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Businesses bracing for Boracay’s closure

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A DECISION by President Rodrigo R. Duterte to shut the holiday hotspot of Boracay, which he has called a “cesspool”, prompted airlines to cut flights on Thursday, as hotels prepared for cancellations and businesses appeared resigned to a move the government said was non-negotiable.

Mr. Duterte late Wednesday ordered the closure of Boracay for six months from April 26 in a bid to rescue from ruin a once idyllic island that drew 2 million tourists and generated over a billion dollars in revenue last year.

Domestic airlines offered customers full refunds or flights elsewhere, but said they would still operate a limited number of flights to Boracay’s gateways, Caticlan and Kalibo, to serve residents, which number about 50,000.

Cebu Pacific, Philippine Airlines and AirAsia Philippines said they would scale down services to the two airports from April 26 to Oct. 25, and add more to other popular beach and dive destinations, including Cebu, Palawan and Bohol.

Cebu Pacific, the dominant domestic carrier, said it cancelled 14 daily round-trip flights and anticipated a loss of $3 million to $5 million over the six months.

The government this week estimated the closure could shave 0.1% off 2018 gross domestic product.

Discovery World Corp. (DWC), which operates a lavish 88-room resort on Boracay, said the closure would have a significant impact on its financial health, citing the resort’s large contribution to revenue.

“The financials are expected to significantly drop for this year, considering that operations of Discovery Shores Boracay contribute a significant majority of the corporation’s consolidated revenue,” DWC said, adding it will downsize operations to a skeletal team that will take care of the upkeep and maintenance of the resort for the closure’s duration.

The listed firm, whose shares dropped 6.67% to end P2.24 apiece on Thursday, said it has also started refunding customers’ deposits and rebooking them to a future date or to its other resort, Club Paradise in Palawan.

At the same time, DWC said “[t]he stoppage will bring about much-awaited time to allow us to accelerate our renovation and be ready for the re-opening of Boracay.”

“The company is looking forward to rebound in 2019 with a significantly renovated resort, the opening of Signature Suites expansion, and the opening of its new swimming pool extension.”

DWC grew net income by 6.44% annually to P26.561 million in the nine months to September as revenues increased by 31.1% year-on-year to P535.864 million and cost of sales and services jumped 48.81% to P328.255 million.

The government made it clear it was ready to take a temporary hit on tourism.

“We have to swallow the bitter pill if we wish to sustain and protect the island of Boracay,” Frederick M. Alegre, assistant secretary for tourism, told a news conference. “It is a temporary setback but we will recover the glory days of Boracay.”

Located off the northern tip of the central island of Panay, Boracay’s white sand, lively nightlife and abundant water sports are a constant draw for visitors. In recent years, growing numbers of Asian visitors, particularly from China, have been straining the resources of beach resorts in countries like Philippines and Thailand.

CATALOGUE OF BREACHES
Since February, Philippine officials have been scrambling to inspect the island and record a catalogue of construction and permit breaches after Mr. Duterte, in one of his trademark public outbursts, said Boracay’s turquoise waters smelled “of shit” because sewage was ending up in the sea.

He has vented fury at an explosion of unlicensed developments on the crowded 10-square-kilometer island, including encroachments on forest and beach land.

So far, the authorities have found 948 illegal structures, half of which they aim to destroy during the closure.

The government has yet to provide specifics about the rehabilitation, but Epimaco V. Densing III, assistant secretary of the interior, on Thursday said a soft opening could take place within 3-4 months, after drainage systems were fixed and illegal structures dismantled.

Priorities, officials said, were overhauls to roads, sewage treatment and waste disposal facilities to handle about 90 to 115 tons of waste a day, of which only 30 tons is brought out off the island, according to the interior ministry.

The local tourism industry has urged a delay to the planned closure and a gradual introduction, something the authorities say cannot work.

Boracay Foundation, Inc., the largest business group on the island, was meeting on Thursday to discuss its response to the closure.

Jose Clemente, president of the Tourism Congress of the Philippines, said businesses needed time to adjust.

“We are a bit depressed right now,” he said.

“I really feel for the people in Boracay,” he added. “They really need to find ways to be employed, or at least keep their head above water for the next six months.”

The government said it will have a P2-billion “calamity fund” to try to help an estimated 30,000 people on Boracay whose livelihoods depend on tourism, directly and indirectly.

The impact on hotels and resorts has yet to be fully assessed. Boracay, one of 7,300 islands in the archipelago nation, hosts 1,800 businesses, including global hotel chains like Shangri-La and Movenpick, and locally listed companies Megaworld Corp. and Manila Water Company, Inc.

Karl Chusuey, vice-president for marketing at Henann Group, which operates one of Boracay’s largest resorts, said it was receiving cancellations, which “were as expected.”

LOOKING AHEAD
Some large operators welcomed the closure, saying it would create a more sustainable tourism environment, and make it easier to complete ongoing construction work.

“It’s good for us because it means a better Boracay after six months,” said Monica T. Salomon, president of Megaworld Corp. subsidiary Global-Estate Resorts, Inc. (GERI), which is behind the 140-hectare Boracay Newcoast project.

“Our big locators in Boracay Newcoast are upbeat with this development. In fact, we will speed up construction of Belmont Hotel in anticipation of huge demand at the time of reopening of Boracay.”

GERI shares dropped 4.55% to end P1.47 apiece on Thursday.

Sought for comment, Timson Securities, Inc. equities trader Jervin S. de Celis said in a mobile phone message that “[t]he closure of Boracay will be a blow to the service sector on the island, but I think the effect of it on the operation of GERI and DWC will be minimal since both firms have presence in other tourist spots such as Tagaytay (GERI’s Twin Lakes) and Palawan (DWC’s Club Paradise and Vanilla Beach Club and Hotel).”

DoubleDragon Properties, Inc. expressed confidence that the clean-up will not delay the company’s construction of the 1,001-room Hotel101 Resort-Boracay, which is targeted to open in 2020.

“We are in full support of the government’s efforts in the proposed rehabilitation which… will result in the necessary cleanup to elevate the island in becoming truly world-class,” DoubleDragon Chief Investment Officer Hannah M. Yulo said in a text message. — Reuters and Arra B. Francia