Domestic Tourists, Not Foreigners, Are Powering Hotel Revenues

For years, the Philippine hotel story was built around foreign arrivals: Koreans and Japanese filling city hotels, Westerners heading to the islands, and regional tourists hopping in for shopping weekends. In 2026, that story has flipped. International arrivals are still below pre‑pandemic levels, but hotels are surprisingly busy—because domestic tourists have become the real engine of demand.

If you are looking at hotels, condotels, or serviced residences as an investment, you cannot ignore this shift. The winning assets are no longer just those closest to foreign visitor hotspots; they are the ones that serve the spending power of Filipinos themselves.

The Numbers Behind the “Local Tourist” Story

Recent hospitality and tourism reports show a clear pattern: international arrivals are recovering, but they have not yet returned to 2019 levels. Meanwhile, domestic travel has surged, with Filipinos traveling more frequently for leisure, balikbayan visits, work trips, and events.

Consultancies tracking the sector highlight several important points:

• Domestic travelers continue to drive hotel and MICE (meetings, incentives, conferences, and events) demand across the country, even as foreign arrivals lag.

• Metro Manila alone is set to add almost 2,900 new hotel keys in 2026, concentrated in Makati and the Bay Area, reflecting developer confidence in sustained demand.

• Over the next few years, thousands more rooms are expected nationwide, from Metro Manila to Cebu, Palawan, Baguio, Boracay, and Davao, indicating a broader, more diversified hospitality pipeline.

In other words, developers and operators are not building this many rooms because they are betting on tourists who have not yet returned in full. They are building because the domestic market is already here.

Why Domestic Guests Are So Powerful

Domestic tourists behave differently from foreign tourists—and that has real implications for hotel revenues.

First, local travelers are more resilient. They are less affected by global shocks like wars, airline disruptions, or foreign visa rules. Long weekends, school breaks, and seat‑sale culture keep a steady flow of Filipinos moving around the country, even when global travel softens.

Second, domestic guests create repeatable patterns:

• Family weekend trips to nearby cities and resorts

• Corporate trainings, conferences, and product launches

• Events like weddings, reunions, and festivals

These patterns support:

• Higher occupancy outside peak international seasons

• Strong demand for function rooms and MICE facilities

• A more stable base of guests that hotels can nurture with loyalty programs and promos

This is why major research houses are emphasizing domestic tourism as a stabilizer of hotel revenues. It is not as glamorous as record‑breaking foreign visitor numbers, but it is often more dependable.

What This Means for Hotel and Condotel Investors

If you are considering buying into a hotel or condotel project, or acquiring a small hospitality asset, 2026 is a year when you should be looking less at “How many foreigners will come?” and more at “How many Filipinos want to stay here?”

Here are key angles to analyze:

1. Location: Domestic Catchment, Not Just Tourist Postcard

Ask yourself:

• Is this property within easy reach of large local populations by land or short flights?

• Does it sit near domestic demand drivers like BPO hubs, universities, convention centers, industrial zones, or government offices?

• Is the airport or major bus hub accessible enough for balikbayans visiting family and friends?

Locations like Metro Manila, Cebu, Baguio, Palawan, Boracay, and Davao are not just foreign tourist magnets—they are also strong domestic destinations. A hotel that can fill rooms with local staycationers and corporate bookings will have a better cushion when foreign arrivals fluctuate.

2. Product: Flexible Spaces for Local Use

Domestic guests often care about:

• Room configurations that work for families and barkadas

• Good Wi‑Fi and work‑friendly areas for “workcation” stays

• Function rooms and ballroom space for events, from corporate seminars to weddings

For investors, that means projects with:

• Strong MICE facilities and banquet revenue potential

• Configurable meeting spaces

• Thoughtful amenity programming that appeals to locals (F&B concepts, pools, kids’ areas, wellness)

A purely tourist‑oriented design that ignores events and local corporate demand could struggle in a domestic‑driven cycle.

3. Operator and Strategy: Asset‑Light and Brand Power

Consultancy advice to developers has increasingly highlighted “asset‑light” strategies—where international brands enter via management or franchise deals while local partners own the real estate. This has a few key benefits for investors:

• Lower upfront capital requirements for expansion

• Access to global reservation systems and loyalty programs, which local tourists increasingly use

• Better ability to reposition and reprice rooms as domestic and foreign mix evolves

If you are buying into a condotel or hotel project, pay attention to:

• Who is operating the property

• How strong the brand is in the domestic market

• Whether the business model allocates revenues and costs fairly between owners and operator

A strong brand with active local marketing can tap domestic demand more effectively than a no‑name property left to fend for itself on online travel agencies.

Risk Factors You Still Need to Watch

A domestic‑driven hotel story is not risk‑free. Here are some important watchpoints:

• Oversupply in certain nodes. Metro Manila and some prime resort areas have big pipelines of new rooms. If too many projects open at once, occupancy and rates could come under pressure.

• Consumer spending power. Domestic demand depends heavily on household budgets. If inflation and interest rates bite too hard, non‑essential travel and staycations can slow.

• Competition from alternative accommodations. Airbnb, serviced apartments, and smaller boutique stays will continue to compete for local guests, especially price‑sensitive segments.

But the key difference in 2026 is this: even with these risks, domestic demand is strong enough that serious investors cannot ignore it. It is no longer just a “bonus” on top of foreign arrivals; in many markets, it is the main story.

Practical Guidelines for 2026 Hospitality Investors

To turn these trends into an actionable strategy, here are concrete steps you can take:

1. Map the demand drivers. Look at projects near airports, IT parks, universities, large malls, and convention centers. Cross‑check with tourism statistics and local event calendars.

2. Stress‑test your projections. Build scenarios where foreign arrivals stay below 2019 levels, but domestic occupancy remains robust. See if the deal still works on those assumptions.

3. Analyze the room mix and facilities. Favor properties with a balanced mix of standard rooms, suites, and family‑friendly layouts, plus credible MICE capacity.

4. Evaluate the operator’s local strategy. Ask how the brand plans to market to Filipino travelers: loyalty programs, corporate tie‑ups, social media campaigns, and partnerships with local airlines or banks.

5. Match investment horizon to the tourism cycle. If you believe foreign arrivals will eventually return in force, target assets that can thrive on domestic demand now and benefit from an upside later, rather than those that barely break even without foreigners.

Domestic tourists are no longer the quiet background of the Philippine hotel industry—they are the main act. For investors, that means shifting from a narrow “international tourism” mindset to a more nuanced, two‑engine view of demand: strong local travel today, with gradual foreign recovery on top.

If you choose locations that Filipinos love, back operators who know how to serve them, and build your numbers around realistic occupancy and rate assumptions, 2026 can be an attractive entry point into hotels and condotels—without having to bet everything on the next wave of foreign arrivals.

Source: Ziggurat Real Estate

A brief overview of extrajudicial settlement

When a person passes on, those left behind are often faced not only with emotional loss but also with the task of settling the person’s affairs. The process of estate settlement affects families from all walks of life, regardless of the size or value of the estate involved. It is therefore not surprising that estate settlement continues to receive public attention, including through proposals in Congress relating to estate tax, such as bills seeking to extend estate tax amnesty programs or to revisit the existing estate tax system itself. While these proposals remain under discussion, they reflect a shared recognition that estate settlement is a common and often challenging experience for many Filipinos and foreigners who have properties in the Philippines.

Estate settlement is the process by which a decedent’s properties, rights, and obligations are identified, settled, and transferred to his or her heirs. There are different ways to complete this in the Philippines, depending on the circumstances. One of the most commonly used methods is extrajudicial settlement (EJS) which allows heirs to settle the estate among themselves without going to court. This is allowed if the decedent did not leave any will, there are no unpaid debts (or the heirs agree to take responsibility for them), and all heirs sign and publish the agreement to divide the estate.

For many families, EJS offers a way to move forward without the added cost, time, and formality associated with judicial processes. However, while EJS simplifies the procedure, it does not remove the legal and tax requirements that accompany the transfer of property from one party to another.

The EJS process actually starts with the determination of who are the heirs and what are the properties left by the deceased. The heirs will then have to decide how the properties will be divided among themselves. This agreement must be formalized in a notarized deed of extrajudicial settlement, which must be published once a week for three consecutive weeks in a newspaper of general circulation. These procedural steps, while straightforward in principle, also form the basis for subsequent steps involving taxes and property transfers.

Tax law imposes a 6% estate tax on the transfer of a decedent’s net estate upon death to the heirs, regardless of whether the estate is settled through court proceedings or through EJS. The law allows certain deductions to arrive at the net estate subject to tax, such as the value of the family home or certain properties received prior to death, subject to limitations.

Beyond estate tax, the way the heirs apportion the estate can also have separate tax consequences. A 6% donor’s tax may apply if an heir gives up part of his or her rightful share so that another heir receives more than his or her legal share. Donor’s tax can likewise be imposed when there is a specific renunciation in favor of a particular co‑heir, as opposed to a general renunciation. In a recent Court of Tax Appeals (CTA) case, the court held that although certain paragraphs of the EJS appeared to indicate a general renunciation (i.e., without designating a specific recipient), these were effectively negated by later provisions that clearly directed the repudiated shares in favor of a specific heir. Consequently, the CTA considered renunciation in the EJS as a gratuitous transfer or donation. Careful drafting and aligning allocations with legal shares help avoid unintended donor’s tax exposure.

Where land or other real property forms part of the estate, local taxes likewise come into play. Under the Local Government Code, local government units are authorized to impose a tax on the transfer of ownership of real property, including transfers by donation and inheritance. The specific rates and procedures may vary depending on the city or municipality, adding another step to the settlement process.

Notably, settling an estate also involves the submission of required documents (e.g., death certificate of the decedent, the deed of extrajudicial settlement, proof of publication of EJS, tax declarations, certificates of title), filing the estate tax return, and paying the tax due to the Bureau of Internal Revenue (BIR). Heirs or their representative must also secure a Certificate Authorizing Registration (CAR) from the BIR for each property before any transfer can be recorded by other institutions such as the Register of Deeds (RD) and the Land Transportation Office (LTO).

Ultimately, beyond these required documents and processes, it’s important to recognize the human context in which estate settlement takes place. Families often begin the settlement process while still grieving the loss of a loved one. During this period, attention is understandably focused on personal and family matters, and the completion of legal and tax requirements may not be an immediate priority. In reality, this may contribute to delays in filing estate tax returns or settling tax obligations within the periods prescribed by law, resulting in the imposition of penalties and interest. This experience is not uncommon and reflects the practical challenges faced by families navigating estate settlement during a difficult time.

From the perspective of families, these layered requirements combined with emotional and personal circumstances can make EJS feel more tedious than initially expected. While the absence of court proceedings remains a clear advantage, the overall timeline of the settlement may still be affected by the need to gather the required documents, complete tax filings, and secure clearances. The delays at any stage may affect the next steps, making timing and coordination an important part of the process.

The government passed several estate tax amnesty measures, with the most recent ending on June 14, 2025. These helped to ease the burden of long-standing unpaid estate taxes for families of decedents, especially those from earlier years. Today, legislators are once again discussing potential amnesty and other reforms, reflecting their continued recognition of the practical realities faced by families in settling estates. While these are still under deliberation, families must manage estate settlement based on existing rules and procedures.

In sum, extrajudicial settlement remains a valuable and legally recognized option for settling estates in the Philippines. At the same time, its effectiveness in practice largely depends on how well heirs or their representatives understand and manage the surrounding tax and legal requirements while coping with personal loss. A clearer appreciation of these realities may help set more realistic expectations and encourage informed decision-making during what is frequently a sensitive and challenging period. 

Source: Business World

May VAT be imposed upon condominium association dues?

Value Added Tax (VAT) is NOT imposed on condominium association dues in the Philippines. Association dues, membership fees, and other assessments collected by condominium corporations are explicitly exempt from VAT under Philippine law.

Legal Basis for Exemption

Supreme Court Ruling

The definitive legal authority is the Supreme Court decision in G.R. No. 215801 (First E-Bank Tower Condominium Corp. v. Bureau of Internal Revenue, January 15, 2020). The Court held that:​

• Association dues, membership fees, and assessments collected by condominium corporations are not subject to income tax, VAT, and withholding tax

• A condominium corporation is not engaged in trade or business

• Dues are collected purely for the benefit of condominium owners and constitute contributions for maintenance, not income

• The dues do not arise from the sale of goods or services

This Supreme Court ruling specifically invalidated Revenue Memorandum Circular No. 65-2012 (RMC 65-2012), which had attempted to impose 12% VAT on condominium dues in 2012.manilatimes+1​

Tax Code Provisions

The exemption is codified in the National Internal Revenue Code (NIRC) through two provisions:

Section 109(Y) - VAT Exemptions: Following the Tax Reform for Acceleration and Inclusion (TRAIN) Law (RA 10963, 2018), this section explicitly lists "association dues, membership fees, and other assessments and charges collected by homeowners' associations and condominium corporations" as VAT-exempt transactions

Section 30(C) - Mutual Benefit Associations: Condominium corporations qualify as "beneficiary societies" or associations operating exclusively for the benefit of their members. No part of net income or assets may inure to any member individually.​

Conditions for the Exemption

The VAT exemption applies only if the condominium corporation meets specific requirements:

Requirement	Details
Legal Structure	Non-stock, non-profit corporation
Primary Purpose	Organized exclusively to manage and maintain common areas for members' benefit
Use of Funds	Association dues must be budgeted and spent solely for common area maintenance, utilities, security, administrative expenses, and governance
Income Activities	No substantial income-generating activities directed at non-members (e.g., commercial leasing)
BIR Certification	Must obtain and maintain a valid Certificate of Tax Exemption (CTE)
CTE Validity	Valid for three years; must be renewed periodically (RMO 38-2019)

Obtaining Tax Exemption Status

To qualify for and maintain the exemption, associations must:

1. File BIR Form 1945 with the Bureau of Internal Revenue, including:

   • Certified copies of Articles of Incorporation and By-Laws

   • Latest General Information Sheet

   • Audited financial statements

   • Detailed list of actual activities

   • Board resolution authorizing the application

2. Pay the certification fee (₱100)

3. Undergo BIR evaluation, which may include field inspection and document verification

4. Receive and maintain the Certificate of Tax Exemption, valid for three years

5. File annual returns (BIR Form 1702-EX for exempt entities) demonstrating continued compliance​

What Is Taxable vs. Exempt

Understanding the distinction is critical for proper compliance:

VAT-Exempt Receipts

• Member association dues and CUSA (common-usage-service-area) charges

• Special assessments for common area improvements

• Penalties and interest on late payment of dues (part of enforcing collection)

• Rental of function rooms to members (mutual benefit activity)

Taxable Receipts (Subject to Income Tax and VAT)

• Lease income from commercial tenants (telco antennas, retail kiosks)

• Interest income on bank deposits (subject to 20% final withholding tax)

• Unrelated commercial operations

• Services rendered to non-members for consideration​

Important Compliance Consideration

Failure to maintain the Certificate of Tax Exemption is critical. If a condominium corporation's CTE lapses due to non-renewal, the exemption is automatically lost. This means all association dues collected become taxable income retroactively, creating significant tax liabilities and penalties.​

Evolution of the Law

The current exemption status represents a reversal of the BIR's 2012 position:

Year	Action	Outcome
2012	BIR issued RMC 65-2012 imposing 12% VAT and 32% income tax	Created significant burden on condo owners
2018	TRAIN Law amended the Tax Code to expressly exempt condominium dues	Provided statutory protection
2020	Supreme Court invalidated RMC 65-2012	Confirmed exemption is constitutionally and legislatively sound
2025-2026	Current BIR position and jurisprudence confirm exemption	Stable legal framework in place

Conclusion

Condominium association dues cannot lawfully be subject to VAT in the Philippines. This protection is established through:

1. Supreme Court precedent (G.R. No. 215801)

2. Tax Code statutory exemption (Section 109(Y) and Section 30(C))

3. Legislative intent embodied in the TRAIN Law and prior homeowners association statutes

4. Underlying principle that condominium corporations are not engaged in trade or business

Unit owners and condominium boards should ensure their associations maintain valid Certificates of Tax Exemption from the Bureau of Internal Revenue to protect this exemption and demonstrate compliance to local government units and regulatory authorities.

Source: Ziggurat Real Estate