Myanmar’s high hotel rates unlikely to fall, report says
Published on Thursday, 04 September 2014 17:10
The average cost of a hotel room is about US$160 per night in Myanmar and the occupancy rate is about 80 per cent, according to New Crossroads Asia, a Singapore-based financial advisory firm that focuses on Myanmar.
“Since the doors to foreign business have opened, visitor arrivals have gone through the roof,” it said in the recently released report “All That Matters”. “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,” it says.
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. “The outlook for room rates in 2014 remains strong due to limited completions of new hotels,” it says. “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 arrive in 2020 and they will generate more than $10 billion in revenue.
Global consulting firm McKinsey and Company last year forecast that Myanmar’s tourism industry would generate $14.1 billion in revenue by 2030, and create 2.3 million jobs.
More than 30 hotels with a total of 5,000 rooms are foreign invested, with six more under construction, according to the ministry.
The capital has about 4,000 hotel rooms and another 1,800 will be added when the National Guest House Compound is completed, Minister of Hotels and Tourism Htay Aung has said.
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 Park Royal in central Yangon rose from $55 a night in 2011 to $250 a night now. Room rates more than doubled in 2012, it says.
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.