The hotel sector in the Philippines faces a cautious outlook for the second half of the year, with delayed effects of the energy crisis likely to weigh on demand and hotel performance, according to a recent analysis.
While tourism in the first half of the year showed resilience, the month-on-month slowdown in growth rates warrants continued caution for the rest of the year, experts warn.
The lingering effects of international events, such as the Iran crisis, are expected to manifest in the second half of 2026 through a gradual slowdown of international tourist arrival growth, with traveler uncertainty persisting and flight cancellations weighing on arrivals.
The key factors expected to shape the tourism and hotel industry through the remainder of the year are identified as inflation, fuel price uncertainty, the weakening peso, and the return of face-to-face Association of Southeast Asian Nations (ASEAN) meetings.
Inflation projected at 6.4% is expected to leave Filipino travelers with less discretionary income for leisure trips, while elevated fuel costs are likely to keep airfares high and discourage domestic travel.
The weaker peso could make the Philippines more affordable for foreign visitors and boost inbound tourism spending, although it could also raise operators' costs for imported goods and services.
The return of face-to-face ASEAN meetings is expected to provide a targeted boost to international arrivals during the remainder of the year, particularly for hotels and destinations with strong meetings, incentives, conferences, and exhibitions (MICE) capabilities.
Hosting such events could strengthen the Philippines' position as a regional MICE destination, according to experts.
Despite the cautious outlook, Metro Manila's hotel market is expected to remain resilient, supported by MICE activity and domestic tourism.
Occupancy growth is expected to remain modest, while average daily room rates are expected to continue rising due to sustained demand and higher post-pandemic operating costs.
Properties with strong foreign visitor exposure and MICE capacity are best positioned, while budget- to mid-tier hotels that rely on domestic travelers remain the most exposed to current economic pressures.
For context, the Philippines recorded 2.74 million foreign tourist arrivals from January to May, the highest for the comparable period in five years.
Arrivals were driven by stronger visitor numbers from the United States, Japan, Canada, and China, although arrivals from South Korea fell 10% to 501,000 from 554,000 a year earlier.
The continued decline of South Korean arrivals remains a critical concern, as it could weigh on overall arrival growth despite gains from other source markets.
