 14); life on land (SDG 15); and partnerships for goals (SDG 17).

Meanwhile, the country’s targets on good health and well-being (SDG 3); quality education (SDG 4); gender equality (SDG 5); clean water and sanitation (SDG 6); affordable and clean energy (SDG 7); sustainable cities and communities (SDG 11); and achieving peace, justice, and strong institutions (SDG 16), show slow progress.

Initiatives towards sustainability

In recent years, unmindful mass production of products is one of the leading causes of environmental problems, leading to significant threats felt by many countries globally. Recognizing this, many companies have opted to go sustainable to reduce environmental footprint and negative impact to communities.

unsplash / Markus Spiske

For instance, One Meralco Foundation (OMF), the CSR arm of Meralco, has continuously provided quality and reliable electricity to the Filipino people. Through its electrification program, OMF has extended energy access to low-income households and off-grid communities. As per its 2023 annual report, Meralco has powered 5,751 low-income households, reaching a total of 75,715 low-income households since it started. Additionally, the program has effectively used solar power to electrify 300 remote public schools, enhancing their access to various multimedia learning tools and other technologies in the provinces of Palawan and Mindanao.

The SM Group also sets a remarkable example of CSR in action. Through its Green Movement, it has focused on making everyday living sustainable. SM Green Finds, a key program within this movement, offers a variety of eco-friendly products made from natural ingredients and crafted by local artisans. Another program under this movement is The Tarp Project, an initiative with local artisanal fashion brand Zarah Juan, that repurposes used tarpaulins and transforms them into stylish bags and pouches. Aiming to provide quality and equal access to education, SM Foundation’s Page for Progress, a book donation program in partnership with Phoenix Publishing House, provided students with the necessary educational materials, specifically books for the academic year. Previously, the program has already donated P15 million worth of books to various local schools; and this year, they will be donating 3,000 books in Pampanga.

Also joining the lead on CSR initiatives, Ayala Foundation has focused on further elevating the lives of Filipino families by fulfilling their basic needs. The ProFuture Project, a digital education program, is one of its initiatives that aims to improve the quality of education in vulnerable communities. This involves providing digital devices, modules, and other digital learning tools suited for students and teachers. To date, the program has reached 126 schools and helped 19,580 students and teachers since its establishment in 2017.

Investing in sustainability

Looking ahead, the surge in sustainability investments shows a positive sign. A report by Capgemini Research Institute, cited by the World Economic Forum (WEF) in an article published on its website, showed that the number of executives globally who recognized the importance of sustainability for businesses has tripled in the last two years. In addition, 52% of executives have stated their intention to up their sustainability investments in 2024, a big jump from 33% recorded the previous year. This presents a growing opportunity to create value and spearhead the sustainability movement forward.

“It is good news that the private sector is fully grasping its responsibility to contribute to the transition towards a more sustainable economy and that it understands it is the only way to create sustainable value,” Cyril Garcia, head of Sustainability Services and Corporate Responsibility at Capgemini, wrote in the WEF’s website.

Mr. Garcia highlighted that businesses need to set the groundwork for sustainable transformation, focusing on areas where they can make the biggest impact. These areas include harnessing climate technologies (e.g., renewables, low-carbon hydrogen, electric vehicles, etc.), adopting circular economy practices, and improving their capabilities on reporting emissions.

“It’s understandable, as these emissions are not within the company’s direct control, but they also tend to be far greater than the organization’s own emissions. It is paramount to ensure the company has internal and/or external resources to track them and ensure they go down properly,” Mr. Garcia said. — Angela Kiara S. Brillantes

Resurgence in the hospitality segment of real estate

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The Philippines welcomed 5,450,557 international visitors in 2023, surpassing the Department of Tourism’s (DoT) target of 4.8 million by approximately 650,000 visitors.

Domestic tourism expenditure also saw a remarkable increase of 72.3%, rising from P1.55 trillion in 2022 to P2.67 trillion. According to Tourism Secretary Christina Garcia-Frasco, there is a growing trend among Filipinos to explore and travel within their own country, driven by a heightened interest in local and “lesser-known” destinations.

The achievements in both international and domestic tourism have had a positive ripple effect on the hospitality and real estate sector. According to a report by Colliers, hotel occupancies and average daily rates (ADRs) have seen significant boosts as a result of the increased tourist influx.

In fact, the number of international arrivals in the second half of 2023 reached 5.45 million. Meanwhile, the average hotel occupancies in Metro Manila reached 65% in the second half of 2023, up from 61% in the first half, attributed to holiday-induced spending and a surge in foreign arrivals in the fourth quarter of 2023.

Colliers stated that four-star hotels posted the fastest average daily rate (ADR) increase in the second half of 2023. Five-star hotels continued to see year-on-year (YoY) growth due to sustained demand for leisure and in-person corporate events.

Furthermore, a notable improvement in occupancy rates is seen in 2023 due to increased holiday spending and the sustained demand for in-person events. The end of 2023 saw occupancy rates at 65%, with an ADR of US$80.

On the other hand, the Philippine tourism and hotel market is estimated to be worth US$2.75 billion by the end of 2024, according to the forecast of Mordor Intelligence. This figure is expected to reach US$3.37 billion by 2029, growing at a compound annual growth rate (CAGR) of 4.15% during the forecast period.

Similarly, Colliers projected average hotel occupancy to reach 68% by the end of 2024, anticipating more international tourists despite substantial new hotel room completions in the capital region. Projections indicate 7.7 million arrivals for the full year 2024 and an annual average of 8.1 million arrivals from 2024 to 2026.

By the end of 2024, the occupancy rates are expected to rise this year to 68%, with ADRs reaching US$85. This upward trend is projected to continue, with annual average growth leading to an ADR of US$102 and an occupancy rate of 70% by the end of 2028.

The growth in average daily rate and occupancy rates is primarily driven by leisure demand, as foreign arrivals approach pre-COVID-19 levels. The report also noted that ADRs grew by 10.4% in 2023, expected to sustain growth with a 5.1% increase by the end of the second half of 2023 and a 6.0% year-over-year increase by the end of 2024.

In addition, the outlook for 2024 forecasted a record-high new supply of hotel rooms, with the Bay Area accounting for nearly half of this expansion.

Specifically, 1,797 rooms were completed in the second half of 2023, and a substantial 5,100 rooms are projected to be completed in 2024. From 2024 to 2026, an annual average of 2,300 rooms is expected to be added to the market.

The significant increase in supply is expected to cater to the growing demand, ensuring that the hospitality sector can accommodate the influx of tourists and business travelers. Colliers reported that the surge in foreign visitors is anticipated to further elevate hotel occupancies and ADRs, contributing to a vibrant and dynamic hospitality market.

Opportunities

Post-pandemic recovery has transitioned into a period of growth because of the increasing occupancies and daily rates. The sector is now focused on sustaining these gains and drawing further interest from stakeholders, including local and foreign travelers, hotel developers, and operators.

According to Colliers, corporate events, property exhibits, product launches, and summits are essential for driving hotel occupancies. Such events are primarily hosted in hotels’ meeting rooms and exhibition centers.

Therefore, hotel operators are recommended to capitalize on the return of these in-person events by offering attractive packages to corporate clients. For instance, collaborating with the DoT, which is actively enticing international organizations to hold their events in the Philippines, can further boost this segment. Especially, the Philippines’ positioning as a key MICE (meetings, incentives, conferences, and exhibitions) destination in Asia is expected to result in a surge of international MICE events, particularly in Metro Manila, Clark, Cebu, and Davao.

Moreover, hotel operators should collaborate with the government to attract more tourists, likely to increase hotel stays and leisure-related expenditures.

The “Build, Better More” initiative by the government, on the other hand, offers significant opportunities for property firms to expand their leisure foothold. The improvement of road networks and airports leading to tourist spots will further enhance the accessibility of these areas. Developers with land near major airports and mass transit systems should consider developing new hotels and complementing them with MICE facilities. — Mhicole A. Moral

Technology’s role in the future of property management in the Philippines

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Property management as an industry thrives in developing economies like the Philippines with robust real estate markets, stable legal frameworks and regulatory oversight, and an environment ripe for turning assets into thriving investments.

Metro Manila’s decentralization and the rise of emerging cities in the provinces are spurring the industry to life. As the urbanization of provinces accelerates and real estate markets expand to those outside the capital, the demand for professional property management also rises.

Property managers — whose tasks encompass a gamut of services from the oversight and administration of daily property operations to maintaining property quality through consistent upkeep and repairs — are necessary to ensure the efficient utilization and maintenance of real estate assets, especially for property investors.

The property management industry brings structure and expertise to managing residential, commercial, and mixed-use properties, ensuring they meet modern standards of safety, sustainability, and tenant satisfaction. In a developing economy, where resources need to be maximized, effective property management can even considerably enhance the appeal and functionality of real estate, attracting investments and contributing to economic stability and growth.

It is an especially remarkable period for the industry, as the country’s onward march towards economic growth and urban development coincides with transformative breakthroughs in technology. Machine learning (ML) and artificial intelligence (AI), for instance, are at the forefront, offering unprecedented capabilities to predict and manage various aspects of property management.

Advanced property management software today utilizes big data to monitor property performance, finances, and tenant behaviors, enabling managers to identify key performance indicators and address weak areas. Meanwhile, sustainability is another critical trend reshaping the industry, as property managers increasingly focus on reducing the carbon footprint of their assets by optimizing energy consumption, improving waste management, and incorporating renewable energy resources.

In fact, many local governments across the nation are utilizing technology to improve their cities. In April, the Baguio City government said it is implementing a technology-enabled initiative titled “Project MINERVA (Monitoring of Indicators for Efficient Redevelopment and Value Assessment)” to address urban decay and promote smart city development.

“With the project’s ultimate goal of driving predictions and monitoring models for air quality, water quality, urban mobility, and tourism management, we’re able to use technology to advance our goal of becoming a truly smart city by 2027,” Baguio City Mayor Benjamin B. Magalong said.

Other cities are also turning towards the smart city route. There are the emerging hot spots, like Cebu, Davao, Bacolod, and Iloilo. Early this year, smart city developer Iveda launched a $5-million venture to execute several contracts over the next 12 months to bring smart technologies to these cities. The initiative will build on their existing work in the country and roll out AI-enabled technologies to modernize key infrastructure, such as airports, roads and sidewalks, leveraging AI tools to enhance public safety and city management.

There are also others like the City of Victorias in Negros Occidental, for another example, which announced a digital road map for the implementation of a smart city master plan merging technology and government in partnership with data science and artificial intelligence company Aboitiz Data Innovation (ADI).

Technology is revolutionizing the real estate sector as a whole; and property managers, by embracing these technological trends, can stay competitive in an industry that is poised for growth and meet the ever-evolving needs of urban living. — Bjorn Biel M. Beltran

Future Filipino business leaders to compete in FedEx/JA International Trade Challenge Regional Finals

Federal Express Corp. (FedEx), one of the world’s largest express transportation companies, announced the six winners of the 2024 FedEx/Junior Achievement International Trade Challenge (FedEx/JA ITC) Philippines Finals. The winners will advance to the FedEx/JA ITC Asia, Middle East, and Africa (AMEA) regional competition to be held in August 2024.

For the past four years, FedEx has been working with Junior Achievement (JA) Philippines to foster the growth and development of Filipino youth. Through the International Trade Challenge program, FedEx and JA provide students with team activities and tailor-made workshops focused on global trade, paving the way for their future success as leaders of commerce.

From over 800 students from different schools across the country, Team Maibago, composed of Rysa Sumalinog and Kate Bacasmas from University of San Jose Recoletos, won the grand prize at the FedEx/JA ITC Local Finals with its innovative AquaCon water tracker. This droplet-shaped device alerts users when they exceed recommended water usage during washing or showering, effectively addressing Australia’s water conservation challenges.

Team ReDrip, represented by Jhazzen Lourdes Mikylle A. Mateo and Marianne De Silva from St. Scholastica’s College Manila, secured second place with its ReDrip water filtration device, which filters household wastewater and rainwater for reuse in activities like gardening.

Team Aquarun, consisting of Geonnie Nicole S. Cadiz and Yzella Amor S. Tepace from Beaconhouse Angels In Heaven School Inc., ranked in the top three with Aquarun mobile game dedicated to water delivery.

The Regional Finals will mark a return to an in-person event for the first time since the pandemic in Singapore this August. The Filipino winners will have the opportunity to collaborate and compete with students from Hong Kong, India, Indonesia, Japan, Korea, Malaysia, Singapore, Thailand, and Vietnam. This format offers Filipino students a unique opportunity for collaborative brainstorming, exchanging of ideas and insights, and engaging in constructive discussions with peers hailing from a rich tapestry of cultures from across the region.

This year, the students were challenged to develop a market entry strategy targeting Australia for a product centered around water conservation. This project is timely and relevant as extreme heat has impacted Australian ecosystems and infrastructure.

“This year’s challenge saw a strong display of creativity, critical thinking, and problem-solving from our young participants who have used what they learned from the ITC local workshops to devise innovative solutions and solve real-world challenges,” said Maribeth Espinosa, managing director of FedEx Philippines. “We look forward to the positive impact these students will bring to the local community as they blossom into the next generation of entrepreneurs that will contribute to the economic growth and prosperity of the Philippines.”

Since 2009, more than 8,000 Filipino students have participated in the FedEx/JA ITC competition, with 78 students representing the country in the regional finals.

Founders Launchpad unveils second cohort of high-potential startups

Startup accelerator Founders Launchpad (FL) unveils its second cohort, featuring five promising startups. With their impressive early achievements, the FL team is eager to support their journey forward.

FL’s Cohort 2 is comprised of: Motorento, a logistics startup that is revolutionizing fleet management for two-wheelers in the Philippines; Clout Kitchen, a platform helping top creators monetize their IP through AI-powered gaming solutions; Dehusk, which creates coconut-based milk alternatives for the local market; OneLot, a fintech startup offering collateralized car loans and software tools for used car dealers; and Skyway Airlines, another logistics startup which operates a dedicated cargo airline in the Philippines to improve supply chain efficiency across the archipelago.

Offering more than just funding, FL’s 14-people team is working closely with the cohort to help them accelerate operations and navigate their space effectively.

“We are thrilled to welcome our second cohort of startups. At Founders Launchpad, our commitment goes beyond providing funding. Our team works tirelessly alongside the founders, dedicating extensive effort to increase the chance of success for each venture. We are eager to work with the next batch of startups,” said Simon Bauer, co-founder of Founders Launchpad.

FL provides not just venture capital but also a wide range of support to early-stage companies. This includes hands-on help with fund raising, operations, marketing, sales, legal counsel, and technical development. FL also offers tailored workshops, mentorship, and networking opportunities to help startups grow and overcome the challenges they may face.

Moreover, FL is building a team that acts as an extension of each startup team. It operates in a high-paced environment where founders can build together, work together, and learn from one another in its coworking and community space.

Not just nails

KISS imPRESS False Eyelashes and Press-on Nails

NAILS may not be the top priority when it comes to one’s morning routine, but for the brand Kiss, present in all of America’s major stores (Ulta, Walmart, Target; name it), nails have put an edge on the industry.

James Park, Kiss Senior Vice-President for Nail Division and Senior Vice-President and General Manager for Kiss International Business Division, in an event in Makati on July 16, told us about the results of market research they did back in 2011. According to him, the market for nail polish was five times greater than for “fashion” (read: press-on) nails. “This year, we surpassed nail polish.”

Kiss was born in 1989 as a nail salon started by John Y. Chang, Sung Yong Chang, and Won Shik Kang in Flushing, Queens (home of The Nanny’s Fran Fine).

Kiss represents the Asian-American immigration story: in the 1970s, after the end of the Vietnam War, actress Tippi Hedren flew in her personal manicurist to train Asian women to do nails after a visit to a refugee camp. Korean immigrants started to dominate the industry in the 1980s. In a study called “Nail File: A Study of Nail Salon Workers and Industry in the United States” by the UCLA Labor Center and California Healthy Nail Salon Collaborative (Sharma, P., Waheed, S., Nguyen, V., Stepick L., Orellana, R., Katz, L., Kim, S. Lapira, K. 2018), it cites that there were over 2,000 Korean-owned nail salons in the New York metropolitan area.

As for Kiss, by 1992, they had begun to sell their nail products in Walgreens stores, hitting the mainstream.

“The nail salons are run by a lot of the Koreans, and now you see a lot of the Vietnamese doing it in the USA. Not just in LA, but in New York as well,” said Mr. Park. He called himself a “1.5-generation” immigrant, meaning he came to America as a young person (his parents form a full first generation). “I was able to study and build a career. The first generation, they really didn’t have that opportunity. So they end up doing something skill-set [based].

“We see a lot of the women now — I see my mom, worked. The first generation, they had to work. I see a lot of young people working as well. They’re professionals. They’re no longer homemakers. By us providing this type of product, they could continue to maintain beauty,” he said.

As for the name, Mr. Park said, “I asked the same question about 30 years ago,” he said. “How perfect the name is. Nobody will forget. And it’s red,” he said, referring to their logo.

During the July 16 event, stations were set up to show off the brand’s line of false nails, lashes, and hairstyling products. The brand holds something like 300 patents.

“I always tell my team this: don’t think about what you want; think about what your customer wants,” said Mr. Park on their innovations.

“We’re constantly thinking about little minor things… we have to work with the plastic. We have to work with the mold, to make sure it fits people perfectly.” As an example, he cited one of their products, designed to mimic the look of French manicures (natural-colored nails with the signature white tip). He said that the tip used to be painted on. “We created tool injection” in which the white plastic was merged with beige or pink plastic in a machine, forming one nail. “So it doesn’t chip,” explained Mr. Park.

The company is over 35 years old, and is available in over 100 countries in the world. “Longevity is innovation. And passion,” said Mr. Park.

“I tell the team: you’ve got to love what you’re doing,” he said. And this, he thinks, is the reason why the products fit so well in the Philippines. “A lot of the women here, I see, are very passionate.”

iFace is the official distributor of KISS products here in the Philippines, with the products sold in Watsons. — Joseph L. Garcia

Expected rate cuts, earnings brighten Ghost Month outlook

BW FILE PHOTO

By Revin Mikhael D. Ochave, Reporter

DESPITE August’s historical reputation as the weakest month for the stock market, some analysts are bullish, driven by anticipated rate cuts and strong second-quarter profit projections.

“Historically speaking, August is the worst month for the stock market. The stock market posted negative month-on-month returns for the month of August in 13 out of the past 20 years. This is typically a broad-based decline, meaning almost all the sectors are affected,” AP Securities, Inc. Research Head Alfred Benjamin R. Garcia told BusinessWorld in a Viber message.

“However, we’re a bit more optimistic this year, with rate cuts on the horizon and good earnings outlook for the second-quarter reports due to come out in early August,” he added.

Ghost Month, which typically falls in August, originates from an ancient Chinese belief that the gates of hell open, allowing ghosts to return to the living world.

This year, Ghost Month, the seventh month in the Chinese lunar calendar, runs from Aug. 4 to Sept. 2.

In light of this, Mr. Garcia advised investors to consider any market declines in August as a ‘buying opportunity.”

“Historically speaking, in 13 out of the past 20 years, stock market returns from September to December has been positive,” he said.

Finance Secretary Ralph G. Recto said last week that the Philippines is on track for a rate cut this year, as inflation slowed to 3.7% in June. The Bangko Sentral ng Pilipinas (BSP) has kept interest rates steady at 6.5% in its last six meetings.

BSP Governor Eli M. Remolona, Jr. has indicated that a rate cut is likely at the Monetary Board’s August 15 meeting.

Rastine Mackie D. Mercado, research director at China Bank Securities Corp., noted that since 1998, August has typically shown weak month-on-month price performance, with both average and median returns just under 2%, and over 65% of Augusts recording month-on-month losses.

“It’s also worthy to note that around 65% of Julys over the same period also posted positive month-on-month returns, which may offer some insight that August may be a month which typically sees profit taking,” he added.

Despite this, Mr. Mercado said it is better to focus on the catalysts that will drive the market in the near term.

“Given that the month-to-date return for July is at around 4.7%, we think that this coming August may be a month where we’ll see profit-taking. If the index stages a consolidation, then we think that a successful test of the 6,550 support could present some redeployment opportunities,” he noted.

“With respect to specific sector performance, we think that the upcoming earnings season will be a key driver in price action,” he added.

For the rest of the year, Mr. Mercado said the prospect of a rate cut will drive the local equity market.

“However, the key to sustaining the uptrend would be an expansion in earnings expectations,” he added.

Mark V. Santarina, Senior Trader at Globalinks Securities and Stocks, Inc., is also optimistic about the market’s outlook for September, aligning with the anticipated rate cuts.

“August presents a good opportunity to accumulate blue-chip stocks as the PSEi is likely to trade sideways,” he said in a Viber message.

Meanwhile, Michael L. Ricafort, Chief Economist at Rizal Commercial Banking Corp., said in a separate Viber message that the market slowdown in August coincides with bad weather and the vacation season in Northern Hemisphere countries such as the United States.

“Any slowdown in trading, economic, business activities is not only due to Ghost Month, but it is also a factor,” he said.

PSE’s Investor Day to highlight key updates from 14 publicly listed companies

The lobby of the Philippine Stock Exchange in Taguig City, Sept. 30, 2020. — REUTERS

The Philippine Stock Exchange (PSE) will host a three-day Investor Day program for publicly listed companies (PLCs) to discuss their first-half financial performance and projects.

The market operator will host the PSE STAR: Investor Day from Aug. 14 to 16, which will be attended by 14 PLCs. These companies will present their short- to mid-term strategies and other corporate developments.

“The return to a three-day schedule speaks of the keen interest of stakeholders involved in this program. PLCs want to share company updates to a wider audience so they join PSE STAR,” PSE President and Chief Executive Officer Ramon S. Monzon said in an e-mailed statement over the weekend.

“Fund managers, equities analysts, and investors, on the other hand, get the latest information and appreciate that they can ask questions directly to the heads of the companies,” he added.

The PLCs participating in the three-day event are ACEN Corp., AREIT, Inc., BDO Unibank, Inc., Cebu Landmasters, Inc., DigiPlus Interactive Corp., D.M. Wenceslao & Associates, Inc., East West Banking Corp., and Global Ferronickel Holdings, Inc. Other companies joining the program include GT Capital Holdings, Inc., MacroAsia Corp., Megawide Construction Corp., Philippine Business Bank, PLDT Inc., and Semirara Mining and Power Corp.

PSE STAR is co-hosted by Bloomberg LP, with partners Fund Managers Association of the Philippines and the Trust Officers Association of the Philippines.

The PSE STAR portal provides additional information on companies through the Spotlight write-up that contains details on the PLCs. The portal also has recorded briefings of PLCs that participated in previous editions of PSE STAR. Bloomberg analysts will also discuss their outlook on the economy and select sectors. — Revin Mikhael D. Ochave

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