Myanmar’s hotel investment falls short

YANGON, 16 December 2013: As Myanmar’s gateway Yangon moves rapidly towards the 1 million annual visitor milestone, investment in the country’s hospitality sector has fallen well short of forecasted growth.

To date a disconnect between the expectations of the private sector and the ability of the government to broadly implement free market reforms remains at a critical junction, C9 Hotelworks managing director, Bill Barnett, reports in the company’s latest assessment released Saturday.

With over 9,000 hotel rooms in the city and approximately 20% of the inventory of international standard, the next two years could see 3,400 new rooms in various stages of development tripling capacity.

Citing the trend that the primary movers in the broad hotel pipeline are domestic developers and not overseas investors is a key focus of consulting firm C9 Hotelworks newly released report on Yangon.

“Pure speculation is driving land prices to unrealistic levels and the knock on effect of inflated values for foreign parties contemplating joint ventures with Myanmar entities,” Mr Barnett said.

This is a key limitation for high profile institutional investors whose appetite remains strong for the destination. Foreign direct investment (FDI) into hospitality assets remains sidelined in many cases with concerns over the lack of a debt market and a slow government approval process.

A highlight of the report is the focus on the current transition period that Yangon is undergoing and stress that an open economy which has seen a massive influx of new automobiles, is having on the city’s transportation infrastructure.

Add into the mix a new international gateway airport in Bago, which expected to open in 2017 and hotel investors are increasingly having to take a forward looking view to gauge where the dust will settle on Yangon’s changing landscape.

Barnett added: “The hotel storyline is not all rags to riches as there remains a keen level of trading volatility given tourism seasonality and the impact of the annual monsoon season. Once new inventory starts entering the supply side rates will start to normalise and the industry’s challenge will be on growing sustainable demand.”

At the moment the country has retained strong investor interest but converting this into more tangible results is going to take longer than the market has expected.

Bill Barnett is the founder and managing director of C9 Hotelworks, a leading consulting firm specialising in hotels, tourism and property development in Asia Pacific. He was awarded a prestigious PATA Gold Award in 2007 and is a member of the ISHC (International Society of Hospitality Consultants). Bill’s popular online new site is widely regarded as a significant industry resource and his byline appears in a number of newspaper and magazine articles throughout Asia.

Source: TTR Weekly Thailand

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