CEBU and Mactan, two of the country’s most critical tourism gateways, are struggling with soft occupancy and mounting supply, raising concerns among hotel operators and developers.
Leechiu Property Consultants (LPC) reported that Cebu-Mactan’s average hotel occupancy is stuck at 55 percent, well below the 68–72 percent threshold considered sustainable and significantly lower than Bangkok’s 78–79 percent. Average daily rates in the area stand at P5,800, but revenue per available room has slipped to just P3,200.
“Supply is outpacing demand, especially in Cebu. We’ve advised developers to clearly define their demand drivers before building,” said Alfred Lay, director for Hotels, Tourism and Leisure, at LPC during the 2025 Midyear Property Update co-organized by the Hotel, Resort and Restaurant Association and Cebu Chamber of Commerce and Industry at Bai Hotel on Sept. 4, 2025.
He warned that more than 4,000 new rooms across 14–15 properties are set to enter the Cebu-Mactan market within the next two years, potentially intensifying pressure on operators. Lay estimates that Mactan alone will see 2,400 additional rooms, while Cebu City is set to add 1,700 more.
Lay cautioned that the incoming supply could outpace demand in the near term. He emphasized that developers must clearly define demand drivers — such as proximity to office hubs, retail centers, or convention venues — before launching new projects. He added that developers should exercise prudence in expanding capacity, while operators need to sharpen their strategies around demand drivers and source markets.
Cebu as strongest transit point
Despite the weak fundamentals, Cebu retains a strategic advantage as the country’s most efficient transit hub. With Manila’s Ninoy Aquino International Airport operating at capacity, airlines are increasingly routing new long-haul flights—from Australia, Europe, and North America—through Mactan.
“The next four to five years will see Cebu as the country’s strongest transit point, which should translate to more overnight stays and stronger hotel demand,” Lay said.
Nationwide, the Philippine hotel sector is entering a pivotal stage in 2026, as operators contend with modest occupancy, shifting source markets and a surge in new supply. National occupancy averages 60 percent, with Metro Manila performing slightly better at 65 percent but still below its pre-pandemic 72 percent.
The weakness is compounded by sluggish international arrivals.
The Philippines welcomed six million foreign tourists in 2024, still far below the pre-pandemic peak of 8.2 million. LPC expects arrivals to remain flat through 2026, with the absence of Chinese tourists—still down 80 percent from 2019 levels—emerging as the biggest drag. South Korean arrivals, the country’s top market, also fell 19 percent in the first half of 2025.
The bright spots are long-haul markets such as the US, UK, Australia, Canada and Japan, which have posted double-digit growth. South Koreans, meanwhile, remain the biggest spenders at around P18,000 per day, underscoring the importance of diversifying services so hotels capture more of this spending directly.
Domestic travel
Domestic travel continues to act as the industry’s cushion.
As gross domestic product growth is projected at five–six percent in 2026, room nights from Filipino travelers are expected to rise in tandem. Still, destinations like Boracay show how an increased reliance on domestic visitors can cap room rate growth.
The sector is also watching macroeconomic shifts closely. Inflation, which had squeezed margins in 2022 and 2023, has eased below two percent and is projected at three percent in 2026. “It shouldn’t have the same effect on your bottom line as it did in 2022 and 2023,” Lay noted.
Looking ahead, developers are banking on infrastructure projects worth P10 trillion nationwide, new visa policies, and expanded air connectivity — from Seattle to New Delhi — to stimulate demand.
At the same time, hotels are expected to embrace AI-driven personalization, sustainability-focused booking tools, and multilingual virtual staff to stay competitive.
“The hotels that adapt fastest to AI and shifting source markets will win in an increasingly competitive field,” Lay said.
While Cebu-Mactan’s occupancy challenges highlight the sector’s vulnerabilities, industry players are betting on transit connectivity, resilient domestic demand and high-spending long-haul visitors to anchor the Philippine hotel industry’s next growth wave. / KOC