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Manila Hotel Market Update November 2013

Manila’s gaming push aiming to induce tourism demand 4.2 million international visitors recorded in 2012 “Manila’s tourism market is taking a decided turn away from a vanilla offering to boost visitor numbers. Over the past 18 months, there was an influx of Korean and Chinese visitors into the Philippines. The country has a competitive advantage over others in South East Asia in terms of its location, approximately 1.5 - 3 hours from major cities in China. Last year it recorded it’s highest growth ever. As Russian tourists arrived in the first Russian charter flight to Manila, which launched in October. Viewing the trend of Russian visitors in other regional leisure markets, the potential to tap into mass tourism remains strong. The South East Asian casino dreamscape is setting up a battle between established gaming giants and independent operators in a high stakes contest of win or lose. Meanwhile the growth by the gaming industry in Metro Manila has fueled the building of hotel rooms.

Gaming Revenue Trend Key Casino Operators Billion US$ 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 2006 2007 2008 Gaming Revenue

% 80 60 40 20 0 2009 2010 2011 Annual Growth

2012

-20

Source: PAGCOR and Resort World Manila Annual Reports, and C9 Hotelworks Market Research

By 2017 the Manila hotel supply is anticipated to add over 6,000 keys into the market, approximately one-third of the existing keys. Given the fact that tourist arrivals to the country are still at a low compared to its peers such as Thailand and Malaysia, the current focus is on generating more demand. Looking forward there is upbeat momentum for future development in the tourism industry in Metro Manila.” Bill Barnett, Managing Director, C9 Hotelworks

Market Trend

Forward Outlook

• In the first eight months of 2013, the Philippines

• A substantial rise of the gaming industry in

• There was a total of 37 million passengers through

• Total revenue generated from casino businesses is

• 36% of total international travelers are first time

• Hotel supply is expected to grow at 38% over the

welcomed over 3 million international visitors with Korean, American and Japanese visitors being lead contributors. Ninoy Aquino International Airport (NAIA) in 2012, a growth of 12% over 2011. visitors to the country.

Manila is anticipated over the next three years which will be a leading engine of economic growth for the Philippines. forecasted to top US$3 billion in 2015, an average of 32% growth year on year. existing supply in the next four years.


TOURISM Airline Indicators • Passengers through Ninoy Aquino International Airport (NAIA) grew at a compound annual growth rate (CAGR) of 12% between 2006 and 2012. • In 2009, domestic passengers dramatically grew at 25% year on year and surpassed the international sector for the first time. In the last year, domestic and international visitors recorded at 20.5 and 16.7 million passengers, a 10% and 7% growth over 2011, respectively.

International vs. Domestic Passengers at NAIA Number of Passengers

%

25,000,000

30 25

20,000,000

In 2012, domestic sector comprised 55% of total traffic through NAIA vs. 45% in 2006

20

15,000,000

15 10,000,000

10

5,000,000

5 2006

2007

2008

2009

2010

2011

2012

No. of International Passengers

No. of Domestic Passengers

Annual International Growth

Annual Domestic Growth

Source: Manila International Airport Authority and C9 Hotelworks Market Research

Tourism Indicators • Total international visitors to the Philippines registered at 4.2 million in 2012, a 9% growth vs. 2011. An upward trend has continued in 2013. For the year to date figures up to August this year, the number of international travelers grew at 11% over the same period versus 2012. • Top five source markets consisted of Korea (26%), U.S.A (14%), Japan (9%), China (9%) and Australia (4%). Two key growth markets, China and Korea, recorded a year on year increase at 61% and 22%, respectively. • Manila ranked as the top tourism destination in the Philippines. In 2012, its arrivals accounted for 73% of total international visitors to the country.

International Visitors to the Philippines

Top 5 Sources Markets

Number of Visitors

%

Number of Visitors

%

4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000

20

900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000

30

15 10 5 0

25 20 15 10 5

-5 2009

2010

No. of Visitors

2011

YTD YTD Aug 2012 Aug 2013 Annual Growth 2012

Source: Ministry of Tourism and C9 Hotelworks Market Research

2

C9 2013 Hotel Market Update: November 2013

Korea

USA

YTD Aug 2012

Japan

China

YTD Aug 2013

Taiwan Annual Growth

Source: Ministry of Tourism and C9 Hotelworks Market Research


HOTEL MARKET Existing Supply By Tier 5% 29%

56%

Luxury

10%

Upscale

2012 vs. 2011 Number of Rooms

%

10,000

20

8,000

15

6,000

10

4,000

5

2,000

0

Midscale

-5 Luxury

Budget and Economy

Upscale

2011 No. of Rooms Source: Ministry of Tourism and C9 Hotelworks Market Research

Midscale

2012 No. of Rooms

Budget and Economy Annual Growth

Source: Ministry of Tourism and C9 Hotelworks Market Research

Gaming industry spurred supply growth in upscale hotel tier

Luxury hotels comprise the largest segment in Manila

Hotel Performance • For the first three quarters of 2013, market-wide occupancy registered at 67% vs. 72% in the same period last year. Average room rates increased by 4%, recorded at US$135. The resulting RevPAR slightly decreased by 2% to US$91.

Overall Performance Trend US$

%

Performance by Tier US$

%

250

100

250

100

200

80

200

80

150

60

150

60

100

40

100

40

50

20

50

20

2011

2012

Average Room Rate

YTD Sep 2012 YTD Sep 2013 RevPAR

Occupancy

Source: STR Global and C9 Hotelworks Market Research

Upscale & Midscale

Luxury & Upper Upscale YTD Sep 2012 ADR YTD Sep 2012 Occupancy

YTD Sep 2013 ADR YTD Sep 2013 Occupancy

Source: STR Global and C9 Hotelworks Market Research

Luxury and Upscale Hotel Openings • A total of 6,030 keys are expected to enter into the market between 2014 and 2017. 60% of total pipeline will be added in the Manila Bay area, followed by Pasay City with 18%. Hotel Name

Location

Rooms

Solaire Resort & Casino Manila (extension) City of Dreams Manila Manila Bay Resort Conrad Manila Westin Manila Bayshore Marco Polo Ortigas Manila Grand Hyatt Manila Shangri-La at The Fort Maxims Tower (extension) Manila Marriott Hotel (extension) Hilton Manila Sheraton Manila Hotel

Manila Bay Manila Bay Manila Bay Manila Bay Manila Bay Ortigas Bonifacio Bonifacio Pasay City Pasay City Pasay City Pasay City

300 920 1460 352 600 313 440 577 170 228 320 350

Opening Period Oct 2014 2014 2015 Aug 2016 Q3 2016 Q1 2014 Jun 2015 Q4 2015 2014 Q4 2015 Jan 2017 Q1 2017

Source: C9 Hotelworks Market Research

C9 2013 Hotel Market Update: November 2013

3


About C9 Hotelworks C9 Hotelworks is an internationally recognized consulting firm with extensive experience in the Asia Pacific region. Its core business focus includes: Hotel and Resort Development Asset Management / Ownership Representation Project Feasibility and Analysis Key competencies include international hotel operator search, selection and contract negotiation, mixed use hotel and residential planning and operation reviews.

Bill Barnett Managing Director

A wide range of both institutional and private developers and a comprehensive portfolio of completed projects give C9 the skill set and background to focus on key issues, evaluate complex ones and assist clients in achieving solid results. Based in Phuket, Thailand and led by Managing Director Bill Barnett, who has 28 years of experience in Asia PaciďŹ c, the ďŹ rm is well positioned to serve an increasingly demanding marketplace.

The Source for all Hotel and Real Estate News www.thephuketinsider.com

C9 Hotelworks Company Limited 9 Lagoon Road, Cherngtalay, Thalang, Phuket, 83110, Thailand (Office located at the entrance of Laguna Phuket) T: +66 (0)76 271 535 F: +66 (0)76 271 536 www.c9hotelworks.com info@c9hotelworks.com


Manila Hotel Market Update November 2013