Thursday 12 June 2014

Future looks bright for Yangon hotel market

From a dearth of international-standard accommodation, the city looks set for a boom

The social and economic reforms that began in Myanmar in 2011 have allowed tourism to flourish in the country. In the former capital city and still the commercial hub, Yangon, international arrivals grew 46% from 550,000 in 2012 to just over 800,000 in 2013.

The number of arrivals in Yangon remains relatively small compared with the 26 million visitors the Department of Tourism says descended on Bangkok last year. But Yangon’s undersupplied hotel market has attracted strong investment interest, which is driving hotel supply to grow rapidly.

Even despite the rapid growth in new supply, investment opportunities in the Yangon hotel market remain huge.

According to Myanmar’s Ministry of Hotels and Tourism, there were about 10,000 hotel rooms in Yangon at the end of 2013, only about 2,000 of which were considered to be of international standard. In response to the low level of international-standard supply and growing lodging demand, the Yangon hotel market has enjoyed strong performance. Occupancy for the up-market and luxury segments increased from 45.8% in 2009 to a record 80% in 2013. The average daily rate (ADR) went up almost 300%, from US$40 in 2009 to $157 by the end of 2013. As a result, average revenue per available room (RevPAR) grew more than seven times to $126 during the five-year period.

The strong financial performance of existing properties and the lack of supply have encouraged investment in the Yangon hotel market to grow rapidly, with many new development projects coming on stream across the city. There are 4,518 rooms expected to enter the Yangon hotel market in the next five years out of which 95% can be categorised as international standard.

Once all the currently planned new rooms are operational, the total supply of international-standard hotel rooms in Yangon will more than double. This year alone, there are 1,200 rooms planned for completion, accounting for 60% of the existing stock. The majority of the upcoming supply comprises hotels in the up-market and luxury segments. Some of the major projects that are currently under construction and planned for completion between 2014 and 2016 include the Novotel Yangon Max (366 rooms), Hilton Yangon (300 rooms), Sedona (420 rooms), Pullman Yangon Myat Min (300 rooms), HAGL Hotel (480 rooms), Pan Pacific Hotel (348 rooms) and Daewoo Hotel (150 rooms).

Despite such a considerable amount of new supply in the pipeline, it is expected that the Yangon hotel market will continue to enjoy a solid performance this year and demand will keep pace with new supply following continued growth of international visitor arrivals.

Occupancy is forecast to stay high at 80% this year, while the growth in ADR will continue though the pace of expansion is likely to slow in response to the increase in new supply. It is expected that an overall ADR and RevPAR figures will grow to by 10% this year over 2013.

The positive outlook for the Yangon hotel market is based on the city’s growing popularity as an emerging tourist destination. This is reflected in increasing international visitor arrivals and direct flights from more countries to the city, aided by the expansion of the Yangon International Airport.

In the longer term, construction of the new Hanthawaddy International Airport at Bago (80km north of Yangon) is expected to help increase international arrivals when it opens in 2018. Moreover, a tourism master plan for Myanmar was introduced last year by the Asian Development Bank in collaboration with the Norwegian government. The plan envisions 39 developments involving improvement of the Bagan River port and initiatives worth $500 million including plans to expand international visitor arrivals and improve tourism education.

Tremendous opportunities remain. Looking beyond 2014, the up-market and luxury hotel segments in Yangon are likely to experience growing competition due a significant increase in new supply. Having said that, the trading performance of the properties is expected to remain strong, given the continued growth of lodging demand.

In addition, there is a strong opportunity for branded mid-level hotels of international standard since this segment remains untapped.

The future remains bright for the Yangon hotel market and opportunities await for investors and operators who are willing to take them.

source: Bangkok Post

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