Myanmar to lay stronger foundation for tourism growth

Hundreds of thousands of foreign tourists have visited Myanmar since relations with the West thawed and the country began to open up to the outside world in 2010. While some are eager to experience the South-east Asian nation’s rich culture and heritage, others are simply curious to see the once isolated country before it changes forever. At the same time, economic development is expanding the market of domestic tourists with the resources to explore their country’s varied destinations.

Growth is thus creating impetus to update and expand sector resources. To meet its tourism goals, it will be necessary for the country to deliver on plans to modernise antiquated infrastructure: crucial not only to tourism, but also the wider economy. The challenges ahead include improving land, sea and air transport, and ensuring a reliable supply of electricity (see Transport & Energy chapters).

Destinations & Development

Most tourists follow a well-trodden route through Myanmar’s varied historic and cultural sites, from the sacred Shwedagon Pagoda in Yangon to the archaeological wonders of Bagan, the beaches of Ngapali and the unique culture of the fishing communities of Inle Lake. Myanmar is also now encouraging foreign visitors to explore new destinations and working hard to improve the overall travel experience, from hotel accommodation to aviation links.

The Myanmar Tourism Master Plan 2013-20 (MTMP), sets out the framework for the industry’s development. Among other things, it focuses on sustainable growth to ensure environmentally sensitive sites are protected and that the country’s different ethnic groups are respected as visitor numbers grow. Targets for expansion are ambitious. At the top end, the MTMP, which will be reviewed and updated as necessary, anticipates arrivals to reach 7.49m by 2020. More modest estimates in the plan suggest 2.82m by the plan’s end.

Financing & Economic Impact

The MTMP includes a commitment to improve sector infrastructure, detailing 38 priority projects with an indicative cost of $486.8m. These are expected to be financed by the government, private investors and Myanmar’s development partners.

Officials have made tourism one of seven priority areas for private sector development, and, if the country meets its top targets, tourism receipts are expected to reach $10.2bn in 2020, by which time the authorities estimate for as many as 1.5m people to be working in tourism-related jobs, up from just 293,700 in 2012, and contributing much to economic activity. The main employment areas for tourism by 2020 are expected to be food and beverage, transportation services, accommodation, recreation and entertainment, and travel services.

“The goal of this master plan is to maximise tourism’s contribution to national employment and income generation, while ensuring that the social and economic benefits of tourism are distributed equitably,” U Htay Aung, minister for Hotels and Tourism, wrote in his foreword to the report.

Visitor Numbers

Myanmar has seen an unprecedented increase in the arrival of tourists over the past five years, reaching 3.08m in 2014, up from 2.04m in 2013 and 791,505 in 2010, according to the Ministry of Hotels and Tourism (MHT). Although impressive, figures for 2015 suggest a more modest expansion amid uncertainty over the country’s first democratic election, which took place in early November 2015. Daw Aung San Suu Kyi securing victory for the National League for Democracy, with the new administration to take office in March 2016 (see Country Profile chapter). Visitor numbers have also been affected by political developments in Thailand, especially Bangkok, which is the main gateway for visitors to reach Myanmar.

Opening the ASEAN Tourism Forum in Naypyitaw in January 2015, outgoing President U Thein Sein expressed hope that as many as 5m tourists would visit the country in 2015. U Phyoe Wai Yar Zar, president of the Myanmar Marketing Committee and secretary of the Myanmar Tourism Federation (MTF), told OBG that achieving such a target was likely to be “quite challenging”. Yet he is optimistic that Myanmar will remain open to outside investment after the new administration takes power in March 2016. “We believe they will be able to make the climate more agreeable for investors,” he said.

The MTF’s numbers show that roughly 1.58m people visited Myanmar in the first six months of 2015, using the country’s three main airports and border crossings. From the period January to May about 61% of travellers entered through land borders, of which there are three with Thailand, 13 with China, three with India and one with Laos. A number of these visitors may well have stayed less than 24 hours, which under UN World Tourism Organisation (UNWTO) definitions means that they should not be counted as tourists.

The bulk of tourists coming by air travelled via Yangon International Airport, which saw 875,854 international arrivals between January and July 2015. It was followed by Mandalay-Bagan with 77,881 arrivals, and Naypyitaw with 9859, according to the Department of Civil Aviation (DCA).

Visitor Profile

Total tourism expenditure in 2014 reached $1.79bn, nearly double the level of 2013. Foreign visitors are staying longer and spending more. The government reports that average expenditure per tourist per day rose to $170 in 2014, compared with $145 in 2013. Since the reform drive began in 2010, daily average spend has grown by 42%. Official data for 2014 shows that foreign visitors made up roughly 37% of all tourists, with markets in the Asian region making up the majority at 71%.

The top source market was Thailand, at 198,299, followed by China (125,609) and Japan (83,434). The figures reflect the large number of day-trips for either business or tourism made at key borders, such as the crossing at Mae Sot in northern Thailand. Many Thais also travel to Myanmar for religious reasons, visiting key temples such as the Golden Rock Pagoda. Road improvements and more relaxed visa conditions introduced in 2015 should encourage greater tourist numbers.

Visitors from Western Europe, meanwhile, comprised about 17% of the international total in 2014, led by France, the UK and Germany. North Americans made up around 7% of foreign visitors.

Domestic

Recent growth in Myanmar’s own economy, and the increased disposable income that has come with this, has also given the local population more means to travel. The Asian Development Bank estimates that national GDP will expand by 8.3% in the 2015/16 fiscal year and 8.2% for 2016/17 (see Economy chapter).

Pilgrimages are popular with local travellers, and guest houses, hotels and transport services have sprung up to cater to their needs. The government puts the total number of domestic tourists at 2.2m for 2014, with spending on hotels and guest houses reaching MMK650.87bn ($585.8m). There were no numbers released on domestic tourism for 2013.

The MHT has said that the total contribution of travel and tourism to the national economy was around $3.2bn in 2014. The World Travel & Tourism Council (WTTC), meanwhile, put the total at MMK3.03trn ($2.7bn) for 2014, or 4.8% of GDP. According to the WTTC, this total will rise by 6.7% in 2015 and reach approximately MMK7.22trn ($6.5bn), or 6.1% of GDP, in 2025.

Different Accounting

The discrepancy in contribution figures stems from the differing ways in which the MHT and WTTC collect and collate their data. The former reports income in terms of “total earnings”, which refers to income derived from tourism activities, while the latter reports, “direct contribution to GDP”, which means total income plus the government’s expenditure on travel and tourism services. The WTTC also maintains its own proprietary database on tourism spending, so its figures may differ from those of the ministry.

The MHT is also being encouraged to remove day-trippers from its arrivals data in order for figures to adhere to UNWTO standards and more accurately capture the number of genuine tourists. The most recent figures from the WTTC noted that travel and tourism provided 823,000 jobs in 2013, or 3% of the total number of jobs in the country, with this total forecast to reach 4% by 2024.

Modernising Infrastructure

At 676,578 sq km, Myanmar is the 40th-largest country in the world by area and the biggest in mainland Southeast Asia. However, years of isolation have left it with deteriorating rail services, a limited and poor quality road network, and unreliable aviation services (see Transport chapter).

In its 2015 “Travel and Tourism Competitiveness Index”, the World Economic Forum ranked Myanmar 134th out of 141 countries, behind Haiti, Sierra Leone and Lesotho, among others. Apart from its commitment to prioritising the tourism industry, the country scored poorly in a range of areas, particularly transport networks and ICT readiness. The government is responding to the need for improvements via various policy agendas. The MTMP, for example, makes an explicit commitment to enhancing transport infrastructure, while an Air Transport Policy is also being drafted with a view to “support developments of tourism and trade”.

Aiming Higher

According to the DCA, international passenger traffic in and out of the country stood at 3.1m people in 2014, up 20% on the 2.66m passengers recorded in 2013, and a 157% jump on 1.25m for 2010. As well as bringing visitors to the country, the importance of air travel to the tourism industry is highlighted by the number of people taking domestic flights, which surged to 2.22m in 2014, up 31% on 1.69m for 2012. There were no figures recorded for 2013.

Given the poor state of the country’s roads and railways, many tourists choose to take local flights to visit the key sites. Myanmar currently has nine domestic airlines providing services to 27 destinations, but paper tickets are still the norm, and flights are often cancelled or combined if the carrier does not sell enough tickets.

Yangon International Airport remains the main international gateway to the country and is currently being expanded to cater to as many as 6m arrivals per year by 2017. Some 31 airlines including Malaysia’s AirAsia, Thai Airways, Singapore Airlines, China Eastern, China Southern and Qatar Airways, offer international connections to Yangon. Four airlines also offer direct flights to Mandalay, while three provide flights into the capital Naypyitaw.

New Airport

Even as Yangon is upgraded, work is also progressing on the new international airport at Hanthawaddy (about 70 km north of Yangon), which will have the capacity to handle 12m passengers a year once it is completed in 2022. The $1.5bn airport will be built by a consortium from Singapore and Japan, and is what the DCA calls a “hybrid public-private partnership”, involving both foreign direct investment matched by official development assistance. Delays in finalising the official development assistance component of the financing have held up the construction of the airport, which was originally scheduled to open in 2018.

The Ministry of Transport has budgeted MMK23.4bn ($21.1m) for aviation upgrades and construction for the fiscal year 2015/16, with Japan providing a significant investment of $12m as part of this financing (see Transport chapter).

Carriers

There were 14,759 flights in 2014 compared with 12,205 in 2013, according to the MHT. Load factor averaged 63.5%, little change on 63% recorded for 2012. Myanmar remains mostly reliant on foreign airlines to bring people to and from the country, although some domestic carriers are now starting international services.

In August 2015 Myanmar Airways International began flying between Yangon and Singapore three times a week, competing with Singapore Airlines and its regional unit, SilkAir, as well as low-cost carrier TigerAir and JetStar Asia.

Safety concerns have long been an issue. In August 2015 Air Bagan suspended operations after a series of incidents. To address this, some tour operators in Yangon are willing to change airline bookings if clients express concern about travelling on particular carriers. The DCA is committed to raising standards and is updating laws and regulations to improve oversight.

Improving Accommodation

Even under military rule, Myanmar attracted a steady crowd of older, well-heeled tourists, but in 1995, then-opposition leader Daw Aung San Suu Kyi, urged tourists to, “stay at home and read some of the many human rights reports”. Visitor numbers dwindled. Along with the rest of the country, the already limited number of four- and five-star hotels fell into decline as Western sanctions kept investors and most international hotel management companies away. Even now older properties, including those marketed as five star, are reminiscent of hotels in other parts of South-east Asia two or three decades ago, and often do not live up to their billing.

However, in the past couple of years expansion has accelerated and international hotel companies are beginning to make their mark. Increased competition has forced existing hotel operators such as Sedona, part of Singapore-based Keppel Land Hospitality Management, to renovate their properties. Room rates have also started to come down, amid complaints from tourists that hotels were too expensive and did not offer value for money.

According to the MHT, Yangon had 287 hotels in 2014, offering 13,146 rooms. For the country as a whole, there were 1106 hotels with 43,243 rooms, 24% more than in 2013. That follows a similar rate of expansion in 2013 and growth of 13% in 2012. The trajectory is set to continue, with more than 1000 new hotel rooms expected to become available in Yangon in 2015, according to real estate consultancy Colliers International.

New Entrants

French group AccorHotels, the biggest hotel operator in the world, with some 3792 properties globally, is expanding its offerings in Myanmar’s largest and most dynamic city, Yangon, as well as other major tourist destinations. The 366-room Novotel Yangon Max opened in 2015, joining the Lake Garden in the administrative centre of Naypyitaw and the Novotel Inle Lake, which opened in 2014.

AccorHotels is developing its portfolio in Myanmar through local joint ventures, with its domestic business partner owning the land and the French firm managing the properties. It is also expected to open two budget Ibis properties in the country.

Meliá, the Spanish hotel group, which operates more than 350 hotels internationally, will open the luxury Meliá Yangon in 2016, as part of the $550m Hoang Anh Gia Lai (HAGL) Myanmar Centre project. The hotel, a partnership with Vietnamese developer HAGL, will include 400 rooms, as well as a spa, several restaurants and a number of meeting rooms, and is Meliá’s first hotel in Myanmar.

High-End Projects

Construction on the glassclad Daewoo-Amara Hotel Project near Inya Lake began in February 2014. The $200m complex, which is due to open in 2016, will include 661 rooms in two towers: one a five-star hotel and the other a serviced apartment building. Korean investors, Daewoo International and Lotte Hotels & Resorts, own 85% of the development, which is being built under a build-operate-transfer contract with the Myanmar government.

Meanwhile, German hotelier giant Kempinski, is working with partners from Thailand and Myanmar to transform the colonial-era State House building on Strand Road into a luxury hotel. Kempinski, which already operates a 141-room hotel in Naypyitaw, will manage the new property. The facility is expected to open after 2016.

Despite the interest of European and East Asian developers, hotel investment continues to come largely from the Asia-Pacific region, with Singapore, which is also Myanmar’s biggest foreign investor overall, leading the way. Foreign investment in the hotel segment reached $2.56bn in 2014, involving a total of 46 projects and 9443 rooms. Singaporean companies were behind nearly 60% of that sum, investing $1.53bn in 20 projects, followed by Vietnam (the single HAGL development) and Thailand, with 10 projects valued at $339.75m.

Off The Beaten Track

 More intrepid investors have begun to open smaller boutique properties to cater to independent travellers. According to government data, about one-third of visitors travelled independently in 2013 and 2014, including domestic visitors looking to explore and get off the beaten track. Others are partnering with local communities to develop projects that directly help the residents of the area. Such projects tend to be welcomed by central government, which is keen to promote sustainable tourism. However, securing the necessary permits from the local authorities can be time consuming, taking at least a year and, in some cases, as long as two years.

Myanmar is also looking to investors to open up some of the country’s more far-flung locations. From hiking in the mountains to the white-sand islands of Mergui (or Myeik) Archipelago in the far south (see analysis), Myanmar has the potential to offer visitors far more than the heritage and culture that are currently the mainstay of the country’s tourism industry. Comprising more than 800 islands dotted across the Andaman Sea, Mergui has particular appeal, and great potential. While many of the islands are uninhabited and lack basic utilities or infrastructure, others are home to the Moken, a group of people known as “sea gypsies”, who live a semi-nomadic lifestyle at sea.

Getting to Mergui is difficult and requires a special permit. Many visitors to the archipelago choose to enter Myanmar through the Thai border at Ranong where they receive a visa that allows a short visit only to Mergui, rather than fly through Yangon. Tour operators are urging the authorities to ease visa provision at the border post and allow visitors to travel elsewhere in the country.

Currently, there is only one sizeable hotel in the archipelago – the Myanmar Andaman Resort – which underwent major renovation in 2014. The hotel has 22 chalets on Macleod Island and defines itself more as an ecolodge than a luxury resort. Another project is under construction, and in 2015 the central government was considering whether to approve construction of up to 30 hotels. One of the most ambitious is a $1.2bn project by Singapore-based Zochwell Group to create a “new Phuket”, which will include a casino.

Great Outdoors

Travel agents are also keen to highlight potential outdoor adventures in the north and west of the country, in places such as Chin State, where the foothills of the Himalayas begin and mountains and rivers carve through the landscape. Official permits are required for some areas and, for now, conditions are basic. A select few tour operators have also begun to offer trips to the Hukaung Valley Wildlife Sanctuary, the world’s largest tiger reserve, and also home to endangered animals such as leopards, sun bears and elephants.

Raising Its Profile

Myanmar’s status as the “last frontier” of South-east Asia has meant that the country has needed to do little in the way of marketing to attract intrepid foreign tourists. Nonetheless, sector players contend that officials now need to develop a comprehensive strategy to entice a wide range of visitors to the country, as well as encourage return travellers. “Thailand is not Myanmar’s competition”, Achim Munz, a resident representative of the Hanns Seidel Foundation, a German political foundation, and someone who has worked closely with the authorities on developing sustainable tourism, told OBG. “It is the country’s big brother. Myanmar can learn from it.”

Myanmar hosted the 34th ASEAN Tourism Forum in January 2015 and stepped up international marketing campaigns during the year. The country’s tourism representatives attended the three largest travel shows globally in 2015, namely ITB Berlin, World Travel Market in London and the Japan Association of Travel Agents Expo.

The MTMP also recognises the need for Myanmar to spread arrivals across the year and many hotels now offer steep discounts during the monsoon, which generally lasts from May until October.

Raising Standards

Efforts are also under way to boost service standards, which often do not meet the expectations of tourists used to the exemplary treatment they receive elsewhere in Asia. Very few young people currently have a strong command of English, though many are eager to practise and learn.

“It is very important [for us] to train our people to give quality service to visitors,” U Phyoe Wai Yar Za told OBG. “We need people with the right attitude and skills to run the show.” Most leading hotels now employ foreigners or Myanmar citizens who have lived and worked overseas as general managers, or in other senior positions of responsibility, to run their operations. This also allows them to mentor their staff more effectively. AccorHotels, for example, operates its own academy to train staff for its properties and operations in Myanmar.

Sector Regulation

Decades as a centrally planned economy have left Myanmar with many antiquated laws, some of which date from colonial times, as well as bureaucracy of a sometimes daunting scale. In tourism this can make planning and logistics somewhat time-consuming and expensive for travellers to visit certain areas of the country. Moreover, it creates unpredictability for investors, particularly foreign.

The sector is governed largely by the 1993 Myanmar Hotel and Tourism Law. It defines the functions of the MHT and provides guidance on investment in tourism and licensing procedures. The Myanmar Responsible Tourism Policy, meanwhile, details the country’s ambition to create an industry that provides jobs for local communities, while also preserving Myanmar’s unique array of cultures and diverse natural environment.

New laws passed by Parliament since reforms began in 2011 also have an impact on tourism. The 2012 Foreign Investment Law made tourism a “priority” sector for development and maps out where and how foreigners can invest. In addition, the Minimum Wage Law, which sets out a threshold of $2.80 for an eight-hour working day, came into force in September 2015.

Easing Travel Restrictions

The government has also moved to reduce red tape associated with visas. The introduction in 2014 of an online eVisa for tourists entering through Yangon, Mandalay and Naypyitaw has been widely welcomed.

Visitors can now apply for their visas online and secure approval within five days. The programme was expanded to business visitors in July 2015, but is not available at land crossings.

Officials are also working to secure bilateral immigration agreements to ease travel not only for visitors to Myanmar, but for citizens from Myanmar who want to go overseas. An agreement with Thailand was finalised in July 2015 allowing visa-free visits for citizens of both countries for up to 14 days. However, Myanmar has not yet implemented the ASEAN Framework Agreement on Visa Exemption, which, among other things, is aimed at boosting the tourism sector and provides a 14-day exemption to citizens of ASEAN member states from tourist visa requirements of other ASEAN states who are also party to the agreement.

A growing network of automated teller machines and wider acceptance of credit cards is also making life easier for international visitors. Cash, however, remains the preferred means of payment, even when purchasing items such as plane tickets.

Outlook

The year 2016 has been designated “Visit Myanmar Year” by the MHT and will provide an opportunity for the country to step up its international marketing campaigns to encourage people to visit. With significant hotel capacity and new transport infrastructure needed, the challenge will be to manage the expansion of the tourism sector in a sustainable way so that all parties can benefit.