MANILA, Philippines — Investors in tourist accommodation facilities would like the government to relax the minimum required investments to encourage new investments and modernization of existing hotels in view of the booming tourism sector.

This was contained in a position paper submitted by the Philippine Hotel Federation Inc. to the Board of Investments, which is now crafting the list of preferred economic activities that would be entitled to a package of tax and fiscal incentives under the 2012 Investment Priorities Plan.

Based on its petition, the group would like to lower to $50,000 the current $100,000 per room investment requirement for pioneer incentives for all categories (deluxe, first class, standard, economy) as long as they are accredited by the Department of Tourism. Projects under this category are entitled to six years of ITH.

The group has also asked to lower the required investments for pioneer status for modernization projects from minimum cost of $10,000 per room to $5,000 per room for deluxe and first class and, to $2,000 per room for the standard and economy hotel class Projects under this category are entitled to four years of ITH.

Modernization projects classified as pioneer are entitled to three years of ITH.

Since the current program does not specify the incentives for modernization projects under non-pioneer status, the group has proposed that projects under this classification the same three years of ITH.

The pioneer status is crucial to investors because this could spell a difference of two to three years of ITH.

For new projects, the group said, the lowering of investment requirement will enhance the attractiveness of investing on first class, standard, and economy hotel types.

This would also allow mid-priced hotels to he built that will cater to a wider tourist market belonging to the lower B and upper C income levels, both domestic and overseas.

"The two-year difference in the length of the ITH between a pioneer and Non-pioneer status hotel project makes a lot of difference in terms of investment returns," the position paper said.

Historically, the group said that the 4th to 6th year of a hotel could be the good years where the business results are good and profits are maximized.

More often than not, the group said, the first year of the hotel is a net operating loss where there is no taxable income at all, hence, the ITH has no bearing.

The profitability would start to show on the second year and would increase thereafter as hotel finally set its foothold in the market and achieve cost efficiencies.

In particular, the hotel operators and owners noted that the $10,000 per room minimum investment requirement for modernization projects is daunting.

This situation forces the hotel to delay modernization programs until such time they can accumulate funds and meet the investment requirement.