The Philippines is a preferred location among foreign investors and one of the top-ranking countries in our yearly Asia Property Index.
With a large and young English-speaking workforce, this nation becomes increasingly interesting among residential and commercial real estate investors alike. Transparent and generous visa regulations further add to the demand.
With that said, the pandemic hit hard on the Philippines. Thousands of new hotel rooms were planned in the coming years, many that might now be postponed.
Hopefully, we will see a rebound when the economic climate starts to get better.
Topics covered in this article:
- Can foreigners buy hotels in the Philippines?
- Process When Setting up a Hotel in the Philippines
- Best Cities for Hotel Investments in the Philippines
Can foreigners buy hotels in the Philippines?
Foreign individuals can get hold of strata-titled residential units in the Philippines, including condominium units.
One of the most notable requirements is that foreigners can own a maximum of 40% of the units in a building. With that said, you cannot buy commercial real estate, including hotels, as an individual.
Instead, you’re left with the following options:
- Establish a foreign company in the Philippines
- Open a local company to buy real estate
Minimum Capital Requirements for Foreign Companies
To establish a foreign company, you have to meet a minimum capital requirement of USD 200,000. For big foreign corporations that invest in hotels it’s generally not an issue.
Opening a local company requires a capital requirement of only PHP 5,000 (around USD 100), which is significantly lower, of course.
The only drawback is that you can only own a maximum of 40% of the shares. The remaining 60% have to be allocated to local Philippine citizens.
This can be resolved through contractual setups to assure that you get majority voting rights.
The key is to work with a credible partner that can help you identify suitable nominees and to draft the contracts.
Process When Setting up a Hotel in the Philippines
Investing in commercial property requires due diligence and is comparatively difficult to residential property.
Below you can find a simple breakdown of the steps involved.
1. Set Up a Local Company
If you decide to purchase the property through a local company, this is your first task on hand. Setting up a company in the Philippines is fairly easy and you first have to verify the company name.
You also have to prepare the necessary documents for the Securities and Exchange Commission (SEC), manage employee registration, and taxes. This typically takes around a month.
There are plenty of company formation agents available in the Philippines, your local partner might also introduce you to one.
2. Environmental Compliance Certificate
The next step is to secure an Environmental Compliance Certificate (ECC). You cannot run a hotel business without this.
The ECC will assure that your business won’t cause any damage to the local environment.
It typically takes one month to receive the ECC and the Department of Environment and Natural Resources and the Environmental Management Bureau will issue the certificate.
To get the ECC, you have to provide information such as:
- A project description
- Affidavit of no complaint
- Environmental impact and management plan
- Photographs of the site (geotagged)
3. Additional Licensing
Keep in mind that you need other licenses when operating a hotel, including everything from an alcohol license to ensure fire safety.
I recommend you check this document which is issued by the Department of Tourism in Manila. It shows the ‘Rules and regulations to govern the accreditation of hotels, tourists inns, motels, apartels, resorts, pension houses, and other accommodation establishments’.
You can see different requirements related to the location, bedroom facilities and furnishing, front office/reception, housekeeping, and more.
You should contact a lawyer earliest possible so that he or she can guide you through the process and list all the requirements needed.
Best Cities for Hotel Investments in the Philippines
The Philippines has 7,641 islands and a population of around 107 million people. Metro Manila accumulates most of the foreign investments.
We’ve seen a tourism boom in the Philippines as it’s set to compete with neighboring countries like Thailand.
Metro Manila has undoubtedly some of the most investments and is predicted to do so in the future.
It’s a metropolitan area that comprises 16 cities:
- The city of Manila
- Quezon City
- Las Piñas
- San Juan
In the past years, major international hotel brands have set up new establishments, The Hilton Manila is one of the latest.
Almost 9,000 rooms were to be completed in hotels and serviced apartments.
On the contrary to resort destinations that attract leisure travelers, Manila receives everything from tourists to business travelers.
Most new hotels will be dedicated to Parañaque City
Parañaque City is one of the fastest-growing and where we will see most of the new hotels in the coming there years.
Makati City has as many as 2,100 rooms in the pipeline, just behind Parañaque City. Some include Mandarin Oriental Manila, Somerset Valery, and Seda Circuit Makati.
Taguig City will come third with 1,600 rooms to be finished. The following two cities are Pasay City and Quezon City, opening more than 1,000 rooms each.
The Bay Area and CBD will have some of the highest rates
JLL Philippines predicts that the Bay Area will see the highest rates thanks to the many resort-casinos available. This will continue to drive the demand from South Korean and Mainland Chinese tourists.
We will also see some of the highest rates in the central business district of Makati.
Cebu has a population of around one million and is most well-known for its relaxed atmosphere and beautiful islands. It’s the oldest city in the Philippines and its name derives from the Cebuano word Sibu that means “trade”.
In addition to tourism, Cebu is highly active in maritime trade and manufacturing. For example, 80% of all the ships are built here, making the Philippines the fourth biggest shipbuilder in the world.
Compared to Bali and Phuket, Cebu experiences a shortage of hotel rooms. With continuous demand for new rooms, as many as 5,000 new hotel rooms were planned until 2024.
This plan will be put on hold due to the pandemic. As many as 75% of hospitality workers might lose their jobs in Cebu City, which would be devastating for the industry, of course.
Commercial Property Agents in the Philippines
The Philippines has a developed real estate market and you can find most multinationals operating here.
Some of the most well-known brands are:
- KMC Savills, Inc. (KMC MAG Group)
- Colliers International Philippines
- JLL Philippines
- Santos Knight Frank
- CBRE Philippines
These companies have a long experience of catering to foreign investors and know the local property market in-and-out.
Asia Property HQ can also help you to identify and connect with sellers of hotels in the Philippines. Simply send a message via the form below and then we will be in touch with you within 24 hours.
Below you can find commonly asked questions and our replies. If there’s anything else you wonder about, feel free to drop a comment below or contact us via email.
How are hotels classified in the Philippines?
Hotels are classified as follows:
- De Luxe Class
- First Class
- Standard Class
- Economy Class
Different requirements apply and related to the locations, bedroom facilities & furnishings, front office/reception, housekeeping, food & beverage, recreational facilities, and more for the different classifications.
What are the documents needed for hotel accreditations in the Philippines?
Below you can find the general requirements for accreditation of tourism enterprises and frontliners:
- Business License from the Local Government Unit
- SEC Registration Certificate and Articles of Incorporation and its By-Laws
- Notarized List of Names of all Officials and employees (with office designation and Nationality)
- Other documents as deemed necessary by DOT
Can foreigners buy land in the Philippines?
The same as it goes in most other Southeast Asian countries, foreign individuals cannot buy land in the Philippines. Instead, you’re allowed to lease land for up to 75 years.
However, if you set up a local company and appoint a nominee you’re capable of acquiring land.