Executive Summary

Visitor arrivals at a record-high in 2004

The Philippines is expected to receive almost three million visitor arrivals in 2004, with a 35%increase from the number of visitors received in 2003. Approximately 8% of visitors are Filipinospermanently residing abroad. Called balikbayans, these proved a steady source of incoming touristsin the country throughout the review period.

Visitors from the US comprise more than 20% of total visitors, the highest share from any countryin 2004. Other major countries in terms of arrivals to the Philippines include other Asiancountries, notably Japan and South Korea. Visitor arrivals from South Korea increased by more than200% during the review period. Despite travel warnings issued against the Philippines by countriessuch as Australia and New Zealand, visitors from these countries continue to flock.

The expansion of business process outsourcing and call centres in the Philippines in 2004 alsocontributed to the increasing number of visitor arrivals. Many of these businesses are managed byexpatriates who receive regular visits from friends and relatives throughout the year.

Philippines WOW foreigners and locals alike

WOW Philippines, the cornerstone program of the Department of Tourism, is proving to besuccessful in attracting visitors to the country. Advertisements shown on international channelssuch as CNN are getting good reviews, showcasing scenic spots, the people and the culture of thePhilippines. These not only entice foreign visitors but also encourage domestic tourism.

Domestic tourism is also expected to reach a record high in 2004. More than 10 million Filipinosare estimated to travel round the country in 2004. Domestic tourism is a major element in thegovernments tourism program, as it provides a more consistent source of tourism spending. Tourismspending in 2004 is estimated at over Ps150 million, as a result of increased spending from bothincoming tourists and domestic tourists.

Tourism gets a boost from key infrastructure projects

Problems with the infrastructure result in long-term major hindrances for travel and tourism inthe country. With a fresh mandate given to President Gloria Macapagal-Arroyo in 2004, infrastructureprojects involving airports, expressways, inter-island transport and even the currently almostnon-existent railway system are part of the 10-point development agenda for the presidency until2010. Travel and tourism will surely benefit, as airports nationwide are being constructed orrenovated to accommodate larger planes and more people. This will not only decongest Metro Manilabut will be more convenient for incoming visitors whose final destinations are outside Metro Manila.

Beyond air, improvements to the national road system connecting major tourism hubs willfacilitate land travel, with land being favoured when visiting domestic destinations. Sea travel,which is significantly cheaper than travelling by air, benefited from the Strong Republic NauticalHighway (RO-RO), which was launched by the government in 2003. Primarily established to facilitatetransport of goods, passenger traffic also increased due to RO-RO, as more modern vessels wereintroduced and more seaports opened.

The Northrail project was meanwhile given the go ahead in 2004, which will rehabilitate thenational railway system. Although this will have no impact on transport during the review period, itis expected to make a significant contribution towards the latter part of the forecast period.

Local airlines go international

Local air carriers began launching or expanding their international flights towards the end ofthe review period. Philippine Airlines (PAL) added more direct flights to US cities, as it openedits Manila-Las Vegas route in the middle of 2004. Cebu Air Inc with Cebu Pacific also added newroutes to mainland China during the same year in its bid to capitalise on the growing number ofChinese tourists. Not to be outdone, even the smaller airlines such as South East Asian Airlines andAsian Spirit added short-haul flights to other Asian destinations such as Malaysia as well.

In addition, the local air carriers are adding direct international flights to cities outsideManila. PAL inaugurated its maiden flight from Seoul to Palawan during the middle of 2004. LaoagInternational Airport in Ilocos also now receives a steady stream of visitor arrivals directly fromTaiwan and Hong Kong.

Fuel hikes plague transportation but do not dampen travel plans

Due to rising fuel prices due to the US-Iraq conflict, all airlines filed for fare hikes andthese were eventually granted by the government in July 2004. Sea transport providers and buscompanies also increased their prices. However, this did not seem to dampen travel plans around thecountry, as all transportation is expected to increase both value and volume sales in 2004.

Hotels bounce back but resorts grow highest in 2004

Rebounding from a challenging year in 2003, average occupancy rates of hotels are expected toreach between 60-70% in Metro Manila and above 50% in other regions in 2004. This is a significantimprovement as Metro Manila hotels posted less than 60% average occupancy in 2003, while someregions in the country had less than 40% average occupancy in 2003. Estimated current value growthfor hotels in 2004 is above 22% over the previous year.

Resorts, however, is expected to post the highest current value growth in 2004 at above 23% overthe previous year. Not only do resorts outnumber hotels but resorts are found in various beachdestinations nationwide, which are the most popular tourist spots. Resorts with various levels ofservice, ranging from basic to luxurious, are able to address foreign and local tourists needs andpreferences in travel accommodation.

Car rental to remain depressed in 2004

The situation is not as rosy in car rental compared to other travel and tourism during the reviewperiod. Constant value CAGR from 1999 to 2004 is expected to be negative and volume CAGR to be lessthan half a percentage points. Although current value growth in 2004 is expected to be highestcompared to the rest of the review period, this is primarily due to price increases.

Rationalised number of outlets benefit travel retail

There are expected to be fewer travel retail outlets in 2004 compared to 1999. Many travelagencies closed many of their branches during the review period and maintained offices only in keytourist areas. This proved beneficial to players, who now are more likely to focus on certain typesof holidays and are able to provide a more personalised service to domestic tourists, who stillprefer to deal face-to-face with a travel agent rather than purely rely on the information from theinternet. Tour operators and travel agents are increasingly working together, focusing on what theydo best rather than doing all things themselves. Travel retail is estimated at more than Ps2 billionin sales 2004.

Casinos and theme/amusement parks provide the highest value sales in tourist attractions

National parks and other areas of natural beauty remain the biggest attraction of the Philippinesand are the most visited of all tourist attractions. However in terms of value sales, they do notcontributed as much, since most charge very minimal entrance fees with some not charging at all.

Value sales from tourist attractions are estimated at more than Ps21 billion in 2004, growing bymore than 8% from 2003. Casinos is the top earner and is expected to account for more than 96% ofsales in 2004. Casinos in the country are regulated by Philippine Amusement and Gaming Corp (PAGCOR),a government corporation, which is one of the largest sources of funds for various governmentprojects in infrastructure and economic development, which in turn also promote tourism.Theme/amusement parks is expected to have the highest current value growth of more than 24% in 2004.The popularity of theme/amusement parks is due primarily to its family orientation, which attractsmany domestic tourists.

Internet transactions still not widely used by locals

Internet transactions still contribute a very small percentage in total value sales across traveland tourism. In travel retail the internet has the most impact, with 0.3% contribution to valuesales in 2004.

Philippine Airlines Inc (PAL) and Cebu Air Inc (Cebu Pacific) started their e-ticketingfacilities for selected local and international flights towards the end of the review period. CebuPacific, which started this in late-2003, admitted that response was lukewarm and introduced bookingand ticketing via the SMS facility of mobile phones in July 2004. In the meantime PAL startede-ticketing in May 2004. It is still too early to tell whether internet transactions or mobile phonetransactions will prove to be more successful as an alternative to conventional booking andticketing outlets.

Industry momentum to be sustained during the forecast period

Visitor arrivals will register a CAGR of almost 4% during the forecast period but domestictourists will grow more aggressively with a double-digit CAGR during the forecast period. By the endof 2009, almost 18 billion Filipinos are expected to travel around the country. Departures ofFilipinos to destinations abroad will have a slightly above 2% CAGR during the forecast period asmore local residents will prefer to go on holiday within the country. This travel pattern willcontribute to an improving balance of payments during the forecast period. A positive balance ofpayments was attained in 2004 and is expected to continue during the forecast period.

The aggressive outlook in terms of visitors and domestic tourists during the forecast period willsurely be good news to many. All travel and tourism except for car rental and tourist attractionswill see value sales grow by more than 40% from 2004 to 2009. Car rental will have a total growth ofless than 10% but will achieve positive constant CAGR during the forecast period compared to itsnegative performance during the review period. Tourist attractions will see its constant value salesgrow by over 20% during the forecast period bolstered by the performance of casinos andtheme/amusement parks.

1. EXECUTIVE SUMMARY

2. OPERATING ENVIRONMENT

2.1 GDP

• Table 1 GDP 1999-2004

2.2 Disposable Income

• Table 2 Disposable Income 1999-2004

2.3 Leisure Expenditure

• Table 3 Consumer Expenditure on Leisure 1999-2004

3. INDUSTRY ISSUES

3.1 Political and Legislative Environment

3.2 Terrorism and Security

3.3 Sustainable Tourism

3.4 Health Issues

3.5 Positive Growth Factors

• Summary 1 Positive Growth Factors

3.6 Negative Growth Factors

• Summary 2 Negative Growth Factors

4. DEMAND FACTORS

4.1 Leave Entitlement

• Table 4 Paid Holiday and Public Holidays 2004

4.2 Holiday Taking

• Table 5 Levels of Holiday Taking 1999-2004

16. Demographics

• Table 6 Holiday Taking by Demographic Groupings 1999-2004

17. Length of Trip

• Table 7 Holiday Taking by Length of Trip 1999-2004

18. Seasonality

• Table 8 Month in which Holidays Are Taken 2004

5. TOURISM PARAMETERS

5.1 Incoming Tourism Receipts

• Table 10 Incoming Tourism Receipts % Growth: 2000-2004
• Table 9 Incoming Tourism Receipts: 1999-2004

5.2 Outgoing Tourism Expenditure

• Table 11 Outgoing Tourism Expenditure: 1999-2004
• Table 12 Outgoing Tourism Expenditure % Growth: 2000-2004

5.3 Balance of Tourism Payments

• Table 13 Balance of Tourism Payments: Value 1999-2004

23. Number of Arrivals

• Table 14 Total Arrivals: 1999-2004

24. Mode of Transport

• Table 15 Arrivals by Mode of Transport: 1999-2004
• Table 16 Arrivals by Mode of Transport: % Breakdown 1999-2004

25. Purpose of Visit

• Table 17 Arrivals by Purpose of Visit: 1999-2004
• Table 18 Arrivals by Purpose of Visit: % Breakdown 1999-2004

26. Country of Origin

• Table 19 Arrivals by Country of Origin: 1999-2004
• Table 20 Arrivals by Country of Origin: % Breakdown 1999-2004

27. Per Capita Expenditure

• Table 21 Per Capita Expenditure per Arrival: 1999-2004

28. Number of Departures

• Table 22 Total Departures: 1999-2004

29. Mode of Transport

• Table 23 Departures by Mode of Transport: 1999-2004
• Table 24 Departures by Mode of Transport: % Breakdown 1999-2004

30. Purpose of Visit

• Table 25 Departures by Purpose of Visit: 1999-2004
• Table 26 Departures by Purpose of Visit: % Breakdown 1999-2004

31. Destination

• Table 27 Departures by Destination: 1999-2004
• Table 28 Departures by Destination: % Breakdown 1999-2004

32. Per Capita Expenditure

• Table 29 Per Capita Expenditure per Departure: 1999-2004

33. Number of Trips and Expenditure

• Table 30 Total Number of Domestic Trips: 1999-2004
• Table 31 Domestic Tourist Expenditure: 1999-2004

34. Trips by Mode of Transport

• Table 32 Domestic Trips by Mode of Transport: 1999-2004
• Table 33 Domestic Trips by Mode of Transport: % Breakdown 1999-2004

35. Trips by Destination

• Table 34 Domestic Trips by Destination 1999-2004
• Table 35 Domestic Trips by Destination: % Analysis 1999-2004

36. Per Capita Expenditure

• Table 36 Per Capita Expenditure Per Domestic Trip 1999-2004

5.18 Tourism Spending

• Table 37 Spending on Tourism 1999-2004
• Table 38 Spending on Tourism: % Breakdown 1999-2004

38. Method of Payment

• Table 39 Method of Payment for Tourism Spending: % Breakdown 2003

6. TRAVEL ACCOMMODATION

6.1 Market Size

• Table 40 Travel Accommodation Market 1999-2004
• Table 41 Travel Accommodation Market: % Growth 1999-2004

6.2 Sales by Sector

• Table 42 Travel Accommodation Value Sales by Sector: Value 1999-2004
• Table 43 Travel Accommodation Value Sales by Sector: % Value Breakdown 1999-2004

6.3 Outlets by Sector

• Table 44 Travel Accommodation Outlets by Sector: Units 1999-2004
• Table 45 Travel Accommodation Outlets by Sector: % Volume Breakdown 1999-2004

6.4 Hotels by Region

• Table 46 Hotels, Rooms and Beds by Region 2003

6.5 Hotels by Star Ratings

• Table 47 Number of Star Rated Hotels by Region 2003

6.6 Hotels by Ownership

• Table 48 Hotel Sales by Independent vs Chained Outlets: Value 1999-2004

6.7 Internet Transaction Trends

• Table 49 Travel Accommodation Internet Transactions Sales: Internet Transaction Value 1999-2004

47. Mergers and Acquisitions

• Summary 3 List of Mergers and Acquisitions 2002-2004

48. Revenue Rankings

• Table 50 Key Players by Revenue 2003/2004

49. Market Share

• Table 51 Hotel Companies by Market Share 2001-2004

50. RevPAR

• Table 52 Key Hotel Players by RevPAR 2003/2004

6.12 Forecast Sales by Sector

• Table 53 Forecast Travel Accommodation Sales by Sector: Value 2004-2009

6.13 Forecast Outlets by Sector

• Table 54 Forecast Travel Accommodation Outlets by Sector: Units 2004-2009

7. TRANSPORTATION

7.1 Market Size

• Table 55 Transportation Market 1999-2004
• Table 56 Transportation Market: % Growth 2000-2004

7.2 Sales by Sector

• Table 57 Transportation Sales by Sector: Value 1999-2004
• Table 58 Transportation Sales by Sector: % Value Breakdown 1999-2004

7.3 Airline Capacity and Utilisation

• Table 59 Airline Capacity by Type 1999-2004
• Table 60 Airline Utilisation by Type 1999-2004
• Table 61 Airline Utilisation by Type: % Breakdown 1999-2004

7.4 Airline Sales by Seat Class

• Table 62 Airline Volume Sales by Seat Class 1999-2004
• Table 63 Airline Volume Sales by Seat Class: % Breakdown 1999-2004

7.5 Airline Sales by Distance

• Table 64 Airline Volume Sales by Distance: % Breakdown 1999-2004

7.6 Internet Transaction Trends

• Table 65 Transportation Sales: Internet Transaction Value 1999-2004

7.7 Emerging Products

61. Mergers and Acquisitions

• Summary 4 List of Mergers and Acquisitions 2002-2004

62. Revenue Rankings

• Table 66 Key Players by Revenue 2003/2004

63. Passengers Carried

• Table 67 Key Players by Numbers of Passengers Carried 2003/2004

64. Market Share

• Table 68 Airline Companies by Market Share 2001-2004

7.12 Forecast Sales by Sector

• Table 69 Forecast Transportation Sales by Sector: Value 2004-2009

8. CAR RENTAL

8.1 Market Size

• Table 70 Car Rental Market: 1999-2004
• Table 71 Car Rental Market % Growth: 1999-2004

8.2 Fleet Size and Number of Operators

• Table 72 Structure of Car Rental Market 1999-2004

8.3 Sales by Sector and Location

• Table 73 Car Rental Sales by Sector and Location: Value 1999-2004
• Table 74 Car Rental Sales by Sector and Location: % Value Breakdown 1999-2004
• Table 75 Car Rental Average Duration by Sector 1999/2004
• Table 76 Average Car Rental Duration: % Breakdown 1999/2004

8.4 Time of Booking

• Table 77 Time of Booking: % Breakdown 2004

8.5 Internet Transaction Trends

8.6 Emerging Products

73. Revenue Rankings

• Table 78 Key Players by Revenue 2003/2004

74. Fleet Size

• Table 79 Key Players by Size of Fleet 2001-2004

75. Average Daily Rate

• Table 80 Key Players by Average Daily Rate for Car Hire 2003

76. Market Share

• Table 81 Key Players by Market Share 2001-2004

8.11 Forecast Sales by Sector and Fleet Size

• Table 82 Forecast Car Rental Sales by Sector: Value 2004-2009
• Table 83 Forecast Car Rental Fleet Size 2004-2009

9. TRAVEL RETAIL

9.1 Market Size

• Table 84 Travel Retail Market: 1999-2004
• Table 85 Travel Retail Sales % Growth: 2000-2004

9.2 Outlets by Sector

• Table 86 Travel Retail Outlets by Sector: Units 1999-2004
• Table 87 Travel Retail Outlets by Sector: % Volume Breakdown 1999-2004

81. Services

• Table 88 Travel Agency Value Sales by Service: % Breakdown 1999-2004

82. Type of Holiday and Destinations

• Table 89 Travel Agency Value Sales by Type of Holiday: % Breakdown 1999-2004
• Table 90 Travel Agency Value Sales by Destination: % Breakdown 1999-2004

83. Exchange Services

• Table 91 Travel Agencies Offering Exchange Services 1999-2004

84. Source of Sale

• Table 92 Tour Operator Value Sales by Source of Sale: % Breakdown 1999-2004

85. Type of Holiday and Destinations

• Table 93 Tour Operator Value Sales by Type of Holiday: % Breakdown 1999-2004
• Table 94 Tour Operator Value Sales by Destination: % Breakdown 1999-2004

86. Sales by Outlet and Type

• Table 95 Exchange Service Value Sales by Outlet: % Breakdown 2003
• Table 96 Exchange Services Value Sales by Currency vs Travellers Cheques: % Breakdown 2003

9.9 Online Travel Agencies

• Table 97 Travel Retail Sales: Internet Transaction Value 1999-2004

9.10 Emerging Products

89. Mergers and Acquisitions

• Summary 5 List of Mergers and Acquisitions 2002-2004

90. Revenue and Market Share

• Table 98 Travel Retailers: Revenue Rankings 2003/2004
• Table 99 Travel Agencies: Market Share 2001-2004

91. Revenue and Market Share

• Table 100 Tour Operators: Revenue Rankings 2003/2004
• Table 101 Tour Operators: Market Share 2001-2004

9.14 Forecast Sales and Outlets

• Table 102 Forecast Travel Retail Value Sales: 2004-2009
• Table 103 Forecast Travel Retail Outlets by Sector: Units 2004-2009

10. TOURIST ATTRACTIONS

10.1 Market Size

• Table 104 Tourist Attractions Market: 1999-2004
• Table 105 Tourist Attractions Market % Growth: 1999-2004

10.2 Sales by Sector

• Table 106 Tourist Attractions Sales by Sector: Value 1999-2004
• Table 107 Tourist Attractions Sales by Sector: % Value Breakdown 1999-2004

10.3 Visitors by Sector

• Table 108 Tourist Attractions Visitors by Sector: 1999-2004
• Table 109 Tourist Attractions Visitors by Sector: % Breakdown 1999-2004

10.4 Emerging Products

98. Visits

• Table 110 Major Tourist Attractions by Visitors 2002-2004

10.6 Forecast Sales and Visitors by Sector

• Table 111 Forecast Tourist Attractions Sales by Sector: Value 2004-2009
• Table 112 Forecast Tourist Attractions Visitors by Sector: 2004-2009

11. KEY STRATEGIC ALLIANCES

11.1 Trends

• Summary 6 Key Strategic Alliances 2000-2004

12. GROWTH COMPANY PROFILES

12.1 Cebu Air

• Summary 7 Cebu Air Inc: Key Facts
• Summary 8 Cebu Air Inc: Summary of Key Events 1999-2004
• Table 113 Cebu Air Inc: Financial Summary 1999-2004

12.2 Waterfront Philippines

• Summary 9 Waterfront Philippines, Inc: Key Facts
• Summary 10 Waterfront Philippines, Inc: Summary of Key Events 2002-2004
• Table 114 Waterfront Philippines Inc: Financial Summary 1999-2004

12.3 Aboitiz Transport System Corp

• Summary 11 Aboitiz Transport System Corp: Key Facts
• Summary 12 Aboitiz Transport Systems Corp: Summary of Key Events 1999-2004
• Table 115 Aboitiz Transport Systems Corp: Financial Summary 1999-2004

12.4 Star Parks Corp

• Summary 13 Star Parks Corp: Key Facts
• Summary 14 Star Parks Corp: Summary of Key Events 2003-2004

12.5 Philtranco Service Enterprise

• Summary 15 Philtranco Service Enterprise Inc: Key Facts
• Summary 16 Philtranco Service Enterprise Inc: Summary of Key Events 1999-2004
• Table 116 Philtranco Service Enterprise Inc: Financial Summary 1999-2004

13. FUTURE OUTLOOK

13.1 Market Opportunities

• Summary 17 Opportunities for Growth and Investment

13.2 Tourism Receipts and Expenditure

• Table 117 Forecast Incoming Tourism Receipts: 2004-2009
• Table 118 Forecast Outgoing Tourism Expenditure: 2004-2009
• Table 119 Forecast Domestic Tourism Expenditure 2004-2009

13.3 Balance of Payments

• Table 120 Forecast Balance of Tourism Payments: Value 2004-2009

13.4 Number of Arrivals

• Table 121 Forecast Visitor Arrivals: 2004-2009

13.5 Number of Departures

• Table 122 Forecast Visitor Departures: 2004-2009

13.6 Travel and Tourism Markets

• Table 123 Forecast Sales by Travel and Tourism Markets: Value 2004-2009

13.7 Developments in Internet Transaction Sales

• Table 124 Forecast Sales in Travel and Tourism Markets: Internet Transaction Value 2004-2009

14. DEFINITIONS