Undersecretary PHINEAS A. ALBURO Managing Growth in Turbulent Times Undersecretary PHINEAS A. ALBURO Department of Tourism 1

Visitor Arrivals to the Philippines, 1997 - 2003 Foreign tourism arrivals in the Philippines from 1997 to 2003. Visitor Arrivals to the Philippines, 1997 - 2003 (In Millions) Trend Line YoY Growth Rate (%) 8.5 -3.3 1.0 -8.2 -9.8 7.6 -1.3 Source of Data: Arrival/Departure Cards and Sea Manifests Visitor Sample Survey at International gateways 2

Definition of a good market portfolio for the DoT Market Portfolio Prioritization Framework High Core Markets Markets that deliver the “bread & butter” Bulk of new investment Best capabilities allocated Investment / Turnaround Markets Invest in these markets ahead of return i.e. invest for the future Tactical / Momentum Markets With focused spend can relatively quickly generate increased arrivals Maintenance Markets Markets that are on the radar Activity only to occur if there is spare capacity Ensure mix of countries creates balance across: Growth cycles Market development Short haul vs. long-haul Seasonality Investment required Ability to Win Competitive Position: How competitive is the Philippines vs. key competitors (SE Asia) ? Ability to Deliver: How adapted is the Philippines offer to consumer needs? Low High Size of Opportunity Current size and growth Potential size and growth Note: Competitive Position (market share, awareness (unaided, aided), positivity towards RP, consideration of RP, information seeking about RP, likelihood of visiting), Ability to Deliver (Ease of access, trade interest, product availability, importance of safety, Fit of assets vs. consumer preferences, seasonality of arrivals, presence of English speaking population), 3

Market prioritization results Market Prioritization Framework Implications High Continue to focus bulk of resources and best people on existing core markets (China, Japan, Korea, US Balikbayan) Increase investment and focus on Tactical/momentum markets (Australia, Russia, Germany, US/Canada) Maintain investment in turnaround markets (Hong Kong, Taiwan, Singapore) focusing efforts on addressing key barriers to growth Monitor maintenance markets (UK, Netherlands, Switzerland, and Denmark) on an annual basis to test for low-hanging fruit Cut focus on Italy, Spain, and India Ability to Win Competitive Position Ability to Deliver Low Low High Size of Opportunity Current Attractiveness Future Attractiveness Note: **US campaigns and activities can be extended to Canada; *Given limited resources and inherent barriers to activation, UK market has been de-prioritized. However, UK remains a good investment market in Europe Source: Monitor Analysis 4

Visitor Arrivals to the Philippines, 1997- 2007 The 2007 has been a breakthrough for Philippine tourism as healthy growth in visitor arrivals was recorded. Visitor Arrivals to the Philippines, 1997- 2007 (In Millions) Trend Line YoY Growth Rate (%) 8.5 -3.3 1.0 -8.2 -9.8 7.6 -1.3 20.1 14.5 8.4 8.7 Source of Data: Arrival/Departure Cards and Sea Manifests Visitor Sample Survey at International gateways 5

Visitor Receipts by Key Market1,2 (2006 – 2007) The tourism sector not only grew in arrivals, but also and more important it grew in receipts as well, all across the board Visitor Receipts by Key Market1,2 (2006 – 2007) Key Observations MM USD In general, key markets have increased receipts more than arrivals, indicating an increase of tourist quality Above average performance has been noticed in NA, Europe, China and India However, reducing arrivals from Japan combined with decreasing tourist quality have posted negative growth of receipts Special attention should be paid to Korea as well, whose growth of receipts was slower than that of arrivals, indicating a decrease of tourist quality +24% +28% +21% +2% +63% -10% +66% +132% Change 2006 2007 2,436 Total NA APAC Korea Europe Japan China India # of Arrivals (000) +8% +4% +11% +14% +5% -6% +18% +20% Note: 1APAC (Asia Pacific) refers to Australia, Hong Kong, Singapore, Taiwan, Malaysia, Indonesia, Thailand, New Zealand; Europe refers to United Kingdom, Germany, France, Russia, Scandinavia (Denmark, Finland, Norway, Sweden), Italy; NA (North America) refers to US & Canada; 2Applied average length of stay in AVSS 2006 for Indonesia, Korea, and Canada for both years – due to not reliable numbers in the most recent AVSS Source: DOT Tourism Planning & Statistics Division, Arrival/Departure Cards 2006-2008, AVSS 2007, Monitor Analysis

Same or faster growth pace than last year Slower growth than last year So far most of the markets has presented a higher growth pace in terms of arrivals than that of last year Comparative % Growth in Number of Arrivals1 (2007 vs. 2006, Jan – Feb 2008 vs. Jan – Feb 2008) Key Observations The most positive result come from China at an astounding rate of 43% It is also rewarding that Japan reduced its declining rates Positive figures were also noticed in North America, despite of the recession in the US and the weak position of the US dollar Nevertheless, Korea suffered a “hiccup” this January, which could be a first sign indicating that this market might face saturation in the next years Same or faster growth pace than last year Slower growth than last year Note: 1APAC (Asia Pacific) refers to Australia, Hong Kong, Singapore, Taiwan, Malaysia, Indonesia, Thailand, New Zealand; Europe refers to United Kingdom, Germany, France, Russia, Scandinavia (Denmark, Finland, Norway, Sweden), Italy; NA (North America) refers to US & Canada Source: DOT Tourism Planning & Statistics Division, Monitor Analysis

In addition to that, the Philippine Tourism is “victim of its own success” and tourism related infrastructure is already presents constrains of capacity Estimated Maximum Capacity vs. Actual Arrivals (MM Foreign Arrivals / year) Airport Utilization Rate Air Flight Load Factor MM Arrivals Region Utilization Manila 135% Cebu 76% Davao 67% Origin Market Load Factor ‘07 China 64% Japan 68% Korea 77% Middle East 88% North America 76% South East Asia South West Pacific 73% Western Europe 74% 4.2 Average Utilization (%) & Hotel Capacity (units) 2 DOT Census 5,355 3,290 2,826 1 2,158 Arrivals Manila Cebu Bohol O. Negros Palawan Boracay Note: 1The capacity is estimated based on the theoretically maximum number of international arrivals in 2008; 2Hotel room capacity for Manila is based on January 2008 sample survey report, other regions are based on 2007 census conducted by DOT; average occupancy rate based on sample survey report data Source: DOT Tourism Planning & Statistics Division, Monitor Analysis

% - Changes in Length of Stay and Daily Spend – (2007 vs. 2006) 1,2 A large part of the growth in receipts came from higher length of stay, and the challenge for the tourism sector is to increase spend % - Changes in Length of Stay and Daily Spend – (2007 vs. 2006) 1,2 Key Observations In general, we observed a higher increase in length of stay than that in daily spend Several factors could explain this fact; some are beyond the reach of the DOT, such as macroeconomic factors However, the DOT and the tourism sector can improve the spend of tourists by Identifying key tourist segments to focus on Developing product offers that motivate those tourists to spend more The big challenge for the tourism sector is to attract the tourists who spend more Note: 1APAC (Asia Pacific) refers to Australia, Hong Kong, Singapore, Taiwan, Malaysia, Indonesia, Thailand, New Zealand; Europe refers to United Kingdom, Germany, France, Russia, Scandinavia (Denmark, Finland, Norway, Sweden), Italy; 2Applied average length of stay in AVSS 2006 for Indonesia and excluded Korea, and Canada for both years – due to not reliable numbers in the most recent AVSS Source: DOT Tourism Planning & Statistics Division, AVSS 2006 and 2007, Monitor Analysis

Hence, in the next years, the DOT and the Philippine Tourism Sector will have to go through a fundamental mind set change From a situation of demand constrains to … … a situation of supply constrain Goals Attract more tourists Attract better tourists Overall Strategy Focused and segmented campaigns with heavy emphasis on conversion Mass market awareness campaign Tourism destination for all ages and preferences Market Positioning More exclusive tourism destination General investment to attract the maximum number of tourists Investment Very much focused into the targeted types of tourists Focus Operational Efficiency Innovation

THANK YOU! 11