Myanmar is slowly emerging as a tourism destination in a region that is a favourite among travellers worldwide. It has a wealth of attractions to draw visitors from abroad, including Yangon’s Shwedagon Pagoda and its many other diverse cultural and historical sites, Inle Lake’s floating villages and gardens, the Bagan Archaeological Zone and its 2229 Buddhist temples, the Mandalay Palace and Ngapali’s beaches. One of the main challenges is to develop tourism infrastructure and ensure an adequate skills base to keep pace with the sector’s growth. This has proved difficult for many of Myanmar’s neighbours, and many wonder if the country has the foundations in place to do a better job of balancing growth with sustainability and conservation.
The main structural policies for the sector, among them the Myanmar Tourism Master Plan 2013-20, were laid out by the previous government. Tourism is among the Myanmar Investment Commission’s promoted sectors, meaning investment projects providing services for hotel and resort construction, transport and sightseeing services for tourists, and ecotourism benefit from income tax and import duty exemptions. The government named tourism as a priority sector in its National Export Strategy (NES) and listed it within the Framework for Economic and Social Reforms. Inclusion in the NES, a five-year plan that began in 2015 to boost economic growth, promises to open the sector up to private investment and loosen constraints in the business environment by increasing access to finance and trade information, as well as by allowing for a diversification of revenue sources from the development of new tourism offers.
A new draft tourism law was submitted to Parliament in 2017. The legislation aims to enhance the quality of sector services by seeking a balance between the rights of businesses in the industry, consumers and authorities. However, the law does not clarify how the sector should be regulated by other laws (such as land and environmental laws) or address the challenges posed by the growth of domestic tourism (see analysis) and is vague on the issue of consumer rights.
The Ministry of Hotels and Tourism (MoHT) is working with sector organisations to write by-laws, which are expected to take effect 90 days after enactment of the law. Further legislative changes include a new Foreign Investment Law drafted by the Directorate of Investment and Company Administration. The law, in effect since April 2017, is meant to encourage foreign investment across a range of sectors, including tourism.
These new laws are underpinned by the Myanmar Tourism Master Plan, created in 2013 to maximise the sector’s contribution to employment, income generation and equal distribution of benefits. In the plan the MoHT identified, in conjunction with the Asian Development Bank, several scenarios for the growth of the sector. Mid-range and conservative scenarios puts international visitor arrivals at 3.7m and 2.8m, respectively, by 2020. The plan also forecasts annual revenue of $10.2bn (under the high-growth scenario), $5bn (mid-range) and $3.8bn (conservative). Under all the scenarios, the tourism sector would be transformed into a substantial driver of growth for an economy the IMF estimates was worth $64.5bn in 2016.
Infrastructure upgrades such as those that reduce travel time between tourism sites and the 2014 introduction of electronic visas processed by local company Myanmar Ease Net and the Ministry of Migration are likely to support a continued increase in arrival numbers. However, passenger numbers can be affected by internal conflicts. In 2017 a high level of cancellation requests were received due to the humanitarian crisis.
Inbound international arrivals peaked at 4.68m visitors in 2015, and in 2016 the MoHT counted 2.9m tourist arrivals, a 38% decline from the previous year. However, this was attributed to a change in the way the ministry counts arrivals, which as of 2016 no longer included visitors on day trips. From January to the end of July 2017 there was a 22% increase in international visitors over the same period in 2016, for a total of 2m. The majority – 68% – of international arrivals were from Asia in 2016, with 19% and 14% coming from Thailand and China, respectively, mostly via land border crossings. Japanese tourists made up close to 8% of arrivals. Tourists from Western Europe comprised 19% of arrivals, and those from North America 7%. More than half of all visitors arrived via overland border gateways, and in 2015 that percentage was even larger, with 72% of all visitors entering through land borders. However, industry stakeholders have underscored that as most foreign tourists arrive by air, airport arrival figures may be a better indicator of inbound tourism than total arrivals. According to the MoHT, there were 1.3m arrivals to the country’s international airports in 2016.
Expenditure & Employment
Tourists spent a total of $2.1bn in 2015 and $2.2bn in 2016, with an average per person daily expenditure of $171 and $154, respectively, due to low hotel and air-ticket prices. However, the reduction in average daily spending was offset by an rise in the average length of stay from nine to 11 days. According to the World Travel and Tourism Council (WTTC), in 2016 the total contribution of travel and tourism to Myanmar’s economy was $4.6bn, or 6.6% of GDP. The sector’s direct contribution was 3%, which the WTTC expects will grow to 3.2% by 2027. Taking into account the wider effects from investment, the supply chain and induced income impacts, the sector’s total contribution is forecast to rise by 7.5% per year to $9.9bn, or 7% of GDP by 2027. There were 804,000 people working in tourism-related jobs in 2016, making up 2.7% of total employment. This number was expected to increase marginally in 2017 to 808,500. Forecasts for 2027 project the sector will directly account for 1.3m jobs, an increase of 4.8% annually over the next decade.
The sudden boost in arrivals in recent years may require more development in other sectors. U Aung Myo Min Din, chairman of tourism operator Adventure Myanmar Group, told OBG, “Tourist numbers have risen considerably in recent years due to the fact that Myanmar has so many hidden paradises. However, the rapid influx has put a strain on supporting infrastructure such as airport capacity.”
Decades of neglect have taken their toll on the rail, road and aviation networks, which has created challenges. The government’s National Transport Master Plan (NTMP) seeks to address this by prioritising infrastructure investment. It includes proposals for new mass transit systems in Yangon and Mandalay, dozens of new highways, the refurbishment of the national railway network, a new airport and port expansions. However, many of the NTMP projects are behind schedule due to insufficient funding and a lack of capacity.
In September 2017 U Win Khant, the permanent secretary of the Ministry of Transport and Communications, said that due to the limited capacity of Yangon International Airport (YIA), construction of the larger Hanthawaddy International Airport (HIA), was the main aviation priority for the NTMP. HIA will be located near the city of Bago, which is 91 km north-east of Yangon. The $2bn project is a private-public partnership awarded to a consortium of Singapore- and Japan-based firms, and construction is expected to be completed by 2022. Meant to serve as Myanmar’s main international gateway, HIA will have the capacity to handle 30m passengers per year when fully operational. It is hoped that it will become a hub for flights from Europe to South-east Asia and compete with Bangkok’s Suvarnabhumi International Airport as a regional gateway; flights from Europe are one hour shorter when flying to HIA as opposed to Bangkok. There are some reservations over the HIA project, however. Its distance from Yangon is seen by some as a problem – up to three hours by car in peak hour traffic – while the recent development of YIA – which is still far from reaching full capacity – casts doubt on the domestic need for HIA at present.
Indeed, YIA, currently Myanmar’s largest airport, is also undergoing expansions, with a new international terminal opened in March 2016. The new facility, the first of three planned terminals, marked the initial phase of construction. Eventual capacity for the airport is expected to reach 20m travellers per year. Of the passengers passing through YIA in 2017, 33% (1.81m) were domestic and 67% (3.64m) were international, according to Asia World, the company that manages the airport. In 2017 total passenger numbers hit 5.45m, an increase of some 16.5% year-on-year (y-o-y).
In addition, there are plans to upgrade key domestic airports, including those at Dawei, Thandwe and Kawthaung. Expansion of Thandwe Airport in Arakan State to accept large passenger planes from international destinations has been suggested, but a final decision has yet to be made. An international terminal at Thandwe Airport would enable tourists to fly directly to Ngapali Beach without transferring in Yangon.
Promotions & Taxes
To promote the sector, the Myanmar Tourism Federation (MTF), a private umbrella organisation for tourism operators, has in the past relied on government funding to conduct tourism promotion programmes it runs on behalf of the country.
In 2016 the government denied the MTF the full amount of its $30m request to be used for promotional purposes, granting it a lower budgetary allocation. In April 2017 the federation announced it had asked the state to impose a tourism tax on visitors to fund tourism promotion activities. U Yan Win, chairman of the MTF, said each tourist would be levied $1 per night at hotels or guest houses if the tax goes ahead. “This is one way to raise money for our tourism promotion budget without having to rely on government funds,” the chairman said, adding that the tax would only be imposed on short-term visits. If implemented, the tax would represent most visitors’ second direct payment to the government, after the $50 visa fee paid by many tourists on arrival. The move is likely to displease cheap hotels and the WTTC, which opposes increasing the tax burden for travellers, saying it often deters visitors and impacts negatively on a country’s overall earnings.
Conserving Local Heritage
The government hopes to make Shwedagon Pagoda a UNESCO World Heritage site, although most such efforts have to date been concentrated in Mrauk U and Bagan. The country has multiple cultural and historical sites in the UNESCO candidate list, including the ancient cities of Innwa, Amarapura, Sagaing, Mingun and Mandalay; Bagan Archaeological Zone and monuments; Inle Lake; Bago and Hanthawaddy; and Mrauk U archaeological area and monuments, among others.
Usually the first stop for international visitors, Yangon is known for its deep ties to Myanmar’s history, economy and culture. Located in the south, it remains the country’s largest and most economically important city, despite the decision to move the capital to Naypyidaw in 2005. Yangon is also a key commercial and transport centre for visitors venturing further afield. The city has an estimated 6000 historical buildings, which include classic examples of colonial architecture. In addition to famous Buddhist sites like the Shwedagon Pagoda, the city is home to mosques, churches, temples and a synagogue. However, economic development has led to a changing skyline in Yangon, which may be putting its architectural heritage at risk. Yangon Heritage Trust, an NGO, is seeking to preserve the city’s character. The organisation’s Yangon Heritage Strategy envisions the city transformed into a regionally competitive metropolis, buttressed by modern infrastructure that retains its unique socio-economic heritage. The strategy recognises that heritage tourism accounts for a growing portion of global tourism and believes Yangon stands to generate billions of dollars in tourism revenue in the coming years. Educating the local population on the importance of heritage is thus a key task.
The hotel segment is currently undergoing a process of rebalancing. In recent years occupancy levels coupled with a supply glut have contributed to lower revenues for hoteliers. This situation looks unlikely to change course soon due to the numerous projects in the supply pipeline. Between 2010 and 2015 the number of registered hotels in Myanmar nearly doubled, reaching 1279 with a total of 49,946 rooms. As of January 2017 the hotel and tourism sector had received foreign investment of $2.68bn, according to the Directorate of Investment and Company Administration. These investments in 67 businesses made hotels and tourism the seventh-most-invested-in sector in the country, and accounted for 3.9% of total investment.
However, occupancy rates have not kept pace with the new supply, and hoteliers have struggled to fill the rooms. In 2016 occupancy rates were under 40% in the low season, the wet months between spring and summer, and hit 50% in the high season, the dry autumn to winter months, according to the Union of Myanmar Travel Association. “Occupancy has fallen in recent years and the market is struggling to find its equilibrium point. That has had an impact on nightly rates, which have also dropped,” Sam Moon Thong, president of regional investment at Keppel Land, told OBG.
The increased supply has diminished the overall performance of the hotel sector. According to consultancy STR, from November 2015 to January 2016 there was a rise in the average daily rate (ADR) of 9.4%, while revenue per available room (RevPAR) fell by 13.6%. Meanwhile, occupancy rates dropped by 21 percentage points to 56.9%. The sample, which was weighted towards the luxury and upscale segments, showed that approximately 3600 rooms were in the construction phase in those categories. In Yangon, the country’s largest market, the ADR rose by 5.6% between November 2015 and January 2016, while RevPAR decreased by 12.1% and occupancy fell by 16.8 percentage points to 48.1%. In the second quarter of 2017 Yangon’s upscale segment’s ADR had also slipped by almost 7% y-o-y. Room rates reached $111 across the city, and occupancy was down 1 percentage point y-o-y, according to property consultant Colliers International. Hotels in Naypyidaw, meanwhile, have begun to discount room prices to attract more customers, with the average price of the capital’s more than 5000 rooms dropping by around 20% in 2016.
Despite the increase in supply and competition, international-level accommodation remains relatively expensive. A lack of adequate supply of upscale international hotels has made the country a comparatively costly destination in Southeast Asia for accommodation. However, this is starting to change as new hotels launch in this segment.
This is especially true for Yangon, where firms are attracted by the many historical buildings that can be turned into boutique and luxury hotels. Swiss-headquarted Kempinski is currently renovating one of the city’s largest colonial buildings, the State House, on Strand Road. A 90-year-old former police commissioner’s building, the property will offer 229 rooms and suites, restaurants, lounges, a grand ballroom and recreation areas. Other planned new offerings include the Pan Pacific at Junction City, the 300-room Pullman Yangon Centrepoint, and the Lotte Hotel & Serviced Apartments in the Outer City zone. In addition, the first Sheraton in the country is scheduled to open in Yangon in the summer of 2018. Japan’s Okura has announced plans to open a 390-room luxury hotel in Yangon in 2020 and said it is keen to add three to five more in the country in the next five years. In addition, development of The Peninsula Yangon has been approved. A huge project involving Myanma Railway, Yoma Strategic Holdings and Hong Kong and Shanghai Hotels, it promises to transform the skyline of the downtown area.
Yangon’s upscale hotel room stock totalled 3875 rooms as of the second quarter of 2017, according to Colliers. Three large new hotels were expected to come on-line during the second half of 2017, adding 1171 more rooms to bring the total new supply for the year to a record high. Some 4000 new high-end rooms are expected to enter the pipeline by 2021.
Investment in the sector is also occurring in other parts of the country. In Mandalay France’s AccorHotels is set to open the 206-room Mercure Mandalay Hill Resort in a joint project with LP Holding. The partners are also working on the Mandalay Hill Resort MG allery by Sofitel, which is scheduled to open in 2020 with 150 guestrooms and villas. AccorHotels is reportedly planning to build a total of six new properties – in Mandalay, Yangon, Inle Lake and Shan State – expanding the group’s presence to nine locations. It already operates two Novotels, Inle Lake Myat Min and Yangon Max, as well as the Lake Garden Naypyidaw. Additionally, Hilton Worldwide has partnered with Myanmar’s Eden Group to spend an estimated $130m on two hotels in Bagan and Inle Lake. International brands such as Best Western, Shangri-La, Amara, Centara, Dusit, Melia and Tangram are already operational in Myanmar.
For the past several years the government has been promoting the capital, Naypyidaw, as the country’s foremost location for meetings, incentives, conferences and exhibitions (MICE). The rationale is that Naypyidaw has many key MICE elements: strong transport infrastructure, international-standard convention centres and more than 50 hotels. Many of the facilities were built in the run-up to the 2014 ASEAN conference, when Myanmar held the ASEAN chair, and the World Economic Forum on South-east Asia in 2013.
However, the availability of shopping, dining, entertainment and mixed-range hotel prices are all also key elements of the MICE proposition and business travel. While local tourism operators welcome the government’s MICE initiatives, they say there is still much to accomplish in the capital before visitors perceive it as a viable international conference destination.
In 2014 Myanmar’s largest private business federation, the Union of Myanmar Federation of Chambers of Commerce and Industry, signed an agreement with the Thailand Convention and Exhibition Bureau (TCEB) to attract business traffic to the capital. The agreement was meant to develop Myanmar’s MICE industry, as well as overall tourism and trade promotion (see analysis). “More business traders and tourists are travelling to cities in Myanmar using Thailand as a gateway,” said Puripan Bunnag, director of the TCEB’s domestic MICE department. “This is an opportunity for us to support Myanmar’s booming tourism sector, and to leverage the trade and travel between the two countries.”
Despite the promotional campaigns, the more attractive destination for MICE may be Yangon, which has a far greater influx of foreign travellers: 1.1m arrivals came via Yangon in 2016, compared to 192,000 at all other entry points, including the capital, according to MoHT data. In 2017 two foreign carriers were servicing Naypyidaw’s airport: China Eastern Airlines, via Kunming, and Bangkok Airways, via Suvarnabhumi.
“Myanmar has been working to position itself as a MICE destination for a number of years, and we have seen an increased interest from our clients looking to host their events there,” Selina Chavry, global managing director for events management firm Pacific World, told press in June 2016. Chavry said Myanmar’s nascent MICE industry is aided by an increase of MICE-friendly hotel and conference facilities, such as the Novotel Yangon Max’s 750-person ballroom and the restored former Rowe & Co building in downtown Yangon.
Developing While Conserving
As hotels, restaurants and other hospitality outlets have sprung up to cater to international travellers, so has the issue of sustainability. “The preservation of Myanmar’s culture is crucial to the future of tourism,” Kelly Willis, director of Uncharted Horizons Myanmar, told OBG. “Transparency and good cooperation between UNESCO, the MoHT and the Ministry of Culture, and travel companies is needed to push towards sustainable tourism and preservation. This is not an easy task, nor a quick one.”
The government is prioritising sustainability as it steers the sector’s development. In 2015 Myanmar began its Ecotourism Policy and Management Strategy, a 10-year plan to ensure development is environmentally friendly and establish management systems that engage communities in protecting ecosystems. Moreover, the director of the MoHT, U Myint Htwe, announced in July 2017 that in FY 2017/18 the ministry is focusing on ecotourism, community-based tourism (CBT) and marine tourism. The government has included ecotourism as one of the investment activities that does not require a joint venture with a Myanmar citizen, making it possible, as with any hotel project, for foreign investors to own 100% of such investments. Additionally, the Ministry of Natural Resources and Environmental Conservation has identified 40 sites where developers are allowed to build eco-resorts after gaining ministerial permission.
The ministry is conducting surveys and studies to identify more potential ecotourism sites. “We will cooperate with related departments, [the] private sector, local people and the MoHT in developing ecotourism sites,” U Ohn Win, minister of natural resources and environmental conservation, told local media. “These ecotourism sites can support the government’s efforts to protect biological diversity and natural areas. It can also improve the income of the local residents and provide more job opportunities.”
As of July 2017 there were 21 active ecotourism sites in Myanmar, including elephant camps, wildlife and bird sanctuaries, and national parks. Additionally, a private company is planning to open a new site in the Bago Yoma mountains that will offer activities such as elephant riding, bird watching and bicycle trekking in the jungle. These sites have been classified as offering a wide array of nature-based attractions ranging from wildlife to flora and landscapes. “These businesses directly impact the incomes of local people,” said U Myit Htwe, director of the Ministry of Natural Resources and Environmental Conservation. “That is why we will try to develop ecotourism sites this fiscal year [2017/18].”
To help ensure local traditions are preserved, hotels and tourism-related activities in places away from popular destinations such as Yangon, Mandalay, Inle and Bagan must be built sensitively and respect the local culture, U Ohn Maung, minister of hotels and tourism, told regional media in January 2017. The minister noted that this is already the case in Chin State’s 11 hotels, which have been built in a traditional style. Its tourism operations have the same focus. The ministry, which designated CBT as a major 100-day project in 2016, has implemented 13 projects along these lines, and is planning to create ecotourism camps in the forests along the Yangon-Pyay and Yangon-Mandalay highways.
In eastern Myanmar, a CBT project in Kayah State is aimed at integrating local producers and service providers into the tourism value chain, while helping inbound tour operators develop inclusive tourism. The project was launched in 2014 by the International Trade Centre, a joint agency of the World Trade Organisation and the UN. Plans to promote the Mergui Archipelago, which is expected to attract visitors to its coral reefs, pristine beaches and a marine national park, include limiting development to about 80 of the 800 islands, with the others accessible only for day trips.
Responsible and sustainable tourism practices are essential, according to the minister, who said, “The country has so much potential, but we have to get it right.” The first step is developing human resources, according to the minister, who hopes to see foreign organisations assist in this process by supporting the establishment of training facilities. Improving infrastructure is the next step. He acknowledged that this involves a significant time investment, with careful management now leading to long-term benefits.
In an attempt to further diversify its tourism offerings, the MoHT is developing trekking and mountain biking in ecotourism sites, with the Japanese and European markets targeted for the ventures, according to U Ohn Maung. He has also urged tourism operators to run “green season” promotions to attract visitors during the low months. “We are calling this the green season as it is the time when Myanmar comes to life; the paddies are alive, the country is green,” he said.
The ministry is putting effort into promoting Myanmar as a year-round destination, rather than being limited to the current season, which generally runs from October to April. To attract more visitors, the MoHT is examining the possibility of creating South-east Asia’s first ski resort. In August 2017 the MoHT said it was negotiating with an Australian investor for construction of a ski resort to begin at Khakaborazi, in the northern state of Kachin. “Myanmar has the potential to become a tourism destination of choice in South-east Asia, but the sector needs more investment. Compared to other countries in the region, public spending and the budget of the MoHT are very low,” U Kyaw Khaing, vice-chairman of the Myanmar Hotel Association, told OBG.
Myanmar is a promising market for investors in hospitality, including hotel equipment and supplies, while the focus on ecotourism in the Tourism Master Plan means investments in eco-resorts could be an opportunity for returns. Tourism has the potential to lift communities out of poverty, as it has in other countries in the region. The challenge is to make development financially and environmentally sustainable.
There are many reasons to be hopeful that increased tourism can and will boost the country’s fortunes and bring it fully into the 21st century without damaging the cultural assets that make Myanmar unique. However, the tourism sector’s potential could be hindered by several factors. These include an unpredictable political situation and violence in Rakhine State, which could stall investment and deter potential foreign visitors; poor-quality infrastructure, which hinders tourists’ ability to access destinations beyond the main cities; and a shortage of skilled human resources. In addition, the rules for the sector remain unclear and there is a lack of consolidated information provided by the government and regional tourism agencies. Furthermore, there remain entry barriers for foreign investors despite improvements, and ethnic conflicts continue to make parts of the country inaccessible to tourists.
Tourism and hospitality operators, locals living in high-potential tourism areas, ecosystems and future tourists will all be shaped by the sector’s development, as will the economic fortunes of the country as a whole.
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