HOTEL OPERATORS within the Philippines are facing pressure from rising costs and weakening demand as the continuing energy crisis drives up airfares, disrupts flights, and dampens hotel demand, in accordance with Leechiu Property Consultants (LPC).
In its first-quarter market report, LPC said “64% of hotels report significant to severe operational impact from the energy crisis.”
LPC Director of Hotels, Tourism, and Leisure Alfred Lay said the industry is entering a tougher period as cost pressures intensify.
“Philippine hotels are entering their most difficult period for the reason that pandemic. Occupancy is anticipated to fall sharply in April and May because the fuel crisis drives up airfares, dampens traveler confidence, and squeezes household budgets,” he said in an announcement.
Early 2026 tourism data showed modest growth, although underlying demand stays uneven. Foreign tourist arrivals reached 1.32 million in January and February, up 3.09% from a 12 months earlier, in accordance with LPC.
Long-haul markets expanded 9.7%, led by the USA, Canada, Australia, the UK, and France. Short-haul markets grew at a slower 3.4%, with gains from Taiwan and Japan partly offset by declines in South Korea and China. LPC said a recovery in Chinese arrivals is anticipated by the third quarter, supported by the expansion of e-visas.
Nevertheless, rising costs are starting to change travel behavior. The report said tourists are expected to take fewer trips, shorten their stays, and shift to cheaper and shorter routes, while booking patterns are reverting to pandemic-era practices.
Occupancy levels showed limited improvement last 12 months. “Hotel occupancy in 2025 remained at 60%, flat 12 months on 12 months, and still below the 68% recorded in 2019,” LPC said.
Performance across destinations remained uneven. “Cebu/Mactan held ADR (average each day rate) but struggled to fill rooms, with occupancy sliding to 54%,” the report said.
Industry conditions have turn into more difficult in early 2026 as higher fuel costs drive up travel expenses and weigh on demand.
“Jet fuel costs doubled inside three weeks, resulting in airfare increases of 25% to 50% for long-haul routes, and destination transport costs rising by 20% to 30%,” LPC said.
Hotels are already seeing the results on bookings, with declines in occupancy already underway or expected in the approaching months.
LPC noted that “80% of hotels already feeling occupancy declines.”
The meetings, incentives, conferences, and exhibitions (MICE) segment can be under pressure, which can further affect hotel revenues.
It said that “650 in-person ASEAN meetings are expected to be canceled, dampening room and event revenues.”
Mr. Lay said the outlook stays uncertain as each international and domestic demand face pressure.
“With international arrivals under threat and domestic spending softening, the industry is bracing for a difficult second half of the 12 months, and the outlook beyond that depends entirely on how quickly the Hormuz crisis resolves,” he added.
In response, hotel operators are adjusting strategies to administer revenues and costs.
LPC said that “30% of hotels are offering value-added packages as an alternative of direct discounting, while 28% are selecting to carry rates and absorb the occupancy drop.”
The report also noted that some operators are reducing rates to defend occupancy.
The outlook for the sector stays uncertain and will depend on how long external pressures persist.
“In a chronic conflict scenario, national occupancy could drop below 45%, potentially making a majority of hotels loss-making in 2026,” LPC said.
Under a more moderate scenario, national occupancy is anticipated to fall between 45% and 50%, while a good consequence could see occupancy get well to 50% to 55%, the report said.
Domestic tourism is anticipated to supply some support as international travel becomes dearer.
“Domestic tourism stays the backbone of the industry,” it said.
Uncertainty can be affecting investment and expansion plans within the sector. Rising construction costs and weaker demand visibility are prompting developers to reassess projects.
“Many hotel construction projects are being shelved, delayed, or renegotiated because of surging costs and unsure demand,” LPC said. LPC said a return to more normal conditions could also be possible by the fourth quarter under a good scenario. — Arjay L. Balinbin