Beyond Resilience: Charting a Path Towards a Brighter Future

Source: Chairman’s Message, Annual Report 2022

Dear Esteemed Stockholders,

I am delighted to address you again as we celebrate yet another year of uncompromising resilience. We are here to review the year that was—look back on our annual milestones, all testaments to the unwavering determination of our company to move forward past trying times.

Beyond our challenges, we are on the cusp of a new chapter. We are working to recover all that was undone during the COVID-19 pandemic and other incidents that have battered the tourism industry here and abroad for the past years. Before these challenging times, the tourism industry was on a history-making growth trajectory, accelerating more than it ever did in past decades. That growth was interrupted by an unforeseen crisis and brought to a standstill. The hostile environment tested the core tenets of the tourism industry’s resilience.

Here we are, years later, with many learnings and proven strengths under our belt. Our country’s hospitality sector displayed incredible adaptability and willpower. Amid adversity, we pivoted strategies, sought innovative solutions, and banded together with other sectors to weather the storm.

Mobility restrictions around the world have largely been lifted, and safety restrictions relaxed to varying degrees. The effect spurred some of the much-prophesied “rebound travel”, although we in the Philippines were allowed what could probably be described as an industry preview rather than a full-fledged rebound.

For the second consecutive year, the market has shown unmistakable signs of recovery. Though not fully back to 2019 levels, the return of international flights and interest in travel reflected in global travel spending in 2022. Global international tourism receipts increased by 61% versus 2021. However, the increase, amounting to one trillion USD, was still below the total receipts in prepandemic levels. Despite the figure doubling from the nadir of 407 million USD at the height of the pandemic, it hasn’t caught up yet to the peak revenue in 2019.

In 2022, Waterfront saw the gradual return of our FIT’s (Frequent Individual Travelers), encouraged by the reversal in travel restrictions. We also saw a bigger rebound among one of our reliable domestic markets, made up of government and NGO groups. The local Philippine market has been the driving force of the Philippine tourism and hospitality’s resilience in 2022 as our international feeder markets like Korea, Japan, and Mainland China retained some travel restrictions or were in lockdown.

Unfortunately, we weren’t free of all natural and unforeseeable disasters. In what was supposed to be a promising year-end in December 2021, Cebu and its neighboring provinces were struck by Category 5 typhoon Odette, the effects of which persisted well into the following year, significantly impacting our success in 2022. Waterfront Cebu City Hotel and Casino (WCCHC) and Waterfront Airport Hotel and Casino (WAHC) in Cebu sustained substantial infrastructure damage, forcing us to temporarily close key areas of our hotels.

In WAHC as many as sixty-nine (69) rooms had to undergo repair as the hotel’s roof was damaged by the typhoon. Apart from the rooms, the hotel’s banquet facilities also suffered damage. In WCCHC, some rooms and suites, a total of 72 rooms, mostly in the Casino wing needed to be closed off for repair.

Instead of pursuing our year-end plans in marketing, promotions, and CSR, we had to contend, as with all affected businesses in the region, with the necessary measures to deal with structural and operational damage caused by the Category 5 typhoon. Valuable resources were reallocated once again for survival instead of development, as we were at the height of the pandemic.

Our company has rallied through the challenges, determined to cross over towards a period of renewal and revival. In 2022, we’ve held the fort, ensuring that all departments delivered excellent performance against the odds, demonstrating growth in many key areas. Even with the challenges we have faced, consolidated revenue for the group has rebounded by double digits. Each component of total revenue has shown exceptional results, with some growing by double and triple digits. Rooms revenue in 2022 is PHP 338.81 million, growing 77.8% from PHP 190.57 million in 2021, Rent and related income has increased by 215.5%from PHP 192.34 million the previous year to PHP 606.75 million this year. F&B revenue for 2022 is PHP 516.36 million. Other income rose from PHP 8.63 million in 2021 to PHP 24.52 million in 2022—a growth of 184.1%. Gross Revenue for the entire WPI group is PHP 1.49 billion in 2022, up by 49% from 997.79 million in 2021.

GOP is PHP 493.06 million, up 39.8% from PHP 352.59 million the previous year. Net income in 2022 is PHP 50.88 million. The group’s
costs and expenses for the entire year—encompassing F&B, rooms, personnel, energy, repairs, maintenance, rent and others—is PHP 993.38 million.

Our flagship property, Waterfront Cebu City Hotel and Casino (WCCHC) has once again demonstrated remarkable strength and adaptability through a challenging year. The hotel’s rooms revenue increased from PHP 100.90 million in 2021 to PHP 201.46 million in 2022—a growth of 100%. Rent and related income likewise grew from PHP 412.08 million to PHP 414.31 million—a 1% increase. F&B revenue rose by a remarkable 195%, from PHP 116.63 million in 2021 to PHP 344.61 million this year. Other income for the hotel grew from PHP 0.98 million the previous year to PHP 4.29 million this year, achieving a 339% increase. The hotel’s consolidated gross revenue amounted to PHP 964.67 million in 2022—an increase of 53% from PHP 630.58 in 2021.

Waterfront Airport Hotel and Casino (WAHC) demonstrated many key improvements in hotel revenue. Rooms revenue went up by 9%, from PHP 48.77 million the previous year to PHP 53.24 million in 2022. Rent and related income is PHP 192.45 million. F&B income rose by an impressive 56% from PHP 28.40 million in 2021 to PHP 44.29 million in 2022. Other income rose by triple digits, from PHP 1.89 million in 2021 to PHP 5.35 million this year—an increase of 183%. GOP in 2022 is PHP 139.14 million, an increase of 10% versus PHP 126.45 million the previous year. Net income for the hotel in 2022 rose by 50%, from PHP 43.07 million in 2021 to PHP 64.67 million in 2022.

Waterfront Insular Hotel Davao (WIHD) delivered positive numbers for all key areas of operations and hotel gross revenue for 2022. Rooms revenue for WIHD in 2022 is PHP 84.10 million, an increase of 106% from PHP 40.90 in 2021. Rent and related income rose by 38%, from PHP 1.28 million the previous year to PHP 1.76 million currently. F&B income jumped by 171% from PHP 46.59 million in 2021 to PHP 126.09 million in 2022. Other income also showed remarkable growth by increasing 251% from PHP 1.70 million the previous year to PHP 5.97 million this year. The hotel’s gross revenue in 2022 is PHP 217.93 million, a growth of 141% versus PHP 90.47 million in 2021. WIHD’s 2022 GOP is PHP 34.58 million and its net income is PHP 5.22 million.

Waterfront Manila Hotel and Casino (WMHC) continues its construction and rebranding phase. While slated to open earlier, the hotel encountered administrative and pandemic-related delays. However, we remain committed to delivering a new innovative
guest experience and capturing the post-pandemic revival, and assure you that construction of this remarkable building is ongoing to deliver the most captivating, entertaining, and memorable experience for business and leisure travelers to Manila.

Just as in recent years, we have maintained the pillars of adaptability and stability that have steadied us, strong and poised to leverage the advantages of a revived travel economy. These are the practices that have kept our organization strong, our workforce robust, and our brand more resilient than ever. In 2022, Waterfront maintained a healthy and well-vaccinated workforce, ready to take on the uptick of guests and travelers, and assuring all staff and guests of safety as we all emerge from the pandemic.

The company has also ensured the continuous maintenance of our distribution channels, both online and offline. We have continued investing in such channels to assure an uninterrupted relationship with our network and to safeguard operations, preventing disruptions on our way to a revitalized travel economy. Revenue from the Online Market Segment has increased from 2021 to 2022 across all our Hotel Properties from a total revenue of PHP 21.43 in 2021 to PHP 144.07 million in 2022, a remarkable growth rate of 572.28%.

For WCCHC, the revenue from the online market segment increased by 924%, from PHP 8.29 million in 2021 to PHP 84.92 million in 2022. Online Travel Agency or OTA bookings generated a revenue of PHP 74.48 million in 2022 from PHP 4.96 million in 2021, a growth rate of 1,402%. Website-based bookings generated PHP 6.14 million in 2022 from PHP 2.04 million in 2021—a growth rate of 201% for the hotel while mobile app-based bookings in 2022 amounted to PHP 4.20 million compared to PHP 1.07 million in 2021 reaping a growth rate of 292%.

WAHC’s online market segment also had a notable run in 2022 with a revenue of PHP 25.92 million compared to in 2021 at PHP 7.83 million, a growth rate of 231%. OTA bookings generated PHP 23.87 million in 2022 as opposed to PHP 3.70 million in 2021, with a growth rate of 545%. And website-based bookings generated a revenue of PHP 1.30 million in 2022 while the mobile app-based bookings produced PHP 0.72 million.

Similarly, our WIHD’s online market production is not one to be set-aside. The hotel’s OTA revenue increased from PHP 4.64 million in 2021 to PHP 30.54 in 2022, reflecting a growth rate of 558.19%. Website online bookings rose from PHP 406 thousand in 2021 to PHP 1.53 million in 2022, an increase of 276.85% while mobile app-generated online bookings for 2022 amounted to PHP 1.10 million compared to its production in 2021 at PHP 261 thousand, an increase of 321.46%. Total online revenue for the hotel increased by 525.80%, from PHP 5.31 million the previous year to PHP 33.23 million currently.

Although availability of our Rooms were affected at the time from the Typhoon Odette’s damage. Nonetheless, our online channels demonstrate robust growth overall, and we will continue to nurture them as we strive to grow and innovate with these technology-driven times.

Our marketing team continues to drive creative ideas and programs designed to stimulate the market. The “Hello 2022” and “Indulgence Plus” packages were implemented in our hotels to encourage booking and generate interest by offering attractive rates and longer validity periods, as well as introducing new products to pique customer interest.

Guest Satisfaction Index (GSI) in 2022 mostly showed overall improvement compared to the previous year. GSI is measured by customer ratings scores, with 5 as the highest possible rating. For WCCHC, Efficiency of Service was rated at 4.64 in 2022, while it averaged at 3.64 in 2021, an increase of 27.47%. Friendliness of Staff was rated at 3.67 in 2021. It increased by 27.25% to 4.67 in 2022. Guest Rooms were rated at 3.46 in 2021. GSI for Guest Rooms increased by 14.74% in 2022 to 3.97. F&B ratings grew from 2.65 in the previous year to 4.67 in 2022—an increase of 76.23%. Overall hotel experience in 2022 was rated at 4.60, an increase of 8.75% from 4.29 in 2021.

WAHC also demonstrated improvements in GSI data. Under Rooms, Efficiency of Service increased from 2.84 the previous year to 3.93 in 2022—an increase of 38.38%. Friendliness of staff was rated at 3.95 in 2022, improving by 38.11% versus the previous year’s 2.86. Guest Rooms rating was 3.32 in 2022, an increase of 16.49% versus 2.85 in 2021. F&B GSI jumped from 2.06 the previous year to 3.85 this year—a growth of 86.89%. Overall Hotel Experience GSI for WAHC in 2022 is 3.76, a 50.40% increase from 2021 at 2.50.

WIHD reported a GSI of 3.36 for Efficiency of Service, 3.38 for Friendliness of Staff, and 2.74 for Guest Rooms. F&B GSI in the hotel improved from 3.20 in 2021 to 3.75 in 2022—a growth percentage of 17.19%. Overall Hotel Experience GSI for WIHD in 2022 is 3.04. We continue to align marketing, product experience, service quality, and improvements in hotel amenities to increase overall
customer satisfaction in all our hotels.

Within the year, we also implemented infrastructure, or as we like to call them, “hardware” improvements that augment the guest experience. Our lead infrastructure project is the reimagining, rebuilding, and relaunching of our Manila property. We also continue to invest in property improvements in our other hotels to refresh the guest experience and ensure high guest satisfaction.

As we strengthen the pillars for resilience and stability, we are moving towards a new phase of recovery and sustainability. Sustainability initiatives are essential in keeping our lead as a top brand in Philippine hotels and hospitality, keeping us on track for the long haul, ready for a resurgence of increased global demand for travel and travel services.

A prestigious local brand, we have weathered the waves of business and are excited to celebrate our 25th anniversary for our flagship WCCH in 2023. Our silver anniversary is a huge milestone. Moreover, it is a shared accomplishment with our dedicated and passionate Waterfront team, our guests, our partners and loyal patrons, as well as you, our shareholders.

Together we have endured, succeeded, and emerge as a precious metal. Our longevity is a testament to the quality of our management, our passion for service, and the care we instill in every touch point of our brand. As we take the first steps into a new era of recovery, we honor the journey that has taken us this far. By strengthening the pillars that keep the company resilient, we sustain the foundations that will take us to a bright future ahead.

Thank you for your valuable support.

SERGIO R. ORTIZ-LUIS JR.
Waterfront Philippines, Inc, Chairman