Rapidly increasing visitor numbers are a boon to the sector but threaten to overwhelm limited infrastructure

White sand beaches and rolling green hills dotted with sacred lakes, golden pagodas and thick jungle cover a culturally diverse and sheltered land that has only just begun opening up to the outside world. Indeed, the tourism sector has been the fastest-growing sector of Myanmar’s economy since the country opened to foreign trade three years ago, though its contribution to GDP remains relatively small in regional terms.

In spite of this growth, however, costs are high and the quality and availability of facilities for visitors remain low. Major upgrades to transport infrastructure as well as hospitality and public services will be necessary to withstand the pressure of the tourism industry on the country’s infrastructure.

Bt The Numbers

According to the Ministry of Hotels and Tourism, there were 2m international entrants to Myanmar in 2013 – double the 1m visitors in 2012. This growth has continued into 2014, with the ministry reporting a 40% year-on-year ( yo-y) increase in arrivals for the first half of the year. These increases dwarf the 3.14% recorded between 2010 and 2011, a figure reflective of the general pace of visitor increases since 2004.

This swell in visitor numbers – and hence sector earnings – clearly began in 2011, when the country’s reform programme came into effect. Tourism accounted for almost $1bn in earnings in 2013, up 73% from the previous year and almost triple the amount earned in 2011, a significant increase from average annual growth of 15% from 2007 to 2011.

Furthermore, Myanmar’s average expenditure per person per day has also increased, rising from $120 in 2011 to $145 in 2013, representing a compound annual growth rate in per-visitor revenue of around 7% y-o-y. “Myanmar has never seen the tourism industry grow as it is growing now,” U Aung Myat Kyaw, the vice-chairman of the Myanmar Tourism Federation, told OBG. “However, our tourism sector is still small when compared to those of our neighbours.”

In 2013 the sector directly contributed only MMK849.6bn ($849.6m), or 1.6% of total GDP. According to the World Travel & Tourism Council (WTTC), this is expected to rise by 9.5% in 2014, at an average of 6.9% per year over the next decade, eventually reaching MMK1.9trn ($1.9bn) in 2024.

Including wider impacts such as investment spending, government spending and tourism-related retail, the sector contributed 3.7% of GDP or MMK2trn ($2bn) in 2013, and is forecast to grow at a rate of 9.2% annually for the coming decade, eventually accounting for 4.1% of GDP by 2024.

Humble Beginnings

Myanmar still has a long way to go before this growth is realised. In 2013 the country had the 111th-largest tourism market of the 184 countries measured by the WTTC, and ranked 174th in terms of the sector’s size relative to GDP. This placed Myanmar far behind its regional peers – tourism’s 1.6% contribution to GDP is the lowest in the region, beneath Brunei Darussalam (1.8%) and far below the global average of 2.9%.

Capital investment in tourism is similarly low. Only 1% of total investment is generated from the sector, placing the country third-to-last on the WTTC rankings and in last place (along with Brunei Darussalam) among its South-east Asian neighbours.

Visitor exports are also an underperforming segment for the country. In 2013 visitors spent only $500m, compared to regional leader Thailand’s visitor exports of $45.4bn and Vietnam’s $6.6bn.

Furthermore, Myanmar was ranked 173rd in the world in terms of job creation from tourism. In this area, too, Myanmar fell behind its regional peers, with only 1.2% of jobs coming from the sector in 2013 – trailing the next-lowest, Brunei Darussalam, by 1.5 percentage points.

Growth

As a result, the country’s tourism sector is now due to skyrocket from this low base. In the coming decade, Myanmar is set to have the fastest-growing tourism market in South-east Asia and the seventh fastest-growing in the world over the coming decade, according to the WTTC. The sector’s contribution to GDP is expected to grow at 7% per year until 2024 – well above the global average of 4.2% and matched only in the region by Cambodia.

Growth in capital investment in the tourism sector over the coming decade is predicted to average 7.7% (the seventh-highest figure globally and by far the highest in the region), while visitor exports will rise to nearly 10% of total exports by 2024.

Jobs

The benefits of this growth will be felt across the board, as more jobs are created and more investments are drawn in. There were 823,000 jobs in Myanmar’s tourism industry in 2013, accounting for 3% of total jobs in the country. This figure is predicted to grow by 4.2% per annum to more than 1.3m jobs in 2024, representing 4% of total employment. This includes employment from hotels, airlines, travel agents, tourist-targeted restaurants and leisure industries, and all indirect tourism-related hires.

Additionally, the further development of transport infrastructure, entertainment facilities, visitor accommodation and new service industries will give rise to a host of indirect knock-on developments, leading to increased government spending, higher employment and more spending in other industries.

Hotels

Higher levels of capital investment will be necessary if growth is to continue at this pace. The WTTC predicts that the MMK108.3bn ($108.3m) invested in 2013 will rise to MMK236.3bn ($236.3m) in 2024 as a host of new hotel construction projects and infrastructure are developed.

The total number of hotel rooms increased 23% from 28,291 in 2012 to 34,834 in 2013. Likewise, the number of hotels grew from 787 in 2012 to 923 in 2013, a 17% increase. This is compared to y-o-y room growth rates of 13% in 2012 and 6.6% in 2011, suggesting that the construction of new hotels may lag behind the rate of increased visitors by a period of two or three years. In 2013 only six of the 923 hotels in the country had five-star ratings; 17 had four-star ratings, with the majority – 65% – remaining unrated. More high-end options are expected to come in the next few years as more international hotel groups establish a presence in the country.

The bulk of the latest bout of hotel construction has taken place in the country’s two largest cities, Yangon (also known as Rangoon) and Mandalay. In Yangon, 28 new hotels became operational in 2013, and 25 opened in Mandalay, accounting for 1260 and 1065 rooms, respectively. However, Naypyidaw, the country’s new capital city, has seen the fastest growth over the past few years, with its room count nearly doubling from 2011 to 4030 in 2013. Though it is a rare destination for holidaymakers, Naypyidaw regularly hosts business visitors seeking meetings with ministries and government officials.

Work & Leisure

In 2013, 61% of tourism spending came from leisure and 39% from business. Leisure is expected to continue outpacing business spending for the next decade, growing at 7.5% per annum – significantly higher than the 5.8% growth predicted for business spending, according to the WTTC. Indeed, domestic leisure activities accounted for the majority of tourism spend in Myanmar. While leisure is expected to remain the dominant segment of the industry, foreign entrants are expected to outpace domestic tourists as more international visitors become acquainted with the country.

Foreign visitors only accounted for 31.2% of total spending in 2013. In the coming 10 years, however, the WTTC expects foreign visitor numbers to increase dramatically, with spending expected to rise from MMK525bn ($525m) in 2014 to MMK1.6trn ($1.bbn) in 2024. These figures predict an average 11.6% growth per year for the 2014-24 period, as opposed to the 3.7% annual spending growth predicted for domestic travellers.

An influx of foreign visitors will be good news for Myanmar’s exports and trade balance, for as more foreign tourists come to Myanmar, more products will be taken abroad. MMK459bn ($459m) was generated through visitor exports in 2013, accounting for 5.1% of the country’s total exports. This figure is expected to grow 14.1% in 2014 and another 11.6% per annum for the following 10 years to MMK1.6trn ($1.6bn), or 9.4% of total exports, by 2024.

A Mixed Bag

The majority of tourists enter through the land borders; only 817,000, or around 40%, flew into Yangon, the country’s major hub in 2013. In 2014, about 1m visitors arrived at airports, with another 2m arriving at land crossings. Most visitors flying into Yangon were independent travellers, accounting for 36% of entrants in 2013, while business and package tour travellers accounted for 18.5% and 18.2% of entrants, respectively.

Around 70% of visitors in 2013 came from Asia. The highest number of visitors (15% of the total and the majority of land crossing entrants) came from Thailand. Another 10% travelled from China, while Western Europe accounted for 18% of arrivals, with France, the UK and Germany representing 3-4% each.

Since the country opened its doors, tourists travelling from Asia have risen as a fraction of the total Myanmar entrants. Indeed, across Asia, travel to Myanmar has become more popular, and the national mix of entrants has become more diverse. Compared to 2009, entrants from Thailand and China now represent a slightly smaller fraction of the pool, while travellers from Japan and Korea have risen from 5.6% and 5.1% of total entrants to 7.6% and 6.1%, respectively. The mix of entrants and Myanmar’s popularity among its neighbours offers some key insights for the design and construction of relevant infrastructure, allowing the hospitality industry to tailor its offerings to specific visitor populations.

“We have begun focusing on the Japanese market to serve a rising demand,” said U Myint Aung, the general manager of Myanmar Polestar, a tour company. “But Japanese tourists have high standards and require a high level of service.”

The Whole Package

Travellers aware of the country’s tumultuous history have traditionally been wary of signing up to package tours, which in the past may have been linked to the military or regime. Indeed, in 1995 activist Daw Aung San Suu Kyi called for tourists to “stay at home and read some of the many human rights reports”. In 2011, she altered her advice and called on visitors to travel “in the right way, by using facilities that help ordinary people and avoiding facilities that have close links to the government”. In 2010, 30% of tourists used package tours and by 2013, after Daw Aung San Suu Kyi’s call, only 18% of arrivals used licensed tour companies. As more options become available and more information is published on the country, travellers are less reliant on tour companies and more willing to tackle the country independently.

Off The Beaten Track

Myanmar’s main tourist attractions – the vast temples of Bagan, the unique royal palace of Mandalay and the peaceful white sands of Ngapali – are the centres of tourism activity so far, but there are an increasing number of off-the-beaten-track sites and land border crossings opening up for more adventurous travellers.

“Myanmar has an incredible number of hidden attractions, and many travellers are itching to explore the country,” Marcus Allender, CEO and founder of travel website go-myanmar.com, told OBG. Allender established his business in the country in 2012 to provide tourists with an up-to-date alternative to guidebooks. His website has since become a leading portal for bookings. Allender suggested a number of little-known attractions, including Pyin Oo Lwin, an old colonial town near Mandalay, Indawgi Lake in the north of the country, and Pa-an (Hpa-an in Myanmar), which hosts impressive mountainous rock structures and cave temples to the east. “A rising number of independent travellers are coming to Myanmar, and our more off-grid tours are becoming increasingly popular,” he said.

A five-hour boat trip from the nearest airport, Mrauk U hosts a rich temple complex that is currently being developed to support intrepid travellers. However, at present it is only accessible by crossing through Rakhine State, an area that has seen Buddhist-Muslim clashes in recent years, which have resulted in hundreds of thousands of internationally displaced persons on the border with Bangladesh. Some charities and non-government organisations providing aid in the region were expelled in 2014 after falling out of favour with the local authorities. For tourists, however, the region is safe and quickly becoming one of the country’s top destinations.

Taking Responsibility

To this end, the government of Myanmar has pushed for responsible tourism development, encouraging the establishment of sustainable ecotourism projects. A Tourism Law and a Tourism Master Plan have been developed to direct this effort countrywide. Unveiled in 2013, the Tourism Master Plan runs until 2020 and has the goal of maximising the sector’s contribution to employment and income generation, while ensuring that the social and economic benefits of tourism are distributed equitably (see analysis). “Travellers should enjoy and respect the country at the same time,” Daw Kyi Kyi Aye, a senior advisor at the Myanmar Tourism Federation, told OBG. “With rising numbers of visitors, more checks and balances will be required.”

Stronger Institutional Environment

To effectively regulate the tourism industry and enact the policies outlined in the master plan, the government recognises the need for a strong institutional environment and several supporting bodies have been strengthened over the past few years, including the Myanmar Tourism Federation, the Myanmar Tourism Board, the Hoteliers Association and Naypyidaw’s Tourism Development Central Committee. Information from the Ministry of Tourism is used to communicate to prospective stakeholders, and data released annually provides a view of the market.

Untapped Treasures

There are still many areas of the country that continue to be closed to mainstream tourism, and many communities that may wish to be a part of the transformation but remain unable to accommodate their guests. Licensed tour companies and hotels are still the only legal way to be a part of the industry. This may change, however, as a goal of the Tourism Master Plan is to bring smaller communities into focus. The plan aims to create a bed-and-breakfast option for smaller guesthouses and hotels that wish to accommodate travellers, according to Daw Kyi Kyi Aye. “Everyone should be able to be a part of the tourism industry,” she said.

One of the most impressive of Myanmar’s tourism assets are a host of old colonial buildings across cities such as Yangon and Mandalay, some of which are being protected by the Yangon Heritage Trust.

“Yangon [has] an unparalleled collection of 19thand early-20th-century architecture, from old teak homes to downtown buildings that once housed multinational corporations like Standard Chartered and HSBC during the beginnings of the country’s independence,” U Thant Myint, the founder of the Yangon Heritage Trust, wrote in the Irrawaddy Journal Magazine in October 2014.

“We have streetscapes and views that no longer exist anywhere else. This provides a tremendous opportunity that no other city in Asia has – to combine old and new in a way that makes Yangon unique. If we destroy this now, it will never come back.”

Some of the structures protected by the trust are still used as government offices, while others have been neglected, calling for a solution to preserve or renew the space. The Yangon Heritage Trust lists 189 buildings across the city, including religious architecture from a variety of faiths, grand colonial offices, forgotten social clubs and red brick schools and hospitals. In this time of radical and aggressive change, the society aims to keep the cultural roots of the city close to heart as high-rise apartment blocks begin to scrape the skyline.

“Global history was made on these streets,” wrote U Thant Myint. “Yangon is at a crossroads.”

Outlook

Myanmar’s rich natural assets and cultural lure have the potential to make the country one of the top tourism destinations in the region. The industry has already generated strong economic momentum that will carry it forward for years to come. However, this influx threatens to overwhelm the country’s capacity for meeting visitor demands. Balancing the demands of a new surge of travellers while also making plans for infrastructural development and trying to ensure sustainable economic growth will present challenges in the years to come.

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The Report: Myanmar 2015

Tourism chapter from The Report: Myanmar 2015

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