Philippines tourism set back by Boracay closure but long-term outlook is bright

The upcoming six-month closure of Borocay island, the most popular tourist destination in the Philippines, will likely have a negative short term but positive long-term impact on the Philippines tourism industry.


Highlights

  • Boracay island is closing for six months in a bold move by the Philippines government to clean up the resort island;
  • Boracay is the most popular tourist destination in the Philippines with about 1 million local and 1 million overseas visitors per year;
  • The Philippines is promoting alternative tourist destinations in attempt to offset the impact of the Boracay closure;
  • However, growth in visitor numbers to the Philippines will almost certainly slow in 2018, ending a string of three years of double digit growth.

Visitors will not be able to access Boracay for six months from 26-April-2018 as a part of an unprecedented government initiative to clean up the island. Boracay has experienced rapid growth over the last several years, which has been a boom to the local economy but with severe environmental consequences.

When Boracay reopens in late Oct-2018 it should be in a better position to attract tourists over the long term and continue its growth trajectory. However, the short-term impact on the local economy, which relies almost entirely on tourism, will be significant.

Boracay would have received approximately 1 million visitors during the six-month closure period. Boracay attracted about 2 million visitors in 2017, including about 1 million visitors from overseas.

Boracay’s gaining popularity overseas has helped drive 11% growth in total visitor numbers to the Philippines for three consecutive years. In 2017, visitor numbers were up 11% to 6.6 million.

Philippine tourism authorities were initially expecting another year of strong growth in 2018, projecting a 12% increase to 7.4 million visitors. The six-month closure of Boracay will make it nearly impossible to reach this target and could make it hard to even match the 6.6 million from 2017.

Tourism authorities are trying to promote alternative destinations. The Philippines has several emerging tourist destinations and offers several beach destinations which are more pristine than Boracay. However, Boracay’s nightlife and large portfolio of resorts is unmatched.

Alternative destinations are becoming more accessible over the next couple of weeks as all three of the main Philippine carriers shift capacity from Boracay to other markets. For example, Philippine Airlines (PAL) has shifted two South Korea routes from Kalibo, the international airport serving Boracay, to Puerto Princesa on Palawan.

Puerto Princesa Airport opened a new international terminal in 2017 but the airport currently only has one regular international flight – a weekly service from Taipei, operated by PAL. The new PAL services from Busan and Seoul will be a boom for Palawan tourism and could be followed by other new international routes. Palawan and other alternative destinations have a golden opportunity to accelerate growth and benefit from Boracay’s closure.

AirAsia is adding three China routes from Cebu as it suspends its international routes at Kalibo. Cebu is the second largest city in the Philippines and a popular gateway due to the proximity of several popular tourist destinations such as Bohol.

AirAsia, Philippine Airlines and Cebu Pacific are also adding flights on several domestic routes from Manila, providing more capacity to a wide range of tourist destinations. The additional flights replace most of the flights these airlines have been operating from Manila to Kalibo and Caticlan, a domestic airport that is closer to Boracay than Kalibo.

Each airline is operating a very limited schedule at Kalibo and Caticlan – one or two domestic flights per day to cater to local residents – during the Boracay closure period. All international flights from Kalibo from the three local airlines and the eight foreign airlines serving the market have been suspended for at least six months.

For more on the impact of Boracay’s closure on airlines see this report from CAPA: Boracay Island to close: major airline and tourism impacts

While Kalibo had several direct international flights, primarily to North Asia, a majority of tourists heading to Boracay now arrive via domestic connections. For example, all visitors from Australia and New Zealand, both of which are growing source markets for the Philippines tourism industry, fly into Manila as there are no direct flights from Australia or New Zealand to other Philippine destinations.

These visitors have plenty of options once they land in Manila. The fact that approximately 85% of visitors to the Philippines last year did not visit Boracay illustrate the diversity of what the Philippines offers tourists. However, inevitably some of the tourists that were planning on holidaying in Boracay will make plans to instead travel to top beach destinations in other Asian countries such as Bali and Phuket.

There will undoubtedly be a short-term impact on tourism in the Philippines. However, if the government succeeds at cleaning up Boracay the tourism industry will bounce back and resume double digit growth in 2019.