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Tourism surge seen to offset wage hike impact on NCR hotels

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By Aubrey Rose A. Inosante

HOTEL OWNERS in the National Capital Region (NCR) are bracing for higher operational costs from a P35 daily minimum wage hike, but some analysts said tourism in the Philippines could offset the impact.

“Labor covers a huge chunk of hotels’ operating expenses, but there are offsetting factors,” said Colliers Philippines Research Director Joey Roi Bondoc in a phone interview with BusinessWorld.

“Foreign tourists might still find Philippine rates relatively cheaper given the weakening peso,” he added.

Last year, average daily rates (ADRs) exceeded Colliers’ forecast with a 10.4% increase, driven by robust demand for business and leisure (bleisure) accommodations, notably in four-star hotels. Five-star hotels also saw growth, supported by steady leisure and corporate event demand, Colliers said.

Colliers anticipates a 6% rise in ADRs for this year, tempered slightly by the substantial completion of new rooms.

The Department of Tourism has said that tourist arrivals in the Philippines reached 1,227,815 as of March 5, marking a 22.86% increase compared to the 999,390 arrivals during the same period in 2023. The department hopes to attract 7.7 million international tourists this year.

Mr. Bondoc said that domestic travelers might perceive hotels’ average daily rates as more expensive.

“But the only offsetting factor for domestic tourists is that if you look at consumers in the top segments, Filipinos are still willing to spend on travel, transportation, hotels, and restaurants,” he added.

The Philippine Statistics Authority has reported that in 2023, Filipinos spent mostly on hotels and restaurants at 19.3%, transportation at 17.1%, and recreation and culture at 16%.

“Whether or not the daily wage hike will translate to higher hotel rates will be a business decision that each establishment has to make,” Philippine Hotel Owners Association Executive Director Benito C. Bengzon, Jr. said.

On July 1, the Tripartite Wages and Productivity Board (RTWPB) approved a P35 minimum wage hike for workers in the NCR, which will take effect on July 17.

Employees in the hospitality sector receive extra benefits in addition to their wages, according to Greg De Garriz, president of the Association of Human Resources Managers in the Hospitality Industry Philippines.

These include complimentary meals, uniforms, service charges, and other incentives, he said.

He described the current state of the tourism and hospitality industry as “generally more bullish,” especially with new hotels and tourism sites opening nationwide.

Meanwhile, Jose “Sonny” G. Matula, president of the Federation of Free Workers, criticized the wage hike as “grossly insufficient” in light of Metro Manila’s high cost of living.

He said the increase is inadequate to dissuade workers from seeking higher-paying jobs abroad, which offer significantly better compensation than local opportunities.

“The general working conditions and pay for hotel workers in the Philippines are challenging. Workers often face long hours, insufficient wages, and inadequate benefits,” Mr. Matula said.

He noted that the recent protest by Sofitel workers underscored concerns about job security and labor practices, issues that were addressed in a settlement agreement.

“However, workers in Sofitel have higher pay than ordinary workers in hotels as Sofitel workers have unions that have CBA (collective bargaining agreement) with their management,” he added.

Mr. Matula suggested measures aimed at enhancing the quality of life for hotel workers. These include ensuring equitable distribution of service charges among all workers, regardless of their employment status (regular, contractual, or provided by cooperative or manpower agencies).

He also proposed implementing living wage policies, providing comprehensive benefits, ensuring job security, enforcing labor regulations, fostering career progression, enhancing workplace health and safety standards, and involving workers in decision-making processes.