Myanmar: Investors beware

Myanmar has become one of the region’s most coveted destinations over the past few years since international sanctions against the country were lifted in response to political reforms.

International air arrivals through Yangon International Airport reached a historic high of 550,654 in 2012, only for the figure to be topped within the first five months of last year, according to research by C9 Hotelworks, which has also seen rocketing hotel occupancy.

The number of airlines serving the country is also steadily increasing, while the destination has made it back onto the itineraries of several cruise lines. Furthermore, four border crossings with Thailand were opened for overland travel last August.

These positive trends have been a boon for inbound operators such as Exotissimo Travel and Phoenix Voyages who now report Myanmar as their second market after Vietnam, where they both started from.

Nevertheless, the trade still faces a number of key challenges: international standard hotel rooms are in short supply, infrastructure is shoddy and human capital is lacking. Perhaps more significantly, political and regulatory risks weigh heavily on the decisions made by investors, said Jean Michel Romon, managing director of Phoenix Voyages, which has been operating in the country for 17 years.

“People need to have a clear legal framework to invest,” he said. “They need to be sure that Myanmar is on the way to a becoming a real democracy.”

“Another major problem is everyone focuses on the main destinations such as Yangon, Bagan, Inle, Mandalay and Ngapali, but to develop and bring more guests into the country we need to open up new destinations. And we need infrastructure – roads, airports, telecommunications – to reach these destinations.”

Businesses wanting to enter the market need a clear strategy given there are already more than 1,300 DMCs operating in the country.

“We see a lot of foreigners coming here dreaming to make business, in reality it is not that easy,” said Romon. “Don’t forget that the (rents in Yangon) are more expensive than Singapore.”

For Edwin Briels, general manager of Khiri Travel Myanmar, the massive swings between high and low season arrivals pose a much greater problem than infrastructure.

“The biggest problem travel (agencies) are facing is the low number of tourists visiting between April and September,” he said. “Bagan, for example, gets about 200,000 tourists per year. The majority visit between mid-October and mid-March, leaving a lot of young professionals in the industry – guides, restaurant staff, hotel staff – without a job for the rest of the year.

“I strongly believe that we need more tourists visiting in the green season in order to grow tourism in a sustainable way.”

The many obstacles are currently deterring some foreign firms, as Arjen de Haan, CEO of Asialink Holidays Thailand, explained.

“We have no interest in opening up in Myanmar now,” he said. “As everyone knows by now, the destination needs more capacity in terms of rooms and finding well-educated manpower is a challenge.”

Dillip Rajakarier, CEO of Minor Hotel Group Thailand, too, felt it wasn’t the right time to enter.

“The country is seeing such swift development the infrastructure is not yet in place to be able to properly support it, and with that comes challenges including the supply chain, staffing and ultimately meeting guests’ expectations.”

However, Patrick Basset, COO for Accor Thailand, Vietnam, South Korea, Cambodia, Laos, Myanmar and the Philippines, said the group felt that “if we don’t start now, it will probably be too late”.

“We have to anticipate the market and plan ahead five to 10 years into the future,” he added. Accor now leads the internationally branded sector with six properties in development.

Progress on room supply is failing to live up to the previously heady expectations, said Bill Barnett, managing director of C9 Hotelworks. “The reality is things are going to take a lot longer then first envisaged…The pipeline is growing but the timeline is stretching out.”

“The Hilton project is a year behind schedule, Peninsula is even further behind. Smaller midscale hotels from local developers will likely come into the market faster, with international projects taking longer,” he said, though remaining upbeat about opportunities.

All eyes are now on the political situation, most notably the general election tabled for the end of next year. Passing this key milestone could remove one of the greatest entry barriers and spur more travel companies to make their foray into Myanmar.

“If the election takes place without trouble, trust builds within the international market and infrastructure is developed, then Myanmar (as a market) will be close to Thailand within 10 years,” said Romon.

Source TTG Asia

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