Upper Scale Hotel Market in Yangon 1H, 2015

Research & Forecast Report
Yangon | Upper Scale Hotel Market
1H 2015

Stronger supply pipeline despite less enthusiastic demand

A total of 489 upper-scale hotel rooms were delivered in the 1H 2015 following the completion of two new hotels.

The overall stock currently stands at 2,582 rooms and is expected to dramatically increase in 2016; and to potentially triple by 2018.

Demand prospects appear to be healthy as Myanmar gears up with the rise in foreign arrivals. However, the continuously rising daily rates has led to a downward trend in occupancy.

Our latest figures show that the overall average occupancy rate fell by 4% YoY and is estimated to drop by 2% over the same period next year.

Forecast Direction
Upper-scale hotel supply stock to almost triple in four years
Yangon has seen a growth in upper scale hotel supply with 489 new rooms delivered in 1H 2015 – including Novotel Yangon Max and the soft launch of Rose Garden Hotel. This resulted to a city-wide stock of 2,582 rooms, or a 23% increase HoH – a new record high. The number is anticipated to rise dramatically in 2016, with some 2,000 additional rooms slated for completion. This will eventually translate to a 75% increase in stock, so far the highest projected annual growth in the mid-term as tracked by Colliers.

Yangon Upper scale Room Stock
Upper-scale supply in Yangon had been stagnant for more than a decade, since the completion of Chatrium Hotel in 1998. The market has seen slight growth in 2014 driven entirely by hotel project extensions. With the market resurgence seen in the last couple of years, developers are now in the process of delivering new upper-scale hotels driving the room-stock to increase substantially going forward. In fact, Novotel Yangon Max has recently been added to this group. The development, which opened in April, is considered to be the first modern designed upper-scale hotel the city witnessed since the economy opened up in 2012. Similar international standard hotels are likely to follow after.

Currently, Yangon has an upper scale room stock of over 2,500 rooms or about 13 existing hotel developments. As tourism growth and infrastructure development continue to progress, foreign operators and hotel developers are beginning to strengthen their presence in the market. Over the next two years, Yangon is likely to see more substantial growth in upper-scale hotel room supply from ongoing projects, expansion projects and the entry of new international operators. The city is estimated to have some 7,206 rooms by the end of 2018, almost three times higher than the current stock.

With five upper-scale hotels set for completion in 2016 and three extension projects at existing hotels, 2016 should see almost twice the upper-scale hotel room growth as the prior year.

Meliá Hotels International, a Spanish-based hotel company, will add 429 rooms to Yangon’s stock. Meliá Yangon, the first of its brand to be introduced in the region, will be located within the mixed-used development HAGL Myanmar Centre along Kabaraye Pagoda Road, in the Inner city Zone. Similarly, Pullman Yangon Myat Min is expected to be launched in 2016. The first Pullman brand in the country will include 300 rooms, to rise in North Okklapa in the Outer City Area.

Jasmine Palace, a modern 21-storey hotel with high-end facilities, is also underway eventually delivering 238 rooms to Yangon’s supply in 2016. Furthermore, the Grand Centre Point Hotel, which was formerly branded as Hilton, is anticipated to deliver 300 rooms as a part of the integrated development, CenterPoint Towers in Downtown. Likewise, the Grand Golden View Hotel will deliver 155 rooms on the same year.

Meanwhile, new foreign hotel brands are likely to emerge over the next couple of years. The Swiss luxury hotel group, Kempinski, in partnership with Kanok Co. from Thailand, will be converting the colonial Regional Office Complex into a luxury hotel called “The State House”. In addition, Starwood Hotels and Resorts Worldwide will be introducing the first Sheraton Brand to Yangon with the opening of the Sheraton Yangon Hotel in 2017.

Demand weakening despite a surge in foreign arrivals
Yangon Upper-scale Hotel Average Occupancy Rate

Yangon Upper scale Hotel Average Occupancy Rate
The average occupancy rate dwindled in the past three consecutive years, despite the increase in foreign arrivals. In 1Q 2015, the city-wide occupancy declined by 4% and 10% in comparison with the same periods in 2014 and 2013, respectively. Likewise, the second quarter saw a YoY drop in occupancy rate, followed by the introduction of Novotel Yangon Max.

Despite the overall drop, the upper-scale hotels in Downtown witnessed a slight recovery. The zone’s occupancy bounced to 76% in 1Q 2015, after a 4% decline recorded in 1Q 2014. Meanwhile, the Outer City area registered a rise in occupancy, by a high single digit YoY. However, the increase in both areas remained insufficient to help buoy the overall city-wide occupancy owing to the substantial decrease in the Inner City zone.

The improvements in occupancy for both Downtown and the Outer City Zone is most likely a result of the Average Daily Rate (ADR) reductions. However, Colliers suspects that the decline in overall occupancy rate is caused by the high-base ADRs and a fast growing supply of decent mid-tier hotels, somewhat pulling market shares of upper-scale hotels down as more tourist and business travelers are now opting for reasonably priced accommodation options. In fact, apart from existing mid-tier hotels, mid-scale international brand namely Best Western is now experiencing healthy occupancy rates. The international operator now runs two hotels in Yangon. Colliers predicts that the number of branded mid-tier hotels will likely increase and gain stronger market shares going forward.

Occupancy rates for upper-scale hotels are projected to decline further in the future driven by a strong supply pipeline reinforced with the increasing preference for high quality mid-tier hotel developments.

ADR & Average RevPAR (Upper scale Hotel)

As predicted, ADR have begun to decline YoY. The 1Q 2015 occupancy registered a decline of 3% YoY, after a continuously rising trend over the corresponding period from 2012 until 2014. Both Downtown and Outer City areas witnessed reasonable ADR reductions; while the ADR in the Inner City Area saw a slight decrease of approximately 1.6%.

Downtown maintained the highest ADR in Yangon, followed by the Inner City and Outer City zones. In general, ADR in 1Q 2015 is slightly lower than the same period in 2014, but higher than in both 1Q 2013 and 1Q 2012.
Meanwhile the citywide Revenue per Available Room (RevPAR) in 1Q 2015 saw a 11.6% YoY decline after increasing 3.5% YoY between 2013 and 2014. All locations in Yangon experienced a decline in RevPAR over this past year.

For more information please contact:
Karlo Pobre
Research Manager
Research & Advisory
+95 (0) 931 336 099

Adrian Soe Myint
Analyst Research & Advisory
+95 (9) 976 895 535

Tony Picon
Managing Director | Myanmar
+95 (0) 942 103 4026

Colliers International
Unit 7/C (6th Floor)
White Cloud Building,
No. (138/142) Thein Phyu
Road, Botahtaung Township
Yangon Myanmar
TEL +95 (0) 931 491 678

Source: Colliers International Myanmar

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