BETWEEN 2005 and 2025, the Philippines’s tourism and aviation industries evolved from fragmented growth to integrated engines of economic development.
While these industries initially operated largely independently-tourism attracting inbound visitors and aviation providing the routes-they became deeply connected, each driving the other’s expansion and resilience through challenges like infrastructure bottlenecks and external shocks like the Covid-19 pandemic.
Diversification of destinations, marketing
Following global challenges like the SARS pandemic and the Iraq War in 2003, the Philippine government focused on playing catch-up with its neighbors.
In 2005, the Philippines recorded 2.62 million inbound tourists, significantly trailing Malaysia (16.3 million) and Thailand (11.5 million). Even Vietnam, which used to be a regional laggard, recorded 3.2 million inbound tourists that year.
The Department of Tourism (DOT), under Secretary Ace Durano, revitalized the ‘WOW Philippines’ brand and implemented a diversification strategy, moving focus from Metro Manila, Cebu, and Boracay to emerging destinations like Bohol, Iloilo, and Siargao.
He also expanded into emerging markets and focused on high-value tourists who like diving, golf, and are into wellness.
Despite these efforts, challenges in global perception persisted. Jose C. Clemente III, president of the pioneering destination management company (DMC) Rajah Tours Philippines, recalls that ‘it was a hard sell to promote the country 20 years ago,’ as they had to grapple with buyer’s inquiries about the ‘peace and order situation, political instability, and other questions, which had to do with the perception of the Philippines.’
In the hospitality industry, veteran Agnes Caparas Pacis, Vice President-Commercial of SM Hotels and Conventions Corp. (SMHCC), notes that the industry was then ‘predominantly conventional, focusing more on physical amenities and brick-and-mortar comfort-in terms of physical spaces or infrastructure-over holistic, guest-centered experiences.’
The rise of LCCs
The aviation industry recognized that connectivity was strategic for the archipelagic nation, leading to infrastructure and business reforms.
Domestic carriers expanded frequency, and airports such as Clark International Airport in Pampanga and regional airports started upgrades.
A significant catalyst was the transformation of Cebu Pacific Air (CEB) into a low-cost carrier (LCC) between 2004 and 2007. Alexander Lao, CEB President and Chief Commercial Officer, says this move ‘drew significant attention, as many did not yet understand how the LCC model worked-especially how the airline could offer ‘piso fares’ while operating brand-new aircraft.’
This LCC model stimulated tourism demand, encouraging more Filipinos and foreigners to travel deeper into the archipelago as airfares dropped.
This competition became a force for industry evolution. Former Transportation Secretary Jaime J. Bautista, who was then president of the pioneering carrier, Philippine Airlines (PAL), admits to ‘moments of anxiety’ when CEB, and later, AirAsia, entered the market.
However, he underscores that ‘more importantly, they became catalysts for innovation. Competition forced us [PAL] to become more efficient, customer-focused, and adaptive. In the end, this diversity of business models expanded the overall market, democratizing air travel for millions of Filipinos.’
This democratization resulted in domestic travel surging to 37.5 million by 2011, up from 24 million in 2005, as per data from the Philippine Statistics Authority.
Viral campaigns, infrastructure milestones
From 2013 to 2018, the Philippines saw sharper growth in inbound tourism and improved air services.
The launch of the iconic ‘It’s More Fun in the Philippines’ brand campaign in 2012, under then Tourism Secretary Ramon R. Jimenez Jr., rekindled the global imagination through its smart use of social media and out-of-house advertising, such as billboards, transit ads, along with increased people-to-people engagement through social activations in public spaces.
The impact was immediate: visitor arrivals jumped 9.07 percent that year to 4.27 million, crossing the 4-million mark for the first time. This, despite DOT working with a budget of just P3 billion.
Clemente says the ‘fun’ slogan ‘put us back on the radar of many foreign markets and captured the essence of the Philippines and our people.’ It is the main reason that he had always pushed for the slogan’s retention when he was president of the Tourism Congress of the Philippines. ‘It’s difficult to find a replacement slogan that encapsulates and captures what the destination and the people are all about.’
Despite challenges like Supertyphoon Yolanda, diplomatic issues with Taiwan and Hong Kong, and Tanim-Bala at the Ninoy Aquino International Airport (NAIA), the compounded annual growth rate (CAGR) of international arrivals remained robust at 8.6 percent from 2012 to 2019, while the DOT used this slogan, notes former Albay Second District Rep. Joey Salceda.
The period also featured a critical commitment to sustainable tourism, demonstrated by the six-month closure of the world-famous Boracay Island starting in April 2018.
Then Tourism Secretary Bernadette Romulo Puyat said this action signified the government’s willingness to invest in sustainable tourism and infrastructure, raise standards, and implement enforcement.
Upon its reopening, she noted that many original stakeholders ‘welcomed the stricter environmental guidelines,’ observing that ‘The main beach is immaculate and peaceful now.’
Elevating global standing
The aviation industry made significant strides in game-changing infrastructure during this time.
Bautista recalls that ‘One of the major turning points was the restoration of Category 1 status by the US Federal Aviation Administration (FAA) in 2014, after years of oversight improvements. This was followed by the lifting of the European Union ban, both of which reaffirmed the Philippines’s commitment to international safety and compliance standards.’
Infrastructure improvements directly enabled greater tourism access, such as the opening of the Bohol-Panglao International Airport in November 2018, which allowed direct international flights to a key tourism destination. This integration confirmed that tourism development (hotels, resorts, attractions) made aviation investments more viable.
Also, upgrades to Mactan-Cebu and other gateways improved capacity, efficiency, and experience for inbound tourists.
By the end of 2019, international arrivals surged to a historic high of 8.3 million, with the industry contributing 12.7 percent to the entire GDP that year. Tourism jobs averaged a 13-percent share of total employment from 2015 to 2019, up from a 10.5-percent share from 2005 to 2009.
Total airline passenger traffic reached a record-breaking 60 million in 2019, double the 30.85 million who traveled in and out of the country in 2010, as per data from the Civil Aeronautics Board.
Pandemic and the pivot to resilience
Sadly, the global spread of COVID-19 in early 2020 abruptly halted this momentum.
While the pandemic crippled many hotels, the Hotel Sales and Marketing Association (HSMA) worked closely with the DOT in converting member-hotels into quarantine accommodations for returning overseas Filipinos.
Pacis, who is also HSMA Director for Education, notes that ‘Filipino hospitality workers’ ingenuity, creativity, and passion to survive surfaced. We redefined our operations and pursued online bookings, hybrid setups, pivoted and repurposed our convention and event spaces, and established strict health protocols that gave a new meaning to ‘safe luxury’.’
For DMCs, business was ‘a complete zero,’ according to Clemente. Yet, he avers that due to a strong collaboration with the DOT, ‘we were able to keep the Philippines on the radar of our markets by conducting product updates, market updates, and other activities, which kept some momentum despite two years’ inactivity.’
Similarly, the aviation industry suffered massive losses. In a letter to shareholders, then CEB President Lance Gokongwei reported that flights in 2020 dropped 71 percent, and ‘Bottom line, we lost P22.2 billion, a major downturn vs. our net income of P9.13 billion posted in 2019’.
Aviation used the downtime to reorganize, exemplified by PAL successfully exiting Chapter 11 bankruptcy after restructuring its finances and cutting over $2 billion in debt, which allowed it to have a stronger balance sheet.
The DOT, meanwhile, pivoted to domestic tourism, pushing for more local destinations to reopen, earning some revenue for the tourism and aviation industries. Between 2020 and 2022, domestic tourism grew by over 137 percent, from 27 million to 64.1 million. Domestic revenue was recorded at P564 billion in 2020, and swelled to P1.4 trillion as Filipinos took advantage of the lowered quarantine restrictions to travel to local destinations.
When borders fully reopened in February 2022, a ‘revenge travel’ boom ensued. Clemente says, ‘Arrivals were more than what we had initially anticipated.’ By the end of that year, inbound tourists reached 2.65 million, which is higher than the 1.7 million the DOT had targeted.
PAL recorded a significant turnaround that year with a full-year operating income of $297.2 million, supported by a 214-percent surge in passengers.
Uneven recovery
By early 2024, the hospitality industry saw ‘almost a total recovery,’ as ‘hotel occupancy and MICE (Meetings, Incentives, Conferences, and Exhibitions) bookings had been steadily increasing,’ according to Pacis.
Travel preferences, however, substantially changed. Clemente observes that ‘tourists are now looking more for tactile and authentic experiences when they travel.’ He notes that tourists now ‘want to experience the world in a deeper way than just by being passive tourists.’
Pacisconcurs, stating that ‘today’s traveler is more discerning, well-informed, savvy, and quite demanding,’ and that ‘convenience and luxury are no longer enough, unlike two decades ago.’
Despite the momentum, inbound tourism in 2024 reached only 5.95 million, falling short of the DOT’s 7.7-million target.
The current DOT chief, Christina Garcia Frasco, has blamed the lackluster performance in the inbound travel sector on a low marketing budget and the tepid arrivals from China due to visa challenges. Ongoing diplomatic tensions between Manila and Beijing over the West Philippine Sea held back the rollout of an electronic visa (e-visa) scheme in China.
Her leadership launched the ‘Love the Philippines’ brand campaign in June 2023, which was highly criticized, especially when its first promotional video was found to have used foreign scenes to depict local popular destinations.
The lower arrivals have impacted many tourism businesses. Clementestresses, ‘Lower arrival numbers have affected most DMCs this year. We feel that we need to reestablish the Philippines as a destination by creating more buzz or noise in the global market. We need to raise the destination’s profile again.’
PPP for airport modernization
The aviation industry is faring better, though. The privatization of Naia-the main gateway to the Philippines-is considered a major milestone. One year after the Ramon S. Ang-led New Naia Infrastructure Corp. won the bid to manage the airport, significant changes have been implemented that have enhanced the traveler experience.
‘For years, limited airport capacity, particularly at Naia, has constrained growth. But in recent years, through public-private partnerships (PPP), the public has seen a strong movement: the Naia rehabilitation project, the New Manila International Airport in Bulacan, and the expansion of Clark and Cebu airports. These developments are helping decentralize air traffic and open new growth corridors,’ says Bautista, under whose term as Transportation chief, all these improvements have been fast-tracked.
Another industry milestone is CEB’s landmark purchase agreement with Airbus and Pratt and Whitney for up to 152 A321neo aircraft, equipped with P and W GTF engines. Deemed as the largest plane order in Philippine aviation history, valued at some $24 billion (P1.4 trillion), this is intended to strengthen the carrier’s services while maintaining a lower carbon footprint.
To ensure strategic and sustainable growth, local carriers advocate for a unified roadmap.
Speaking at the recent Aviation Summit of the European Chamber of Commerce of the Philippines, PAL Chief Operating Officer Carlos Luis Fernandez argues for an airport development master plan, stating: ‘We need a master plan standardizing secondary airports through night-rating, runway extensions, and upgraded air navigational aides so they can serve as reliable mini-hubs.’
CEB’s Laoagrees, noting that because airlines typically plan 10 years, ‘the aviation sector requires a clearly defined short-, medium-, and long-term development roadmap. This will ensure that growth is strategic, sustainable, and aligned with national goals.’
Total passenger traffic is projected to expand to 66 million by 2028, up from 53 million in 2023.
Remaining challenges
Stakeholders emphasize that strong policy and regulatory alignment are crucial for continued growth.
Affordability: The rising cost of airfare is a major concern. Pacis says, ‘Fluctuating room rates and unstable airfares have turned affordability into a critical factor in travel decisions.’
Government focus: Philippine tourism continues to play catch-up with its neighbors in terms of attracting inbound visitors. Clemente stresses that ‘tourism is very dependent on the government, especially as it pertains to how much value it places in this industry, and who is put in charge of the DOT and its related agencies.’
Regulatory reform: Bautista pushes for the strengthening of the Civil Aviation Authority of the Philippines ‘by granting it greater autonomy, improving technical capability, and aligning its governance with ICAO [International Civil Aviation Organization] best practices.’
Looking ahead, as long as the industries maintain integration-airports and airlines aligned with destination development, with regulators that are enabling rather than constraining, and private-public partnerships thriving-the Philippines is well-positioned to survive not just future shocks, but to thrive as an Asia-Pacific tourism and aviation hub into the next decade.