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Marriott closes in on deal to build a hotel in Myanmar

Jun 06, 2013 6:17 am

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Marriott’s entrance into Myanmar is on the cautious side as it both waits for the real estate market to cool a bit and watches to see how much ground the newly opened state makes in communication, banking, and transportation.

— Jason Clampet

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Marriott International Inc., the largest publicly traded U.S. hotel chain, expects to seal its first agreement for a property in Myanmar in the next six months as the country opens its doors to foreign investors.

The company’s first hotel in the Southeast Asian nation will probably be a Marriott or Courtyard, Asia-Pacific President and Managing Director Simon Cooper said. It’s in four or five discussions with partners for locations including Yangon and Bagan, he said today.

“The conditions at the moment are right and we’re certainly enthusiastic about the opportunities in Myanmar, no two ways about it,” he said in an interview with Bloomberg Television’s Haslinda Amin in Naypyidaw, where he’s attending the World Economic Forum. “They have a masterplan for tourism, which clearly includes international brands, and we would like to be one of them.”

Marriott is seeking investments in Myanmar as President Thein Sein allows more political freedom and loosens economic controls since coming to power two years ago. That has prompted nations including the U.S. to ease sanctions and attracted companies such as Ford Motor Co., MasterCard Inc. and Unilever NV. The country needs to spend $320 billion by 2030 to achieve economic growth of 8 percent a year, according to a report by McKinsey Global Institute released last week.

Myanmar’s efforts to catch up with the world around it after half a century of military rule has drawn delegates including Cooper as a summit of government and business leaders fills its hotels for the three-day event.

Old days

The Bethesda, Maryland-based company operated a Renaissance hotel by Inya Lake in Yangon in the “old days,” Cooper said. “In some says, we’re coming back,” he said.

Thein Sein signed a foreign investment bill in November to woo overseas companies into spending more. Companies scouting opportunities or striking development agreements also include closely held hotel chain Best Western International Inc.

“Everybody’s very interested in it, but everyone is still waiting for further development of the infrastructure, like banking, that would certainly make hotel development easier to take place,” said Jonas Ogren, Singapore-based Asia director at STR Global, a hotel research company. “Having stability in all those types of elements will be of concern.”

Modernization plans for one of Asia’s poorest countries include upgrading its financial system, building roads and airports, as well as giving the nation’s 64 million people greater access to mobile phones.

Land costs

Gross domestic product may grow 6.75 percent this fiscal year, the International Monetary Fund said in a report last month. The economic expansion pushed property prices higher, a key challenge for hotel owners, said Andrew Langdon, a Bangkok- based senior vice president of strategic advisory at Jones Lang LaSalle Hotels.

“Essentially, rising land costs is a problem in maintaining the feasibility of a project,” he said. “However, land prices in Yangon have peaked. We are seeing them level out a bit now.”

The economy could more than quadruple to $200 billion with an 8 percent annual growth rate, according to McKinsey Global Institute, almost double the pace from 1990 to 2010. That may help lure $170 billion in capital inflows, with foreign direct investment making up $100 billion, more than twice as much as it attracted in the previous two decades, it said.

Among hotel companies, Best Western will open its first Myanmar property in 2013 to take advantage of a shortage of rooms. The Phoenix-based group is considering locations including Yangon and Mandalay, the nation’s two largest cities, Glenn de Souza, Bangkok-based vice president of international operations for Asia and the Middle East, said in January.

For Marriott, the strategy is to start with the capital or cities where tourists travel to and branch out from there, instead of having just one hotel, Cooper said.

“We would love to be in Myanmar as soon as it’s appropriate,” he said. “The will is there but the momentum is there as well.”

Editors: Linus Chua, Andreea Papuc. To contact the reporters on this story: Kyunghee Park in Singapore at kpark3@bloomberg.net; Kenneth Foo in Singapore at kfoo23@bloomberg.net. To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net.

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