International hoteliers are eager to open their doors

After decades of sluggish growth in the tourism sector, Myanmar’s hotels are now cashing in on the surge of new arrivals, with nightly rates soaring up to five times what they were a decade ago. Furthermore, new entrants are now keen to enter the market, and some of the world’s best-known brands have plans to expand into the country.

A Troubled Past

In the late 1990s and early 2000s tourists generally avoided Myanmar, viewing it as a hostile nation under military rule. Hoteliers – and indeed the industry in general – suffered as a result. Some sought other means of income: the Traders Hotel, now renamed Sule Shangri-La, at one point leased five floors of its building for businesses to use as office space before the recent boom allowed rates to rise.

“The period between 1997 and 2010 marked the dark age for the industry,” Sukhdeep Singh, the general manager of the Inya Lake Hotel, told OBG. “We charged only $28 per room in 2002.”

Today Inya Lake is one of Yangon’s premiere hotels, and its cheapest nightly rate is around $150. At peak season rooms must be booked weeks in advance. The Sule Shangri-La charged $48 in the early 2000s, with its rate rising to $230 in 2014 – an increase of nearly 400% over the past 10 years.

Alongside the surge in visitor numbers, Myanmar has witnessed a significant rise in investment during the past three years, with a raft of new hotels and infrastructure developments providing a boost to existing stock. The number of hotels registered in Myanmar reached 1019 at the end of July 2014, up from 960 recorded in March, according to the ministry.

“After nearly 50 years of stagnation, the hotel industry has experienced exponential growth since 2011,” Singh told OBG. “The huge increase in tourist arrivals has led to high occupancy rates.”

While new developments pushed up hotel stock by more than 10% during the first half of 2014 and took room numbers to in excess of 35,000, the industry will need to maintain momentum if it is to keep pace with the rise in tourist arrivals.

Infrastructural improvements will also have a key part to play in facilitating growth. Efforts to fill the gaps are already under way, with a new airport earmarked for Hanthawaddy, outside of Yangon, which is scheduled to open in 2019. The new airport will be capable of handling a total of 12m international passengers annually, doubling current capacity levels across the country. Upgrades are also planned for existing facilities to support the initiative.

Main Players

On the back of this sudden success, the Shangri-La Group has taken a more aggressive stance in the country, re-naming its iconic Traders hotel in downtown Yangon to Sule Shangri-La, as well as building high-end serviced apartments near Kandawgi Lake, near the city centre.

The Shangri-La Group’s main competitor, the Hilton Group, has announced an ambitious plan to open five hotels in Myanmar over the next three years even as their first project – managing the Centrepoint Office Towers – was set back by delays. Hilton has signed management agreements with Eden Group, one of the country’s larger conglomerates run by local businessman U Chit Khaing, and plans to rebrand two existing properties and build another three by 2017.

Meanwhile, Kempinski Hotels, Europe’s oldest luxury hotel group, plans to open a 141-room property in the capital, Naypyidaw, at the end of 2014, and Best Western has already opened properties both in Yangon and Mandalay. Other international players, such as Novotel and Accor, are following suit in the rush to be a part of Myanmar’s rapidly expanding hotel sector – indeed, the country is estimated to have the seventh-fastest-growing tourism market in the world, according to World Travel & Tourism Council data (see overview).

Balancing Growth With Quality

These extraordinary growth figures are not giving the market a chance to adapt, and massive price hikes and rushed construction may play to Myanmar’s disadvantage in the long term. The major players in Myanmar’s tourism sector must be sure they are offering services on par with their counterparts in neighbouring countries – both in terms of quality and cost – to ensure that visitors will return.

While the rise in visitor numbers signals good news for both the tourism industry and Myanmar’s broader economy, concerns are growing that the rapid pace of development could put a strain on resources.

Industry players have highlighted the importance of ensuring future growth is sustainable. “Negative publicity about disappointing travel experiences travels faster and reaches more people than the positive stories,” Frank Janmaat, managing director at Yangon-based Lighthouse Hospitality Consultancy, told OBG. “Under current circumstances, trying to attract the highest number of tourists might be counter-productive for the image of Myanmar as a travel destination.”

The country is also currently missing a sound regulatory environment, which may well prove crucial in providing protection for historical and natural places of interest. “Myanmar has only just opened up,” U Aung Soe Tha, chairman of Myanmar Combiz Travels, said, when speaking to OBG. “We need to improve rules and regulations within the tourism sector to protect local business.”

Mwwting Demand

“We need to keep the private tourism sector strong,” Daw Kyi Kyi Aye, a senior advisor to the Myanmar Tourism Federation, told OBG. “This will make Myanmar a better place to live and visit. We need to refocus on tourism, improve training and education, and create more community-focused options, such as bed and breakfasts. Myanmar communities need to learn what foreigners want.”

The ministry’s Tourism Master Plan attempts to address these concerns by laying out some careful guidelines for the industry’s development (see analysis), but in the rush to cater to the recent influx of tourists, many may find it hard to believe the surge could be threatened. Though more hotels will enter Myanmar and more options will be available for tourists in the coming years, the expectations of those tourists will also rise quickly. In a region famed for its tourism, Myanmar must avoid appearing to be of less value for money than its neighbours – something that can only be achieved with effective regulation and wise moves among decision-makers in the tourism sector.