GLOBAL REPORT—While Egypt, Libya, Yemen and Tunisia were violently protesting against their governments during the Arab Spring two years ago, Myanmar, also known as Burma, was slowly shifting gears toward a more democratic government after 50 years of military rule. And as the country begins to stabilize and open its borders to travelers and hotel developers alike, the once repressed Myanmar is poised to take its moment in the global hotel industry spotlight.
In June, the U.S. eased two decades of sanctions against the country, and President Barack Obama’s visit last month was a notable symbol of Myanmar’s slow evolution.
With this sustained reformation, the country is opening itself up as a tourism haven, with hopes of rivaling its neighbor Thailand for travelers seeking a leisure and business destination, leaving an untapped hotel market ripe for development.
“The Myanmar tourism market has experienced tremendous growth in the past year as the country began economic and social reforms,” said Jon Ottevaere, VP of strategic advisory for Jones Lang LaSalle Hotels Asia/Pacific.
Since 2009, visitor arrivals to the country increased steadily, Ottevaere said, with international arrivals buoyed by strong demand in the corporate and leisure markets growing at more than 40% in the first six months of 2012. Arrivals in Yangon, the former capital, have grown more than 20% per year between 2009 and 2011, he said.
According to a Jones Lang LaSalle Hotels market insight report, Yangon hotel supply is expected to grow 36.7% compound annual growth rate from 2012 to 2016*, assuming all projects are completed.
“As there is a shortage of hotel accommodation, hotels in Yangon are generally full during weekdays, reflecting the strong surge in corporate demand, mainly from the Asia region,” Ottevaere said. “There is a strong seasonality in leisure demand, which tends to peak between October to March during the dry season.”
Data collected by Euromonitor International projects that the number of hotel rooms in Myanmar will nearly double from 25,600 in 2010 to 40,600 in 2016.
A renewed interest
Didier Belmonte, GM of the 30-suite Strand Yangon, said the growth potential in Myanmar is beyond huge, but even as the room supply increases, it’s still a major hurdle, with “only 1,800 rooms of international standard.”
“Until now, group travel was the core of our business during the high season, with reservations on the books six to 12 months ahead of the stay,” he said. “But now with the new influx of business travelers, the market segment is slowly changing.”
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Didier Belmonte GM at Strand Yangon |
Although most visitors come from Asian countries, Belmonte is having “as many Americans and British as Europeans at the Strand.”
Additionally, with airport arrivals increasing 25%, Belmonte said the hotel did not see a low season this year, especially as more leisure travelers are entering the market. “If not for the recent enthusiasm for Myanmar, we would have had difficulty achieving 30% (occupancy). We exceeded 70% with an attractive increase in (average daily rate).”
Interest in the region’s culture and its abundance of natural resources make it one of the most appealing unexploited destinations in the world. For Gary Franklin, managing director for trains and cruises at Orient-Express, Myanmar is “one of my favorite countries to visit and travel.” That’s because of the “people there, the sights, the culture, the religion—it just fascinating, and relatively untouched.”
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| The Strand Yangon has seen a large increase in business travelers coming in, looking out for the right opportunity for trade and investment, said GM Didier Belmonte. |
Orient-Express offers “hotels, river cruises and tour operators to see the sights,” Franklin said. The Governor’s Residence hotel is located in Yangon’s Embassy Quarter, and the company offers river cruisers Oracella and Road to Mandalay for guest stays.
However, major international brands from the U.S. and Europe are nonexistent in the region, but with loosening sanctions, “Myanmar is definitely the country watch,” explained Glenn de Souza, VP of international operations in Asia for Best Western International.
De Souza said the lack of international hotels and the saturation of luxury hotels in the region mean there is room for midscale brands such as Best Western to launch in the country to cater to “the growing demand of business travelers.”
“With a lack of internationally-branded hotels in the country, especially in the midscale market, we believe that the Best Western brand will be incredibly well received in Myanmar,” he said.
Marriott International also is interested in the region.
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Gary Franklin Orient-Express, Myanmar |
“Certainly as the country opens up and business and tourism develops, we would be extremely interested in operating in the country,” Daniel Ford, executive director of communications for the Asia/Pacific region, said. “It is certainly a country that we are interested in and are keeping a close eye on developments in Myanmar.”
Challenges abound
But even with its lush natural resources, Myanmar is fraught with infrastructure and technology problems, not to mention corruption, forcing the country to play a game of catch-up with its more advanced neighbors.
“The country still has frequent power shortages as most of the power is exported to China. There is no global network for mobile phones, so visitors from abroad have no mobile connectivity. There is no modern banking system, credit-card usage is only accepted in some international hotels and a hefty fee is charged,” Ottevaere said. “Even in Yangon, flooding can still occur during wet season. A legal framework is still to be developed. But there are clearly prime opportunities for foreign companies to tap into a market of more than 50 million people.”
In fact, a foreign investment law was signed this month, aimed to bring foreign capital to address the country’s shortages and grow the economy. The law says foreign investors will not require a local partner to set up a business; foreigners will be able to own 100% of a company in Myanmar with any share in a joint venture with a domestic partner mutually agreed on by both parties. Investors also will receive tax incentives, according to the Jones Lang LaSalle Hotels study.
Because of higher demand, hoteliers have been raising room rates aggressively, causing the local authorities to put a cap rate of $150 on rates. However, not every hotelier is following these rate caps.
Belmonte said there are opportunities beyond Yangon for the country, including Bagan and Inle Lake—“two magical places,” he said, that are “high on anyone’s bucket list for a visit to this country.”
But things will take time for Myanmar to be on the same caliber as tourism hot spots Thailand and Indonesia, he said.
“The beachside requires much development, but the country is taking the necessary steps to ensure that its heritage is not destroyed in a headlong rush to catch up with the rest of the world.”
*Correction, 29 November, 2012: An earlier version of the story misstated the dates.