The hotel market in Yangon is set to continue its record growth in 2014, following a 46 percent year on year increase in international visitor arrivals in 2013, according to the latest report from property research firm Jones Lang LaSalle (JLL).
Tourist arrivals to Myanmar are expected to continue growing at the same speed, especially with the expansion of the main airport and construction of Hanthawaddy International Airport, said JLL’s update.
Andrew Langdon, executive vice president, Thailand and Indochina, JLL’s Hotels & Hospitality Group, said: “Ever since Myanmar embarked on its journey to democracy in 2011, Yangon has seen an incredible improvement in hotel market performance as demand continues to outpace supply.
“Recently unveiled plans from the Asia Development Bank coupled with the expansion of the existing international airport and the opening of a new airport near the city in 2018, means we don’t expect any let up in the growth of tourist arrivals to Yangon.”
The strong demand for international standard accommodation, which is predominantly driven by visitors from Thailand, Japan, China and South Korea, is currently outpacing supply with less than a third of Yangon’s 9,163 rooms considered to fit the criteria of international standard.
Despite this, JLL’s report said there are signs that the imbalance is being addressed with 4,518 rooms expected to enter the market in the next five years, of which 95 percent will be international standard – more than doubling the supply in Yangon.
The report said there is huge opportunity present to investors and operators looking at the market as occupancy for the upscale and luxury segments increased from 45.8 percent in 2009 to a record 80 percent in 2013.
“Over the past 12 months we’ve seen a number of international hotel operators, including Accor and Hilton, take advantage of these conditions with key projects slated to open later in the year,” Langdon said.
RevPar (revenue available per room) is also dramatically increasing, growing more than 7 times to $126 over the past five years, JLL said. RevPAR is a performance metric in the hotel industry, which is calculated by dividing a hotel’s total guestroom revenue by the room count and the number of days in the period being measured.
Due to the increase of supply planned for 2014, occupancy is set to remain stable at 80 percent throughout the year, while ADR (average daily rate) is forecast to be $173, up 10 percent from 2013. ADR is a statistical unit that are often used in the lodging industry, representing the average rental income per paid occupied room in a given time period.
Yangon also faces a dearth of serviced apartments, with JLL noting that most unbranded apartments are running at close to full occupancy.
The Sebel Yangon Myat Min by Accor is expected to be the first internationally branded serviced apartment in Yangon. Other properties to open in Yangon include Daewoo Serviced Apartments in 2016; Somerset Kabar Aye Yangon, HAGL Serviced Apartments, and Pan Pacific Serviced Apartments in 2018.
Midscale opportunities
JLL said opportunities for investors lie in the mid-scale segment of the hotels market, given that the lion’s share of future supply is going towards the upscale and luxury end of the market.
“With the majority of future supply concentrated towards upscale and luxury, this presents a strong opportunity for the mid-scale brands where the market remains relatively untapped,” Langdon said.
Beyond 2014, however, occupancy rates are expected to stabilise as an increase in supply will help moderate average daily hotel rates, the analysts said.
“The future remains bright for the Myanmar hotel market and opportunities await investors and operators who are willing to take them.”
