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Research & Forecast Report

Yangon | Upper-scale Hotel Market 1Q 2014

Foreign hotel operators take keen interest in Yangon market The number of upper-scale hotel rooms in Yangon is expected to double as some 2,500 rooms are scheduled to complete within the next three years.

Demand is projected to continually expand as the country is estimated to receive over two million foreign arrivals by the end of the year. However, the continuous rise in upper-scale daily rates is a deterrent to healthy occupancy levels going forward.

The current average occupancy rate is now 13% lower than in 2012, while the average daily rate has increased threefold since 2010.

Forecast Direction

1Q 2014 – 1Q 2015

New Supply

Occupancy

Average Daily Rate

2 Research & Forecast Report | 1Q 2014 | Yangon | Hotel Market

Upper-scale hotel room stock to double in the next two yearsThe number of upper-scale hotel rooms in Yangon remains scant having had an unchanged room-stock since 1998. There are only 11 existing upper-scale hotels, as tracked by Colliers International, in the city translating to over 1,900 rooms. However, as the level of tourism and business interest heightens, backed by political and economic reforms, hotel developers and foreign operators alike are now taking a keen interest in the dearth in supply. In the next two years, the upper-scale hotel room stock in Yangon is expected to double with some eight new projects in the pipeline.

In 2015, Hilton Hotel is expected to add some 300 rooms to the ‘luxury’ supply stock as it commences operation in the mixed use Centrepoint Towers project in Downtown Yangon. In 2014, Novotel Hotel Max (360 rooms), is slated to open in Pyay Tower in the Inner City area. However construction can be sluggish for some projects and completion may be pushed back. In a similar way, Rose Garden Hotel (300 rooms), located in Minglar Taung Nyunt, nears completion yet the opening date remains uncertain.

Current average occupancy rates lower than in 2013 and 2012 levelsAs at 1Q 2014 the average occupancy rate for all upper scale hotels in Yangon stood at 76%. The current rate is lower by six percentage points from 1Q 2013, and 13 percentage points from 1Q 2012.

The downward trend in occupancy is attributed to the substantial increase in the average room rates per night driving frequently visiting travelers especially business visits to seek relatively inexpensive accommodation options in lower grade locally operated hotels.

Meanwhile, four more hotels are slated to complete in 2015. Vietnamese developer, Hoang Anh Gia Lai, is set to introduce a 480-room luxury hotel to the currently under construction mixed-use development, HAGL Myanmar Centre, in the Inner City area.

Moreover, Myanmar developer Serge Pun and Associates, in conjunction with Yoma Strategic Holdings, has laid out plans for a luxury hotel (80 rooms) to be represented by the Peninsula brand. The hotel is designed to accommodate 80 rooms and will rise in the heritage listed former railway headquarters. The phase two extension site of Sedona Hotel has likewise been in preparation for the addition of 420 new hotel rooms from the currently existing 366 rooms. Also in the same year, the Pullman Yangon Myat Min, a project brought together by Accor and Myat Min Co., will supply some 300 rooms. Other projects targeted to complete in the medium term are Daewoo Amara Hotel, and Golden City Hotel.

Source: Colliers International Myanmar

Yangon Upper-scale Room Stock

Yangon Upper-scale Hotel Average Occupancy Rate by Location

Source: Colliers International Myanmar

3 Research & Forecast Report | 1Q 2014 | Yangon | Hotel Market

RevPar to ADR Gap continually widens as rates increase combined with lowering levels of occupancy

The Inner city area of Yangon had a high occupancy rate averaging 80%, slightly up QoQ, but is down compared to the same period in 2012. The average occupancy rate in downtown likewise declined on both quarterly and yearly basis. On the contrary, the average occupancy rate in the Outer City area improved by four percentage points QoQ.

As more sanctions are being lifted in Myanmar, the number of tourist and business travelers in Yangon has risen dramatically over the last three years. Almost a million foreign arrivals have been recorded in the country (excludes border tourism) in 2013 (+52% YoY) with about 92% entering via Yangon and majority of whom were tourists according to the visa.

The record growth in foreign arrivals is most likely to continue in the near to medium term. But, the continuous rise in daily room rates of most upper-scale hotel will likely dampen occupancy rates going forward. However, with new upper scale hotels slated to open in the next two to four years, the soaring room rates are projected to gradually ease driving overall occupancy rates to stabilize at reasonable levels. At present, mid-scale hotels are benefitting from high occupancy rates, which many travelers have resorted to.

The average daily rate (ADR) among the upper scale hotels in Yangon continued to increase substantially year-on-year amid limited supply and increasing foreign arrival levels. As at end of 1Q 2014, city-wide average daily rate stood at USD191 per night, a growth of 2% QoQ, and 10% YoY. The current rate has increased more than threefold versus the 2010 level – with ADRs then ranging between USD40 to 50.

The ADR in the Outer City posted the highest growth by 6% QoQ, yet remains one of the relatively lowest rates among all other city areas. On the contrary, a slight dip in ADR occurred in the Inner City area but the rate is expected to rebound as the location remains preferred by most leisure travelers owing to its scenic location; and by business travelers requiring a location closer to the north of Yangon. Meanwhile, downtown Yangon continues to demand the highest average daily rate, at USD217, as of the end of the quarter.

City-wide ADR is expected to decline within the next six months to buoy occupancy rates over the rainy (low) season, a cyclical yearly trend. Meanwhile, the average RevPAR improved by 3% both on a quarterly and yearly basis, currently at USD147. The continuous increase in ADR combined with the relatively lowering levels of occupancy rates have consistently widened the RevPAR to ADR gap. As at 1Q 2013, the ratio was at 77%, five and 12 percentage points lower than in 1Q 2013 and 1Q 2012, respectively.

ADR & Average RevPAR (Upper-scale Hotel)

Source: Colliers International Myanmar

Number of Foreign Arrivals in Yangon

Source: Colliers International Myanmar

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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.

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Karlo PobreResearch Manager Research & Advisory+95 (0) 931 336 099karlo.pobre@colliers.com

Theint Theint ThwinResearcher Research & Advisory+95 (0) 950 267 22theint.thwin@colliers.com

Tony PiconManaging Director | Myanmar+95 (0) 942 103 4026antony.picon@colliers.com

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