The tourism industry is among the strong drivers of the economy. Before the onset of the Wuhan virus, tourism accounted for 12.7% of gross national product (GDP) or roughly $46.5 million worth of goods and services. Its hefty contribution to the economy was achieved on the back of 8.2 million foreign visitors and more than 120 million domestic travelers.
Unfortunately, tourism is one of the industries most severely affected by the pandemic. Statistics from the Department of Finance show that revenues of tourism-related establishments plunged by a whopping 81.9% during the peak summer season. Recovery will be low and slow until a vaccine is made available.
In the first few weeks of the pandemic, the Department of Tourism (DoT), under the baton of Secretary Berna Romulo-Puyat, responded quickly to mitigate the effects on tourism-related establishments. Lifeline measures were extended to those affected including the deferment of corporate income tax payments, deferment of contributions to the SSS, PhilHealth, and PagIbig, a payment moratorium for DoT accreditation fees, and waivers on participation fees for international trade shows. The DoT also assisted its stakeholders in obtaining wage subsidies from the Department of Labor and Employment.
Now that we transition to the new normal, the DoT faces a whole new set of challenges. For starters, it must minimize cases of insolvencies among tourism stakeholders. Secondly, it must formulate new business plans to lead the industry towards recovery. Third and most importantly, it must re-establish confidence among local and foreign tourists to travel in and around the Philippines. The DoT has put together its Tourism Response and Recovery Plan (TRRP) to meet these challenges.
The lion’s share of funding for the TRRP will come from appropriations embedded in the ARISE PH Law (otherwise known as the Accelerated Recovery and Investments Stimulus for the Economy of the Philippine Law). The law was approved by Congress on third reading on June 4 for which P58 billion was made accessible to the DoT to support tourism enterprises.
The P58-billion fund will enable the DoT to grant, through the Development Bank of the Philippines and Land Bank, five-year interest-free loans and/or loan guarantees to tourism stakeholders. The loans can be used for a variety of purposes. Among them is to upgrade rooms and back-of-the-house facilities to be compliant with new safety standards, for marketing and promotions purposes, for staff re-training, for digitization of operations, for improvement of emergency response and other programs meant to mitigate the effect of the pandemic.
In addition, the Board of Investments is offering a three-year income tax holiday and duty-free importation of capital goods for hotels, resorts, and banquet halls (that cater to meetings, conferences, and expositions) that need to renovate their facilities. This turns a capital expense into an investment, or a pre-paid tax.
As mentioned earlier, the recovery of the industry will be low and slow. It will come in waves, says Ms. Romulo-Puyat. The first wave will be characterized by short road-trips by locals to nearby tourist destinations. Tourism will be intra-municipality or intra-province in this phase. This is where we are at the moment.
The second wave will come once the hysteria over the pandemic has subsided and commercial flights become available (and affordable) again. In this phase, local tourists will venture further to the hotspots they love and miss like Boracay, Palawan, and Siargao.
The third wave will be the return of foreign tourists. Travel corridors will play an important part in jumpstarting international travel. A travel corridor is established when two governments forge mutual agreements on safety protocols and vouch for the safety of particular cities. For example, Seoul and Cebu can establish a travel corridor (some refer to it as a travel bubble) in which residents from both cities can travel to the other without restrictions and with relative ease.
The Philippines enjoys two distinct advantages. The fact that we are an archipelago makes it less problematic to enforce stricter safety protocols per island. It is also easier to contain the spread of the virus in case of an outbreak. The second advantage is that the Philippines now has 12 operational international airports. Tourists can land within one or two transfers from their final destination and get tested only once.
This, among other reasons, is why Forbes magazine named the Philippines among the seven countries with the potential to become a major tourist destination in the post-COVID-19 world. If we play our cards right, the industry can emerge stronger than it was before.
As we move forward, we can expect drastic changes in tourist behavior and preferences. The sooner our industry adapts to these preferences, the quicker the recovery will be. Health and safety considerations will be the primary consideration for selecting a destination and the hotels and restaurants therein. Hence, local government units that depend on tourism revenues better step up their safety protocols and make it known that indeed, their localities are safe. The same is true for the tourism-related establishments. A certification from the DoT would do wonders for this.
Tourists will depend on digital platforms to secure information on the safety of a place as well as bookings and general transactions. This is why it is vital for tourism establishments to digitize their operations.
In terms of preferences, tourists will prefer destinations with low densities but with high value and high experiential impact.
It’s going to be rough sailing ahead for the tourism industry. The good thing is that all the countries that we are in competition with are going through the same thing.
The name of the game, at this point, is to use this downtime as an opportunity to reboot and strengthen all that is weak with our tourism offerings. Now is the time to make our industry more competitive — to offer products that are better and safer than the rest. The TRRP is a step in the right direction. But a lot more has to be done to emerge as the preferred tourist destination in Asia.
Andrew J. Masigan is an economist