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Burma (or Myanmar, for the politically correct) is one of the hottest destinations of 2012, and will likely remain so for the next few years, as the country opens up after decades of military rule. President Obama’s visit this week is only going to accelerate that. One of the biggest benchmarks of that growth is the exponential number of hotels cropping up in its former capital and main travel hub Yangon (formerly Rangoon).
According to a new report from Jones Lang LaSalle Hotels, the international quality hotel supply is expected to grow about 37 percent per annum (CAGR) from 2012 to 2016, assuming all projects which are underway or in the pipeline are completed.
Some current numbers on Yangon hotel & travel industry:
- There are currently about 8,000 hotel rooms in Yangon; of these it is estimated that only 1,500-2,500 are of international standard.
- International hotel brands account for just under 20% of hotel room supply in Yangon.
- Average daily rate (ADR) will have grown 350% from 2007 to end 2012, according to the report.
- International visitor arrivals to Yangon have grown rapidly achieving year-on-year growth rates of 24.8%, 25.9% and 21.7% in 2009, 2010 and 2011, respectively.
- Visitor arrivals to the country have grown by 45.1% YTD September 2012.
But, according to Lang LaSalle, “given the continued growth in visitor arrivals, construction lag and potential economic, legal and political risks…Yangon will experience a major shortage of hotel rooms for the next five to ten years until substantial room supply enters the market.”
The Lang LaSalle report continues:
The market is not without challenges; land acquisition is difficult and sources of funding remain opaque. Certain projects in Yangon are fairly speculative and there is a fair chance they will not move forward. However, Myanmar’s new foreign investment law (introduced this month) is aimed at bringing in foreign capital to rapidly address numerous shortages and to grow the economy. The law stipulates that foreign investors will not require a local partner to set up a business. Foreigners will be able to own 100 percent of a company in Myanmar, with any share in a joint venture with a domestic partner mutually agreed upon by both parties. In addition, investors will enjoy various tax incentives such as income tax exemptions of up to five consecutive years, while land leases have been extended to 50 years with options from the government to extend an additional two 10 year periods.
In light of the projected influx…and limited room supply of international standard in Yangon, hotels have been aggressively renegotiating contracts with travel agents in an effort to increase rates. In response, the government has implemented a USD 150 rate cap to try to mitigate the higher room rates, but this cap is only applicable to lead-in rooms sold to travel agents / tour operators and is due to expire at the end of March 2013. Most hotels have been running at full capacity during weekdays throughout the year and also at weekends during the high leisure season.
Full report, embedded below: