Why Are Hotel Owners Against the Planned Legislated Wage Hike?

The proposal to increase the minimum wage across the board currently being discussed in the House of Representatives will only derail the industry’s recovery, officials of the country’s hotel industry said. 

“While we fully support the goal of enhancing the welfare of our workers, we firmly believe that the imposition of a wage hike at this time would have a devastating impact on the already fragile tourism hotel industry in the Philippines,” Philippine Hotel Owners Association (PHOA) President Arthur M. Lopez said in a letter to House Speaker Martin Romualdez dated March 14, 2024, a copy of which was obtained by Esquire Philippines.

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“It is important to note that our industry is still reeling from the profound effects of the Covid-19 pandemic, with tourism numbers and revenue figures struggling to return to pre-pandemic levels,” Lopez added. “This places us at a significant disadvantage when compared to other regional players such as Singapore, Taiwan, Thailand, and Vietnam, all of which have seen much more robust recoveries in their tourism sectors.” 

Data from the Department of Tourism (DOT) showed inbound tourists reached some 5.5 million, which was 34-percent less than the 8.3 million arrivals in 2019. Foreign tourists also spent an estimated $8.69 billion in the country in 2023, or 6.6 percent less than the $9.3 billion spent in 2019. The DOT’s own National Tourism Development Plan for 2023-2028 indicated that the Philippines will likely recover its pre-pandemic inbound arrivals and spending in 2025, based on conservative estimates.

The PHOA has 60 member-companies that operate 206 hotels in the country. It includes major hotel owners such as SM Hotels and Conventions Corp., AyalaLand Hotels and Resorts Corp., Filinvest Hospitality Corp., Phinma Microtel Hotels Inc., The Bellevue Hotels & Resorts, Diamond Hotel Philippines, Bonifacio Landmark Inc. (Grand Hyatt Manila), New World International Development Philippines Inc., Waterfront Manila Hotel and Casino, Sheraton Manila Bay, Philippine Plaza Holdings Inc. (Sofitel Philippine Plaza), among others.

The House of Representatives is currently discussing proposals calling for a P150- to P350-increase in the minimum wage, while the Senate recently approved on third reading Senate Bill 2534, providing a P100-minimum wage hike. The current minimum wage in Metro Manila is P610 per day.

Lopez noted that the industry’s key performance indicators such as average room occupancy rates and revenue were still below pre-pandemic levels, which indicated the industry’s slow and challenging road to recovery. 

“Introducing an across-the-board wage hike at this critical juncture would only serve to exacerbate the financial strain on hotels and tourism establishments, potentially leading to higher operating costs, decreased competitiveness, and even displacement of workers,” he said.

The group underscored that the regional tripartite wages and productivity boards were quite capable of determining adjustments in the minimum wage. “[They] are better equipped to account for the specific economic conditions and needs of different regions across the country. We hope that a more holistic and sustainable approach to economic growth, encompassing initiatives such as education, training, and efforts to improve the ease of doing business, is essential in ensuring the long-term prosperity of our industry and the creation of more and better-paying jobs for our workforce.” 

Labor groups have generally welcomed the moves in Congress to support legislated wage increases, although economists, warned that this would speed up inflation, i.e., the rise in the prices of consumer goods and services.

“No doubt, our workers deserve some wage hike,” leading economist and former deputy governor of the Bangko Sentral ng Pilipinas (BSP) Diwa C. Guinigundo said in a statement sent to Esquire Philippines. “Their purchasing power has dwindled over the years when inflation reached historic highs. Unless supported by productivity gains, it could be inflationary. It should be regionalized as it is, rather than an across-the-board wage increase legislation.”

Inflation has slowed down 3.4 percent in February 2024 coming from a high of 6.1 percent in May 2023, but even the BSP believes the Philippines is still not out of the woods as rice prices remain high due to tight supplies and the rise in global oil prices.

For his part, Albay second district Rep. Joey Salceda said a legislated wage increase would hit small and medium enterprises (SMEs). “As it is, SMEs can barely afford the P600-minimum wage [in Metro Manila] per day. If you increase that by P100, they will have to lay off workers to be able to pay P700. I am sympathetic, really, on wage hikes, but 99 percent of our enterprises are SMEs. Would you like to kill them?” he asked his colleagues recently.