colliers international yangon hotel market report 2q 2014

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Research & Forecast Report

Yangon | Hotel Market 2Q 2014

More hotel zones planned to serve rapidly increasing demandBoth foreign-invested and local hotel developments are projected to heighten on the back of increasing business and tourist arrival levels in Myanmar. In Yangon city alone, the total upper-scale hotel room stock is predicted to nearly triple to 6,000 units in the next four years.

Demand in the rest of the country is forecast to trend strongly upwards particularly in Mandalay. However, room requirements in rapidly emerging destinations such as Inle Lake, Bagan, Ngwe Saung, and Ngapali, is similarly rising. The total number of foreign arrivals in the 1H 2014 grew by 43% YoY, and will only expand further amid positive economic reforms.

Despite the growing foreign arrivals, the increasing ADR of upper-scale hotels in Yangon dampened occupancies in 2Q 2014 with levels lower than in the past two years. This has resulted in a decline in RevPAR for 2Q 2014 in most of the city hotels YoY. On the other hand, locally operated hotels, of good quality, are benefitting from the immediate demand due to relatively lower rates.

Forecast Direction

2Q 2014 – 2Q 2015

New Supply

Occupancy

ADR

2 Research & Forecast Report | 2Q 2014 | Yangon | Hotel Market

New developments and expansion plans to boost upper-scale hotel room-stockMyanmar’s booming tourism industry, reinforced with strong economic reforms, continues to lure investment opportunities in the country’s rapidly expanding hotel industry. More foreign investors are now submitting investment proposals, and new foreign partnerships are being formed - set to respond to the increasing business and tourist requirements. On the other hand, local investors rush to construct mid-sized hotels to immediately serve the pent-up demand, while some pursue keen interest on the upper-scale segment in the long term.

Meanwhile, the government is further driven to establish more hotel zones with an aim to accommodate the surge in demand, particularly in key destinations such as Yangon, Mandalay, Bagan, and Taninthayi regions in the south. Likewise, development plans will be carried out in the Taunggyi district (Inle Lake) where supply is reportedly lacking, especially during the peak season.

In 2013, a total of 923 hotels were registered nationwide, according to the Ministry of Hotels & Tourism. The number grew by a substantial 17% annually translating to some 35,000 rooms. While in the first four months of 2014, 59 new hotels were unveiled with over 3,700 new rooms delivered. The majority were located in Yangon and Mandalay.

At present, Yangon city represents roughly 30% of the total supply; while with 250 more hotel licenses approved early this year, the city’s total room-stock is projected to more than double, backed by the surge in business and tourist arrivals.

These new hotels include upper-scale projects currently being constructed and expansion plans of existing developments. Renovations and plans of expanded operations are currently in place in many of the presently completed hotels in Yangon such as Sedona, and Strand. In fact, Traders Hotel in downtown was rebranded to Sule Shangri-La in the second quarter of the year, after undergoing extensive renovations over the last two and a half years.

Aside from the planned additional rooms, new foreign-invested upper-scale projects are expected to deliver substantial supply in the medium term, namely Hilton Hotel (300 rooms) in Kyauktada Township, Pullman Yangon Myat Min (300 rooms) in North Okkalapa, Novotel Yangon Max (366 rooms) and Daewoo Amara Hotel (346 rooms), both in Kamaryut Township. Hotels, as key components of mixed-use developments, will similarly take shape in the next three to five years, in projects such as HAGL Myanmar Centre in Bahan Tonwhip, Golden City in Yankin Township, The Landmark in Pabedan Township, Junction City in Kyauktada Tonwhsip, and Dagon City 1 in Dagon Township.

Along with the other projects in the pipeline, the projected cumulative room stock of Yangon’s upper-scale hotels will consequently reach nearly 6,000 units in 2018 - almost triple from the current stock of 2,000 rooms. This translates to an average of 780 new rooms annually within a span of four years.

Yangon Upper-scale Room Stock

Source: Colliers International Myanmar

3 Research & Forecast Report | 2Q 2014 | Yangon | Hotel Market

Lower grade hotels accommodate immediate demandThe upsurge in the average room rates per night continues to dampen occupancy, despite the increase in foreign arrivals, particularly in four and five star hotels. While some new leisure tourists prefer international standard accommodation, many business and frequent travelers find quality options in new lower grade locally operated hotels. As a result, many local entrepreneurs are now geared to deliver more mid-sized hotels (50-60 rooms) which can be quickly constructed, thus serving the immediate demand, at relatively lower rates.

A seasonal drop in demand was expected in the 2Q 2014; however occupancy levels for the upper-scale segment reveals a further declining trend from the same period over the last two years. Yangon city-wide occupancy rate for all upper-scale hotels dropped by 22% QoQ to average at 54%, following the hot season in the months of April to June. The current rate is lower by seven and 13 percentage points than the same period in 2013 and 2012, respectively.

Upper-scale hotels in the outer city area registered the least drop in occupancy which collectively stood at 64% - the highest occupancy rate for the quarter across Yangon. On an annual basis, the average occupancy in the Inner city is down by 4%; while in Downtown, a significant 16% drop was recorded.

66%61%

54%


Yangon Upper-scale Hotel Average Occupancy Rate by Location

a excludes border entries

Number of Foreign Arrivlas in Yangona


In the rest of the country, demand for hotel rooms in both current and emerging tourist destinations are projected to trend strongly upwards. In the past year, Myanmar received more than 2.4 million foreign arrivals, close to half entered by air and sea, while the rest arrived through the border gates. Furthermore, a large majority landed in Yangon (registered as tourists), while travelers with business visas were evidently increasing as well.

In the first half of 2014, foreign arrival levels continued to expand. Based on government data, over 1.6 million tourists were recorded, up by 43% than a year ago, and in line with the official target of 3 million by year end. Majority of the visitors came from Asia, specifically China, Japan, and Thailand. Demand for hotel rooms, both in Yangon and Naypyitaw, will especially be bolstered in the remainder of the year as the country is scheduled to hosts series of meetings, economic forums, and regional events, as part of its chairmanship role of ASEAN in 2014. Meanwhile, with a tourism road map being developed, coupled with airport facility upgrades, foreign arrivals are expected to similarly heighten in rapidly emerging destinations such as Bagan, Inle Lake, Ngwe Saung, and Ngapali.

Karlo PobreResearch Manager Research & Advisory+95 (0) 931 336 [email protected]

Theint Theint ThwinResearcher Research & Advisory+95 (0) 950 267 [email protected]

Tony PiconManaging Director | Myanmar+95 (0) 942 103 [email protected]

Copyright © 2014 Colliers International.

The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

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

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Landlords continue to dictate higher rates; average RevPAR decliningDespite the lowering levels of occupancy, landlords of upper-scale hotels in Yangon continue to dictate higher rates in the 2Q 2014 to average at USD165 per night. The rate has soared substantially by USD 50, or an increase of 42% over the same period two years ago. Though, compared to the previous year, the average daily rate (ADR) in Downtown and Inner City area tapered-off minimally by 2%, but remained higher by 19% and 43% than in 2012, respectively. In contrast, the ADR in the Outer City zone grew both from 2Q 2013 and 2Q 2012, by 21% and 54% respectively.

Meanwhile, despite the increase in ADR, the continuous modest decline in occupancy levels resulted in consecutive reductions in the revenue per available room (RevPAR) of most upper-scale hotels. The city-wide RevPAR dropped by 8% YoY to settle at an average of USD 88 in the second quarter. A noticeable 27% decreased occurred in Downtown Yangon, while a 10% drop followed in the Inner City area.

Despite that ADR in the Outer City zone is similarly trending upwards, the rate remains the lowest across Yangon, and the occupancy levels declined at modest rates. This resulted to an increase in RevPAR for the said area by 15% YoY.

ADR & Average RevPAR (Upper-scale Hotel)


colliers international yangon hotel market report 2q 2014

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