HOTELS in Metro Manila have had to cut their average daily rate (ADR) on rooms by as much as 28 percent during the extreme community quarantines imposed by government to contain the spread of the novel coronavirus.
This was among the findings of real-estate services firm Santos Frank Knight in its Hospitality Sector Update for the second quarter 2020. But the hotels trimmed their ADR discount to an average of 25 percent under general community quarantine (GCQ), “to compensate for the additional costs incurred in complying with the health and safety protocols by the DOT [Department of Tourism].” Other hotels, which reopened only during the GCQ, offered smaller room rate discounts to recover lost revenues.
The company also projects a drop in new hotel rooms to 1,500 by the end of the year, from the original forecast of 2,700 rooms prior to the imposition of community quarantines.
In an e-mailed message, Kash Salvador, the company’s associate director for investment and capital markets, said, “Hospitality and tourism are among the hardest hit sectors in the real-estate industry. Occupancy has dropped drastically over the last couple of months that slumped hotel revenues, and the global tourism market is still far from going back to pre-Covid-19 levels. At this point, some investors are on the lookout for distressed hotels to acquire. It is very important now more than ever that hotel owners and operators adapt and innovate to make use of their real estate in the changing times of today.”
She added, “Local tourism will be the best bet in the industry’s start of recovery. Many of the country’s world-renowned tourist spots are just waiting to be rediscovered and enjoyed by the Filipinos.”
Under the enhanced community quarantine (ECQ) and modified ECQ from March 16 to May 31, overall hotel occupancy plunged by 25 percent, with those continuing to operate posting an average of 58 percent of their rooms. “Some hotels extended additional discounts to BPO [business-process outsourcing] firms on top of corporate rates as a means of attracting more occupants…. Due to high discounts offered, some hotels were reported to operate even at a loss, only doing so out of altruism, especially for their employees and frontliners,” the report said.
Under GCQ, which began on June 1, the situation improved with 60 percent of hotels operating, up from only 43 percent during ECQ-MECQ. Some hotels—Go Hotels, Summit Hotels and Seda Hotels—“repurposed a portion of their facilities to long-stay rooms and work spaces.”
The report noted though, average hotel occupancy declined to 50 percent due to the departure of BPO employees who started working from home, with guests now composed of stranded and repatriated overseas Filipino workers.
The realtor noted that delays in completion dates of new hotels were caused by several factors such as the extended lockdowns, disruptions in the supply chain and new working guidelines in the construction sector. “Moreover, other challenges faced by the hospitality sector during the pandemic such as operational restrictions, travel bans and other uncertainties in the market, have forced some hotel operators to suspend their opening dates indefinitely. Other operators have pushed back their target completion to a later year,” the report said.
Leisure travel, especially by domestic tourists, will likely restart the industry. The report recognizes, though, that this will depend on the quarantine status and travel restrictions imposed by local government units, and “subject to the discretion of the individual travelers” who have to weigh in the risks or safety of traveling for holidays.
“Likewise, demand for business travel will remain uncertain depending on the travel restrictions as well as the financial capabilities of the companies,” the report said. “Recovery will be much slower in areas with stricter quarantine than MGCQ as only those employees from exempted establishments, such as government offices, are allowed to travel. Moreover, processing and securing of documents, such as travel passes, will take significant time and effort.”