Republic of the Philippines

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

OFFICE OF THE VICE PRESIDENT FOR BRANCHES AND SATELLITE CAMPUSES
STO. TOMAS BRANCH
OFFICE OF THE ACADEMIC HEAD

“TOURISM INDUSTRY: Catalyst for Economic Growth in the

Philippines”
Casabal, Gian Victor C., De Castro, Justin D., Enriquez, Jerick V.

I. Background

International tourism has become an important industry in many developing countries.

Fully aware of the potential contributions of the expanding tourism industry to economic growth
and development, the Philippines has embarked on increased tourism improvement. The
economic benefits of the tourism industry are often measured by the number of tourists and
foreign exchange generated by the industry. These measures only give a partial picture of the
total economic performance of tourism. The study on the impact of international tourism on the
Philippine economy is designed to find out the relationship of the tourism industry with various
productive sectors of the economy and evaluate the direct impacts, its indirect and causative
effects. The exploration relies heavily on input-output analysis as a tool to determine the benefits
that can be derived from expanding the tourism industry.

Measuring the contribution of tourism to the Philippine economy is difficult due to the
unique nature of the industry and the inherent limitations of national databases. However, it can
provide an assessment of the significant contribution of international tourism to the Philippine
economy and can serve as a guide for government planners in formulating policies. Policies and
programs that benefit not only the tourism industry but also the entire Philippine economy.

The Philippines is known for its dynamic and growing tourism industry, offering a wide
range of attractions. It boasts beautiful beaches, dramatic mountains, and a rich cultural heritage,
making it a popular destination for travelers worldwide.

In 2019, International arrivals exceed target with 8.26 million visitors to the Philippines. It
is well-known that the Philippine business economy greatly benefits from the tourist sector, which
also aids in the growth and development of the nation. The Philippine Archipelago comprises
about 7,641 islands for that reason the Philippines has been a popular destination for both
domestic and international tourists. Philippines have many tourists’ destination that features a
variety of attractions, such as beaches, mountains, vibrant coral reefs, cultural heritage sites, and
even man-made attractions. The Department of Tourism (DOT) started a campaign called "Save
Our Spots" to urge everyone to travel responsibly and to support others in doing the same in order
to protect the nation's natural and man-made wonders.

However, the tourism industry in the country suffered significant losses in 2020 because of
the pandemic. Nevertheless, the country is optimistic and expecting a revival and revitalization of
its tourism economy.

Poblacion 2, Sto. Tomas Batangas Phone: 043-7783508

E-mail Address: acadoffice_pupstotomas@pup.edu.ph
“ THE COUNTRY’S 1ST POLYTECHNIC U”
 Republic of the Philippines
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
OFFICE OF THE VICE PRESIDENT FOR BRANCHES AND SATELLITE CAMPUSES
STO. TOMAS BRANCH
OFFICE OF THE ACADEMIC HEAD

II. Effect in Philippine Business Economy

The tourism industry has constantly been rated as one of the top industries in terms of
GDP contribution. Millions of Filipinos have benefited from the economic activity that tourism has
fueled by way of jobs and income. Tourism has been a major driver of economic activity, providing
jobs and revenue to millions of Filipinos. The Philippines provides a wide range of vacation
experiences, from crowded metropolises like Manila and Cebu to more secluded locations like
Palawan and Boracay. It is considered a year of celebration for Philippine tourism when 8.26
million foreign tourists visited the country in 2019, exceeding the 8.2 million annual objectives set
in the National Tourism Development Plan (NTDP) for 2016–2022. In comparison to the year-end
number of 7.16 million in 2018, the DOT's year-end visitor arrival report noted a 15.24 percent
increase. With the exception of January, almost all months experienced double-digit growth rates;
August's was the largest at 27.54 percent, while December's 776,798 volume was the highest.
"This is a high point for Philippine tourism as it depicts our solidarity and commitment to make
tourism work and prove its full potential as a sustainable and inclusive economic activity.”
Secretary Puyat remarked.

As a result, the Philippine tourism sector was honored internationally in 2019 with a
number of awards and recognitions, including the Excellent Partner Award (for Sustainable Efforts
in Boracay) and the World's Leading Dive Destination Award from the World Travel Awards.

One of the major problems facing the Philippine Tourism Industry is the COVID-19
pandemic. Because of this, it has negatively impacted the sector in recent years. Thousands of
livelihoods were severely affected and many jobs were lost. Indeed, in 2021, this sector may only
contribute 5.2% to the country's GDP. Employment in the tourism industry in 2021 also fell to
around 4.90 million jobs, which although higher than the 4.68 million recorded in 2020, is still
significantly lower than pre-COVID-19 figures. As mentioned, the recent pandemic has posed
unprecedented challenges to the Philippine tourism industry. Manufacturing is one of the hardest
hit sectors, with international and domestic arrivals significantly reduced.

Under the circumstances, businesses are subject to travel restrictions, social distancing
requirements and reduced travel spending. In Standard Insights' latest Philippines Consumer
Report 2023, which surveyed more than 1,000 Filipino respondents in November 2022, more than
half of the population reported health and safety issues (53.6%) is their biggest concern when
traveling in 2023. Interestingly, most Filipinos, especially 76.6%, feel safe traveling abroad despite
the current COVID-19 situation. Only a minority of 6.2% expressed feeling unsafe when traveling
internationally this year.

The limited availability of air travel connections, both domestically and internationally,
poses a substantial challenge to the Philippine tourism industry. However, with a limited number
of flights, travelers may have difficulty visiting multiple destinations in one trip.

Poblacion 2, Sto. Tomas Batangas Phone: 043-7783508

E-mail Address: acadoffice_pupstotomas@pup.edu.ph
“ THE COUNTRY’S 1ST POLYTECHNIC U”
 Republic of the Philippines
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
OFFICE OF THE VICE PRESIDENT FOR BRANCHES AND SATELLITE CAMPUSES
STO. TOMAS BRANCH
OFFICE OF THE ACADEMIC HEAD

Adding to this provocation are high airfares affecting the industry. Additionally, airfares in
the Philippines tend to be higher than other Asian countries due to taxes imposed by local and
international airlines as well as fuel costs that are often not included in the ticket price.

And lastly, the Philippine tourism sector is inadequate infrastructure and services such as
hotels, transportation networks, and attractions available at tourist destinations across the
country. Inadequate infrastructure often leads to overcrowding at major tourist spots during peak
season and prevents visitors from enjoying all that each destination has to offer. Additionally, poor
public transportation options make it difficult for tourists to explore beyond just their immediate
area without having access to private transport such as cars or taxis.

In 2021, they launched their Tourism Response and Recovery Plan (TRRP) to help
mitigate the impact of COVID-19 on the industry and protect jobs, visitors and communities by
providing support Finance for businesses and individuals in need. This helps support the recovery
of tourism businesses and helps restore confidence and growing demand in domestic and foreign
markets. The plan also includes a domestic tourist incentive scheme, which was implemented in
the said year and aims to help revive local tourism by reducing prices on accommodation, food
and activities.

On top of that, starting in 2024, foreigners will be able to receive tax refunds on purchases
in the Philippines, as part of the government`s goal to attract more tourists. Value-added tax
(VAT), currently charged at 12% on goods consumed domestically, will eventually be refunded to
international visitors for items they take out of the country. This achievement encourages the
Department of Tourism (DOT) to set a new target of attracting 5 million foreign tourists this year.

In recent years, the Philippine tourism industry has faced countless obstacles, especially
health and safety issues. Post-pandemic, these issues persist, with more than half the population
expressing concerns about traveling in 2023 due to the lingering impact of COVID-19. Despite
the challenges, the industry remains resilient and adaptable, taking measures to ensure the safety
and wellbeing of tourists and locals.

The government has also responded by launching various initiatives such as the Tourism
Response and Recovery Plan to help revive the industry and boost domestic and international
tourism. By continuing to focus on strengthening infrastructure, encouraging domestic tourism,
and offering attractive packages to foreign visitors, the Philippines is taking steps to restore the
tourism industry to its former glory.

The improved state of the Philippine travel and tourism industry has resulted in the
recovery of 1.3 million jobs. In the long term, the sector is expected to contribute significantly to
the country's economy, with the World Travel and Tourism Council forecasting a 3% annual
growth rate over the next decade. This growth is projected to generate at least 3 million new jobs,
constituting 21.5% of the country's total employment, providing a positive outlook for
interested parties and potential investors.

Poblacion 2, Sto. Tomas Batangas Phone: 043-7783508

E-mail Address: acadoffice_pupstotomas@pup.edu.ph
“ THE COUNTRY’S 1ST POLYTECHNIC U”
 Republic of the Philippines
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
OFFICE OF THE VICE PRESIDENT FOR BRANCHES AND SATELLITE CAMPUSES
STO. TOMAS BRANCH
OFFICE OF THE ACADEMIC HEAD

Reference:

Standard Insights. (2023, June 9). Tourism in the Philippines: Opportunities & Challenges.
Standard Insights. Retrieved from https://standard-insights.com/blog/tourism-in-the-
philippines/?fbclid=IwAR1XwBbusdlsuzCNJ2plAgZmaMD9KJHI1o-Erx-tyZGuCyQrBjt9i8pyj3c

Zafra, M.A. (December 2021). Developing The Philippine Blue Economy: Opportunities and
Challenges in the Ocean Tourism Sector. Retrieved from
https://www.adb.org/sites/default/files/publication/761906/adbi-wp1291.pdf

United Nations. (1993). The economic impact of tourism in the Philippines. Retrieved from
https://repository.unescap.org/handle/20.500.12870/4076

Economy Growth Report: Philippines Ready to Boost Tourism in 2022. (2023, October 17).
Exploring the Economic Impact of Tourism in the Philippines. Retrieved from
https://ycpsolidiance.com/article/tourism-impact-report-philippines
2022?fbclid=IwAR2Qd8w1J_vQTU2ydDDyxKaN3-cYpMT0Kyrd7aGFBjdJnYDuQjIFWB1rm3Q

Poblacion 2, Sto. Tomas Batangas Phone: 043-7783508

E-mail Address: acadoffice_pupstotomas@pup.edu.ph
“ THE COUNTRY’S 1ST POLYTECHNIC U”