Myanmar: Paving the way for tourism development

The tourism industry in Myanmar stands to be one of the key winners from the country’s bid to open up economically and politically, following a remarkable two-year period in which international sanctions against the Southeast Asian state were eased.

Despite being considered previously off-limits to all but the most adventurous travellers, Myanmar is poised to have received a record 1m visitors in 2012, up 20% on 2011’s arrivals and following on from three years of steady growth. Progress in liberalisation, together with visits from world leaders, including US President Barack Obama and UK Prime Minister David Cameron, have helped raise Myanmar’s profile on the global stage.

However, while efforts are now under way to build on this exposure and capitalise on its natural advantages, Myanmar will have to channel considerable investment into tourism infrastructure to help the sector realise its potential.

News that the number of passenger numbers arriving at Yangon (also known as Rangoon) Airport was up 50% between January and October 2012 prompted the Minister of Hotels and Tourism, Htay Aung, to announce in December that the government expected international visitors to the country to hit 1m by year-end.

The minister said 600,000 visitors would enter Myanmar through its airports, while a further 400,000 were expected to arrive by land. He added that Yangon Airport was receiving 2300 visitors daily.

While international investors seem keen to explore opportunities emerging in the expanding and increasingly open economy, substantial investment in hotels and related infrastructure will be needed to support continued growth, especially in high-end accommodation, which can be challenging to find.

Didier Belmonte, general manager of the Strand Hotel in Yangon, which reports 100% occupancy throughout much of the year, told the international press there were only 1800 rooms of “international standard” throughout Myanmar. While local media has suggested that some hotels are raising their prices by as much as 200% due to growing demand, there are also indications that the industry is moving to increase capacity. The Traders Hotel in Yangon, which targets the high-end business travel segment, is planning to extend its current room count of 270 to 336 by the end of 2013. The hotel also plans to increase capacity further to 485 in 2014 by converting offices into guest rooms.

Real estate firm Jones Lang LeSalle forecasts that hotel room supply in Yangon will grow by a compound annual growth rate (CAGR) of 36.7% between 2012 and 2016. Economic forecasting company Euromonitor expects the number of hotel rooms in Myanmar as a whole to reach 40,600 in 2016, up from 25,600 in 2010, with much of the new accommodation likely to come from international brands.

Glenn de Souza, vice-president of international operations in Asia for Best Western International, the world’s largest hotel chain, agrees. He told the international press that “Myanmar is definitely the country to watch” due to its low level of penetration by major brands and an expected rise in tourism due to the lifting of sanctions. Marriott International, the US-based chain, is also openly discussing setting up operations there.

While increasing hotel room supply presents opportunities for the tourism sector, other challenges, led by inadequate infrastructure and acute shortage of available land for development, risk delaying development. Power outages and poor roads that can flood in the wet season cause particular problems.

A lack of clarity on the whole legal framework could also hold back international investment, while the antiquated banking system causes issues both for investors and visitors, including the barely nascent use of credit cards. However, the World Tourism & Travel Council (WTTC) is upbeat about growth prospects for the industry. It expects the sector to have expanded by 5.6% in 2012, in what is thought by many to be a conservative estimate, and at an annual average 4.7% from 2012 to 2022.

The industry has a long way to go before it begins catching up with neighbouring countries such as Thailand, which attracted 20m visitors in 2012. However, a new era of political and economic liberalisation looks to be stimulating the growth of what could become an important earner.