EARLY movers into Yangon will be handsomely rewarded, with the opportunity to grow rates substantially even though room supply is expected to grow by 36.7 per cent annually, revealed a hotel intelligence report by Jones Lang LaSalle (JLL) Hotels.
With visitor arrivals leaping 45 per cent year-to-date in September 2012 over the same period in 2011, there has been a dearth in international standard rooms, pushing the estimated ADR in 2012 up 350 per cent over 2007’s figures.
Although there are about 8,000 rooms in Yangon, industry sources concur that international standard ones only account for 1,500-2,500 rooms.
This has given hotels leverage in renegotiating contracts with travel consultants for even higher room rates. The Myanmar government has implemented a US$150 cap to stymie soaring rates, though it only applies to lead-in rooms sold to travel consultants and tour operators, and expires March 2013.
International brands are scarce within Myanmar’s hotel industry, comprising 19.4 per cent of supply. Even if international hotel supply were to triple over the next few years, the Yangon market “still offers plenty of opportunities for early movers, given the severe lack of capacity currently”, said JLL senior vice president Andrew Langdon.
A new foreign investment law also allows businesses to be 100 per cent foreign-owned, and the government offers five-year income tax exemptions and 50-year land leases, with the option for further extensions.
On the other hand, challenges in the short- to medium-term include the lack of consistent power generation and a skilled labour pool. Land acquisition also remains difficult, and sources of funding, opaque, said JLL’s report.
