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The future of Philippine tourism

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Business Matters

The future of Philippine tourism

Slowly but surely, the tourism industry is becoming the third growth engine in the service sector, after remittances from overseas Filipino workers and the BPO-IT sector. Tourism Secretary Wanda Teo recently announced that the figures for foreign visitors in the first two months of 2017 show encouraging signs that the target of 7 million foreign tourists for the whole of 2017 is attainable. There were 631,639 foreign arrivals in January, and 579,178 in February, half of them from South Korea and the United States. These figures for the first two months of the year already represent 17.30 percent of the targeted 7 million visitors. That’s the good news.

The not-so-good news is that the Philippines is way behind its neighbors in foreign tourism. In 2016, for example, Thailand attracted 33 million foreign visitors, Malaysia 27 million, Singapore 16 million, Indonesia 12 million, Vietnam 10 million, and the Philippines 6 million. These figures can be found in a detailed report on Philippine tourism issued by the think tank CLSA based in Hong Kong.

In a publication issued last February, titled “Mabuhay! Philippine tourism still full of potential,” analyst Jose-Paolo Fontanilla of CLSA analyzed the Philippine tourism industry and made projections for the next six years. He painted a bright scenario, projecting that international tourist arrivals will grow at 16 percent annually for the next six years so that by 2022 total arrivals will break the 14-million mark.  Foreign exchange receipts by 2022 will account for 3.5 percent of GDP.

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There is an upside in what is called “Dutertenomics”—i.e., if the massive infrastructure projects both by the government and the private sector (public-private partnerships) are actually implemented, the influx of foreign visitors could even be beyond expectations.  Note that a good number of the planned projects involve the privatization of airports in the major tourism destinations like Cebu, Bohol, Palawan, Iloilo, Bacolod, Davao and Cagayan de Oro.

Also contributing to a positive outlook is the rebalancing strategy being followed by the Duterte administration in shifting greater attention to closer relations with our northeast Asian neighbors such as China, South Korea, Japan and Taiwan—potential sources of increased tourism flows into the Philippines.  The CLSA study projects the number of Chinese tourists to the Philippines to pass the 4.5-million mark by 2022, which would still be half of Thailand’s Chinese visitors.  By that time China could account for 32 percent of the Philippines’ tourist arrivals, surpassing South Korea as the Philippines’ top source of tourists, perhaps as early as 2019. In fact, the one-million mark of Chinese tourists to the Philippines may be reached this year. There is a lot of room for growth for tourists from Japan, Singapore, Taiwan and Malaysia, as well as Australia and the United Kingdom.

As a whole, international tourist arrivals can grow at the brisk rate of 16 percent annually (keeping pace with the growth of the BPO-IT sector), compared to only 9 percent during the past six years (2010-2016).    Total arrivals will reach 14 million tourists who will be contributing 3.5 percent to GDP by 2022, up from 2.4 percent in 2016.  Tourism also should include the more than 65 million domestic travelers, as reported in the 2015 Domestic Household Survey conducted by the Philippine Statistical Authority. If domestic tourism is included, the gross value added contributed by the tourism sector is already equivalent to 8.2 percent of GDP as of the latest actual data in 2015.  The CSLA analysis expects this to reach 12.6 percent of GDP by 2022.

Even more important than its contribution to GDP is the employment-generating potential of the tourism sector, especially in the countryside. As of 2015, the tourism sector was estimated to have a total employment of 5.0 million, representing about 12.7 percent of the global workforce in the country. The Duterte administration is targeting to bring this number up to 6.5 million by 2022; this would bring up the rate to 14.4 percent of total employees, which is close to the employment rate of manufacturing today.

 Comments to bernardo.villegas@uap.asia

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TAGS: bernardo m. villegas, BPO-IT, Business Matters, Inquirer Opinion, ofws, Philippine Tourism, Wanda Teo
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