The Philippine tourism industry is expanding, but persistent structural constraints continue to limit its full growth potential, according to the Philippine Institute for Development Studies (PIDS).
In its “Philippine Tourism Sectoral Review (2000-2025)” study published in December 2025, researchers found the country continues to lag behind its Association of Southeast Asian Nations (ASEAN) peers in visitor arrivals, tourist spending and length of stay, despite revenues nearing P700 billion in recent years.
PIDS senior research fellow John Paolo Rivera said while the recovery of the sector is real, its growth remains below potential. “The issue here is not just demand. The issue here is systems,” Rivera said.
The study found that domestic tourism has largely driven the rebound of the sector, providing resilience during external shocks. However, inbound tourism, the main source of higher-value spending and foreign exchange, remains constrained.
Rivera said structural gaps, such as relatively fewer arrivals compared to regional peers, lower spending per visitor, shorter stays and slower investment flows, reflect deeper bottlenecks. These include limited airport capacity, high travel costs, weak inter-island connectivity and investment friction.
“We are underperforming not because of weak potential… [but] because of weak systems,” Rivera said.
Unlocking the full potential of the sector would require a whole-of-government approach because many structural constraints extend beyond the mandate of a single agency, he said.
Asian Institute of Management Center for Tourism advisory board member Maria Cherry Lyn Rodolfo said tourism performance is fundamentally a systems and network issue rather than a branding concern.
Tourism should be experienced as a chain from international access to domestic transport and local services, especially in an archipelago of more than 7,600 islands, she said.
“Connectivity policy is actually tourism policy. In a network, the performance is determined by the weakest link,” Rodolfo said.
Weak connectivity, fragmented logistics and inconsistent service delivery can undermine even high-quality destinations, according to the study.
Department of Tourism Region 3 director Richard Daenos said the challenge also lies in implementation, citing the need to sequence reforms rather than pursuing everything simultaneously.
“We would like to focus on something that is not negotiable, and this is to fix infrastructure first. This cannot be done at the same time, not everything at once,” Daenos said.
Daenos noted that some priority segments with a competitive edge include island and beach tourism, diving, community-based tourism and cultural and culinary experiences.
The PIDS study concluded that the Philippines does not lack tourism demand, destinations or talent, but rather an efficient system that connects, prioritizes and delivers.
While recovery is underway, competitiveness will depend on whether structural constraints are addressed, PIDS said.
Without reforms in connectivity, governance and investment activation, current gains risk plateauing rather than translating into sustained growth.
Rivera said tourism has always been the fastest driver of employment, but only if it is treated as a national economic strategy rather than just a sector.
