High hotel rates unlikely to fall

Myanmar’s hotel room rates, which average about US$160 per night, should remain unchanged in the medium term due to the slow completion of new properties and continued influx of visitors, according to New Crossroads Asia.

In the recently released report “All That Matters”, the Singapore-based financial advisory firm that focuses on Myanmar said that the occupancy rate is about 80 per cent.

“Since the doors to foreign business have opened, visitor arrivals have gone through the roof,” it said. “Those attending conventions and conferences, on official state business, or simply investigating the business environment have collectively managed to push average hotel room rates to a level on par with developed countries.”

Rates will remain high this year and new hotels under construction will not lead to an oversupply that could cause them to fall, the report says. It also predicted that rates would remain high in the next few years.

“While some commentators fear an oversupply of hotel rooms in the medium term, after a closer analysis of potential future demand we have identified several factors that will drive strong growth of visitors to Yangon and easily soak up all of the expected new completions,” it adds.

These factors include the high price of land, which will hinder construction of budget hotels, rising tourist arrivals and an expected surge in foreign investment after the 2015 elections.

According to the Ministry of Hotels and Tourism there are only five five-star hotels and 18 four-star hotels in Myanmar. Yangon has just 204 hotels, with a total of 9,000 rooms, data from the ministry shows.

According to the Myanmar Tourism Master Plan, 7.49 million tourists are expected to arrive in 2020, against 3 million this year, and they will then generate more than $10 billion in revenue.

Global consulting firm McKinsey & Company last year forecast that Myanmar’s tourism industry would generate $14.1 billion in revenue by 2030, and create 2.3 million jobs.

The ministry’s data showed that at the end of July, the number of hotels nationwide rose to 1,019, compared with 960 in March. The combined number of hotel rooms also rose from 37,482 to 38,722 in the corresponding period.

International companies have invested more than $1.85 billion in the hotel industry, according to the ministry. Among foreign investors, Singapore tops the list with more than $800 million, while Thailand sits third with more than $235 million. International chains are making their presence felt, including Shangri-La Hotels and Resorts, Pan Pacific Hotels Group, Accor and Best Western.

New comers include Kempinski, which this month announced the opening of its first property in Nay Pyi Taw. The 141-room hotel will begin welcoming guests on November 1, in time for the first Asean Summit to be held in the country.

“Our mission and our promise is to make the property the most luxurious hotel in Myanmar,” said Franck Droin, general manager of Kempinski Hotel Nay Pyi Taw. “We are confident that Nay Pyi Taw will soon be a popular destination with international leisure and business travellers seeking a relaxing alternative to Yangon.”

Hilton in June announced the plan to gradually open five properties in Myanmar from 2015.

Most of the properties are in Yangon, the largest commercial city. Minister of Hotels and Tourism Htay Aung said recently that there are about 4,000 hotel rooms in Nay Pyi Taw and another 1,800 will be added when the National Guest House Compound is completed.

The surge of foreign tourists to Myanmar has made it difficult for them to find accommodations. Since 2011, tourists have had to deal with highly inflated hotel prices. The New Crossroads Asia report notes that the cost of a room at the ParkRoyal in central Yangon rose from $55 a night in 2011 to $250 a night now. Room rates more than doubled in 2012, it says. Pan Pacific also opened another ParkRoyal property in Nay Pyi Taw and keeps its eyes open for expansion opportunities in key destinations for both city and resort hotels.

Foreign visitors have complained that there is a gap between prices and service, with service standards far higher in other countries in the region and prices much lower.

Prices are unlikely to fall, according to New Crossroads Asia. “Even with all the known hotel projects in the pipeline, according to our data, surging tourist demand will outstrip the large amount of absolute hotel supply coming online. Hence, we see little reason why hotel room rates cannot remain very high into the mid-term because even new projects that could be announced will take a few years to hit the market,” it says.


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