The Myanmar hotel boom

REPORT FROM MYANMAR—Global hotel chains are eyeing Myanmar as the next big Asian market for expansion.

Shangri-La Hotels and Resorts has a property there, as does Orient-Express Hotels, and last month a Best Western opened in Yangon, the country’s largest city.



“It is, essentially, Southeast Asia’s last great wilderness,” said Glenn de Souza, VP of international operations, Asia and Middle East for Best Western International. “The opening of Myanmar to foreign investment is already (creating) a huge surge of interest in the country. Likewise, demand for leisure travel is soaring. Greater accessibility and the removal of ethical concerns over travel to Myanmar mean the country is now increasingly popular.”

Hotel groups such as Best Western are moving quickly to gain a foothold in the country. According to de Souza, the Best Western development team first met with the owners of the 189-room Green Hill Hotel in late February at the Myanmar Hospitality & Tourism Conference and by May secured an agreement to convert the property to a Best Western.

De Souza said Best Western is close to signing a second property, a Best Western Premier in Nay Pyi Taw, Myanmar’s capital, and is looking for additional deals.

Open to the outside

Last year, the United States removed diplomatic and economic sanctions against Myanmar as the country started moving toward democratization. U.S. President Barack Obama punctuated the easing of tensions between the two countries by visiting Myanmar last November.

Since then, a number of U.S. consumer goods companies, including Coca-Cola and Yum! Brands, have begun to do business in the country.

The influx of Western companies includes several hotel chains. Hilton Worldwide announced in March that it signed a management agreement for a 300-room Hilton-branded hotel in Yangon. Shangri-La, which operates a 305-room Trader’s Hotel in Yangon, will open a Shangri-La Residence later this year and a Shangri-La Hotel in 2016, both in Yangon.

Orient-Express has had a presence in the country since 1996 when it launched the Road to Mandalay river-cruise operation. It 2004, it opened the 45-room Governor’s Residence in Yangon. It also operates another cruise operation and is seeking other hotel and cruise opportunities, said Sven Gevers, regional managing director for Asia.

He said business is booming at the company’s Myanmar properties with revenue per available room at its Yangon hotel increasing 51% so far this year over last year.



“We’ve had increases from every market,” he said, noting the U.S. is the company’s No. 1 source of business for its Myanmar operations and that business has grown by 42% this year. “The Asian market is coming on as well, and there is a lot of interest in the corporate market. In past years, (business in) the low season was quite slow but now it is being impacted by the business market.

“Some people think in five or six years (Myanmar) will be a heavyweight contender to Thailand,” he said. “Whether it goes that fast is another thing to see, but even coming within a couple of percentage points of Thailand would be a massive achievement for the country.”

A market of potential
According to Myanmar’s Ministry of Tourism, tourist arrivals to the country grew by 29.7% in 2012 to just over one million visitors. Earlier this month, the government launched a tourism master plan designed to increase the country’s tourist arrivals to 7.5 million by 2020. The $500-million plan, which will be funded by the government of Norway, outlines 38 projects, ranging from infrastructure improvements to tourism education and training programs. The initiative also calls for reviewing a 1993 tourism law to streamline licensing formalities for hotels and other tourism-related businesses.

According to the ministry, Myanmar, a country with a population of 60 million, has 787 hotels with 28,291 rooms. The hotel inventory includes 23 properties rated as 4- or 5-star by the government. About one-fourth of all hotels (204) are in Yangon.

Today, 15 hotels are in the in construction, final, pre-planning or planning stages of the development pipeline, according to STR Global, sister company of HotelNewsNow.com.

Marriott International is looking to enter Myanmar but has yet to sign a deal, said Peter Gassner, director of hotel development, Asia/Pacific.

“The demand for international branded quality hotels has surged and the market is seriously undersupplied,” Gassner said. “The country has great potential as the next big tourism destination in Asia. This emerging market represents a unique opportunity for growth in Southeast Asia.”

Challenges ahead
Developers and operators face challenges in entering the Myanmar market, said several hotel executives.

“Of course all emerging markets face certain challenges, but Myanmar is emerging with such pace that it is encountering several bottlenecks,” de Souza of Best Western said. “Manpower is a problem. As an international hotel company we need to maintain our service standards, and this might be more challenging in Myanmar, which has a far smaller pool of workers with professional service skills.”

The executives also stressed the importance of partnerships in doing business in the country. Gevers of Orient-Express said the company’s long presence in the country helps it navigate the business landscape.

“We’ve been able to filter who are the business people who do business in the proper ways, and that’s how we’re expanding and flourishing,” he said. “For a start-up, that takes time. That’s why (our success) can’t be replicated overnight.”

Gassner of Marriott agrees that local knowledge and connections are important.

“Chinese, Singaporean and Thai companies did business in Myanmar during the times under sanction and feel more comfortable with the current legal framework and existing challenges than do Western companies,” he said. “It will be difficult for foreign developers to enter the market without local partners, and it’s Marriott's business model to partner with local real estate owners and developers to build our hotel portfolio.”

source: Hotel News Now
http://www.hotelnewsnow.com/Articles.aspx/10717/The-Myanmar-hotel-boom