Collier Property Market Report – Ngapali Beach Hotel & Resort 22nd June 2017

Stronger investment interest surfaces in Ngapali

The increasing global awareness along with the rising confidence in domestic tourism is now driving Ngapali’s (Thandwe township) hotel market to new heights. Once a sleepy town engaged mostly in farming and fishing, Ngapali is fast evolving, now recognised with international accolades as Asia’s next beach destination. In fact, stronger investor interests are resurfacing, with many now looking beyond the currently concentrated hotel zone, specifically at new potential sites with attractive land rates. Going forward, Colliers recommends developers to focus into the untapped international standard mid-tier hotel category given the growing number of FITs and local visitors.

Hotel room stock on the rise amid growing foreign and local demand.

The increasing demand from both local and foreign travellers has resulted in a growing number of hotels in Ngapali over the past decade. At present, the famed Ngapali beach, which stretches three kilometres wide, offers 17 mid-tier to upscale hotels collectively representing 720 rooms. This stock grew by an annual average of 15% from 1996 until 2014, with Hilton Ngapali Resort & Spa being the latest development, and the first international branded hotel to enter the market.

Though there was no new supply introduced in 2015 and 2016, the recent rise in demand is an impetus for some hotels to now undergo room stock expansion, along with local and foreign investors keen to acquire new development sites. In fact, future supply is starting to build up with eight new hotel projects in the pipeline, collectively representing more than 500 rooms. With plans to expand the already concentrated Thandwe hotel zone, more investors are now looking to acquire properties both towards the north and south of the main Ngapali beach, and to some extent, in the nearby coasts and islands. As a result, asking land prices in these areas rose since 2013 by at least six times to the current USD300 to USD400 per sq m.

Going forward, Colliers sees demand for the hotel market to track a lengthy up cycle especially as the government plans to improve infrastructure facilities.

In particular, the future upgrade of Thandwe Airport will drive regional demand for the area. The recent flight routes from Mandalay have similarly paved the entry of some Chinese group travellers coming mostly from Yunnan Province, while eventually direct flights from Bangkok to Thandwe could only mean further growth. At present, the number of tourist arrivals is already on the rise. Data from the Ministry of Hotel & Tourism revealed a substantial 30% YOY increase in visitor arrivals in 2016. Growth in domestic visitors was notably high which grew more than twice the previous year.

Untapped demand for international standard mid-tier hotels and resorts

Demand for hotels in Ngapali is still considered generally seasonal. Tourist arrivals are particularly high during the months of November to January, as well as in April for Myanmar’s New Year festival. While most hotels shut down during the monsoon season (June-September), some remain partially operational, catering mostly to local guests taking advantage of the promotional rates. We think further electric grid connectivity in the area should support this trend. In 2016, the low season occupancy rate hovered between 30% and 40%, while the high season reached 83%; some hotels have recorded fully occupied levels. Overall, the average occupancy rate in 2016 grew by 4% YOY to end at 53%. Meanwhile, the average daily rate grew by 1.5% and 3.4% YOY for the upper-scale and mid-tier hotel categories, respectively.

 

 

The upward trending demand is mainly facilitated by the increasing global awareness along with the strengthening confidence among domestic travellers. Foreign arrivals are still mainly led by European nationals particularly from Germany, the UK and France. The majority of these visitors are couples, staying between five and seven days. Many hotels have similarly witnessed a considerable rise in local travellers, mostly families as well as through corporate bookings especially during summer.

Travelling costs, especially airfares, are still considered generally expensive in Myanmar. This leaves many of the local travellers to settle in lower grade hotel options. Colliers advises investors to start banking on the rise of domestic arrivals by tapping into the mid-tier hotel segment. Future developments should adopt international standards that focus on the overall guest experience. This can be reflected in the quality of rooms, services, building upkeep, interior designs, landscaping, amenities and facilities. At present, most three-star hotels in Ngapali lack such offerings.

 

Source:  Collier Myanmar

 

For more information please contact:

Karlo Pobre
Associate Director
Research & Advisory
+95 (0) 979 573 3378
karlo.pobre@colliers.com

 

The Htet Oo
Assistant Manager
Research & Advisory
+95 (0) 979 765 7777
thehtet.oo@colliers.com

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