The year 2016 has proved to be a sobering one for Myanmar’s hotels, especially in Yangon, which is home to more than a third of the country’s hotels.

A building boom triggered by the optimism surrounding the country’s democratisation and the relaxation of rules relating to foreign hotel investment is now beginning to be felt, and the sudden jump in supply, particularly at the higher end, has contributed to a decline in room rates.

Spending Habits

According to estimates from the Yangon Heritage Trust, which recently completed a study of sustainable heritage tourism, about 10% of Yangon tourists spend less than $100 a day (including accommodation), 80% are in the mid-range bracket ($100-200 a day) and 10% at the high-end, willing to spend upwards of $200 a day, and possibly as much as $1000.

At the end of June 2016 the stock of rooms in upper-scale hotels increased to more than 4300 following the opening of the Melia Hotel, which is part of HAGL’s Myanmar Centre development, and the Yangon Sedona’s 29-storey, 431-room Inya Wing. The increase in supply contributed to a 22% year-on-year drop in the average daily room rate and pushed the occupancy rate down to just 42%, a record low, according to Colliers International.

The real estate consultancy expects a further decline of between 8-10% up to the second half of 2017, as even more high-end hotels open. “The strong supply pipeline suggests a more competitive playing field,” Colliers analyst Daw Tin Thandar Oo wrote in the firm’s half yearly review of the Yangon hotel market. The company expects an average of 900 new keys to become available each year for the next four years.

New & Improved

Amid the intensifying competition, some properties are being renovated and expanded, most notably Yangon’s venerable hotel The Strand, which last underwent a major makeover 30 years ago. The hotel, jointly owned by GCP Hospitality and the Ministry of Hotels and Tourism (MoHT), reopened in November 2016, with the 31 suites in its original 1901 building given a contemporary update. New rooms will open in an annexe to the rear, probably in 2018.

GCP also plans to reopen its mid-range Thamada hotel under its Hotel G brand in March 2017, following updates and renovations. Colliers notes that mid-range properties are often more attractive to leisure and business travellers, registering an average occupancy rate of 77% in June 2016.

However, it also warns that new supply – Best Western is expanding in Yangon and Ibis Styles is due to open before the end of 2016 – is likely to push down occupancy rates.

In 2015 Myanmar had 1279 hotels, motels and guesthouses offering 49,946 rooms, according to the MoHT. These included a total of 324 in Yangon (15,424 rooms), 168 (6788 rooms) in Mandalay and 78 (2565 rooms) in Bagan.

The Directorate of Investment and Company Administration notes that there is a “need for affordable as well as high-class accommodation” in areas beyond the main cities.

Inle Lake has been witnessing increasing competition, as international brands such as Accor open properties and entrepreneurs open smaller, more intimate hotels. The opening of the 94-room Sanctum Inle in October 2016 also raised the bar for accommodation in the area.

The resort is managed by Ho Chi Minh City-based AppleTree Asia, which also operates luxury properties in Vietnam and Laos. “The hotels that are good are making lots of money,” Achim Munz, resident representative of the Germany-based Hanns Seidel Foundation, a development organisation, told OBG. “The others are suffering. If they want to stay in the game they must update and renovate.”