The days of inflated room rates in Yangon are over, as new hotels have opened up to ease the severe room crunch. Xinyi Liang-Pholsena sizes up the new situation
It was barely three years ago when soaring demand and a paucity of rooms in Yangon sent the hotel industry booming and rates skyrocketing. The doors to the country had just opened after decades of military rule, drawing a massive influx of foreign direct investment and dramatic upswell of interest from the global travel community.
The situation is now changing, as a large increase in hotel supply has applied downward pressure on highly-inflated room rates and turned the tables for players in Yangon’s tourism field.
Supply up, rates down
Yangon’s upper-scale room supply grew in 1H2015 with an addition of 489 rooms following the opening of Novotel Yangon Max and the soft launch of Rose Garden Hotel, according to Colliers International. This led to a 23 per cent HoH expansion of the citywide stock to 2,582 rooms – a record high. The supply is expected to dramatically increase in 2016 and potentially triple by 2018, the report added.
In October 2015, Sedona Hotel Yangon soft-opened its Inya Wing, adding 431 guestrooms and suites to its existing 366-room Garden Wing to bring its total inventory to 797 keys – the biggest in town.
More international-standard hotels are debuting in the next two years. In 2016 alone, hotels poised to open their doors include the 429-room Meliá Yangon, the 300-room Pullman Yangon Myat Min, the 238-room Jasmine Palace, the 300-room Grand Centre Point Hotel and the 155-room Grand Golden View Hotel. Global hospitality brands like Kempinski and Sheraton will also emerge on Yangon’s hotel scene by 2017.
Despite the rise in visitor arrivals, the average occupancy rate has dwindled in the past three consecutive years. Based on figures from Colliers, the city-wide occupancy for upper-scale hotels dropped four and 10 per cent in 1Q2015 from the same periods in 2014 and 2013 respectively.
Meanwhile, room prices in Yangon have dipped with boost in supply. RevPAR citywide in 1Q2015 also recorded a 11.6 per cent decline after rising 3.5 per cent year-on-year between 2013 and 2014.
“In the olden days, which were just three years ago, people were throwing money and couldn’t get a room. Those were the really good days,” said Mok Kok Meng, general manager at Sedona Hotel Yangon, who shared that average rates at the property have dipped from US$250 to US$165.
“It’s much more balanced now, with three-star and economy hotels popping up across the board and providing some breathing space for the industry. We welcomed this because they helped in the overall sense by making it easier to get a room at a more affordable and logical rate.”
New opportunities, new challenges
While it may be a bane for hoteliers, lower room rates in Yangon now tilt the situation in favour for inbound players and visitors alike.
Thomas Barrows, product manager, Myanmar, Exo Travel, said: “One of the main drawbacks to travelling in Myanmar in the past was the high cost of the hotels compared to neighbouring countries. As the supply of rooms starts to greatly increase, we are seeing hotel costs going down, making Myanmar a much more affordable destination.”
With the expansion in Yangon’s upmarket hotel inventory, Tour Mandalay managing director and owner Khin Zaw sees strong potential in pursuing the high-end FIT markets from the UK, the US, Germany and France. Changes in car import regulations have also made transfers a more comfortable and plush affair with the availability of new luxury cars.
While room crunch is no longer an issue, inbound agents stress that the bigger challenge lies in overcoming the perception that Yangon – or Myanmar as a whole – remains a pricey destination.
Highlighting the need to update and educate overseas agents on the price situation in Yangon, Edwin Briels, general manager of Khiri Travel Myanmar, commented: “When I compare how much a three- or four-star tourist spends for a trip to Myanmar with other ASEAN countries, I think that Myanmar is not that expensive…prices spent in a day in other ASEAN countries are pretty much on par.”
Compounding the pricey perception is the traditional slump in tourism during the monsoon season in Myanmar, another issue inbound players are keen to overcome too. Said Khin Zaw: “Our tourist season is only six months, unlike Thailand which sees tourists year-round. We need to tell visitors that Myanmar can be visited the whole year round, so we need to target new markets like Russia, Canada, Latin America and Australia (to spread footfalls during the low season).”
At the same time that Yangon’s room crunch is being alleviated, the city’s streets, on the other hand, are now facing congestion as the vehicular growth has vastly outstripped the road infrastructure.
Barrows commented: “The number of cars flooding into the country over the last three years has overwhelmed the infrastructure, particularly in downtown Yangon. With no real viable public transport, the gridlock downtown is becoming quite a problem. A new vision to handle this growing traffic is needed to keep downtown a popular tourist attraction.”
Briels agreed: “A traffic-free zone in the downtown area or better public transportation would be good for tourism as we see that the average number of days tourists are staying in Yangon is decreasing.”
Myanmar Welcome Travels & Tours saw booming demand – an 80 per cent growth – from Thailand in 2015, in part driven by visa-free regulation between Thailand and Myanmar introduced last August.
Said its director Nwe Nwe Khaing: “Back when we had room shortage, the Thai market used to buy three-star properties but with more reasonable prices in Yangon, they have become less budget-conscious and are increasingly turning into a high-end market,” she added.
No longer a frontier destination?
Thailand is not the only market visiting Yangon in droves. The Ministry of Tourism has predicted 4.5 million tourist arrivals in 2015, up from 3.8 million in 2014 and 2.1 million in 2013. Nearly three-quarters of the international arrivals were from Asian countries, led by Thailand, followed by China, Japan and South Korea.
With rising confidence for Myanmar following the landslide victory of Aung San Suu Kyi in last November elections, the trade expects visitor interest and business prospects for Yangon to stay rosy.
Briels remarked: “We can see that Myanmar has developed itself from a niche destination only for early innovators to a more mature destination. A few years ago, tourists visited Myanmar because it was ‘new’, nowadays tourists visit the country because it simply has a lot to offer them.”
But as Myanmar heads towards its target of 7.5 million tourists by 2020, will mass tourism develop too quickly in Myanmar along the lines of neighbouring Thailand and Vietnam?
Laurent Kuenzle, CEO of Asian Trails, contends that Yangon is still a “far way from being a modern city and a mass tourism destination” as the city retains its traditional ways and charismatic allure.
