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Investment in Yangon hotels still short of forecasts: Report

Abandoned colonial buildings in Yangon could be golden opportunities for Thai firms to turn them into hotels, which are in high demand to serve the rising number of visitors.

Abandoned colonial buildings in Yangon could be golden opportunities for Thai firms to turn them into hotels, which are in high demand to serve the rising number of visitors.

Though Myanmar's gateway Yangon moves rapidly towards the one million annual visitor milestone, investment into the country's hospitality sector has fallen well short of forecasted growth.





To date a disconnect between the expectations of the private sector and ability of the government to broadly implement free market reforms remains at a critical junction. With over 9,000 hotel rooms in the city, approximately 20 per cent of these are of international standard. Over the next two years with over 3,400 new rooms in various stages of development could see the segment triple in size.

Citing the trend that the primary movement in the broad hotel pipeline are domestic developers and not overseas investors is a key focus of consulting firm C9 Hotelworks newly released report on Yangon.

"While the hospitality sector has enormous room for growth, Yangon remains in an early stage of development. Most of the deals being done for hotel assets in the current landscape are from local parties and not overseas groups. Given Yangon has captured investor sentiment as a South East Asia hot spot, it has yet to deliver on it's expected promise," said C9 Hotelworks’ Managing Director Bill Barnett.

"Pure speculation is driving land prices to unrealistic levels and the knock on effect of inflated values for foreign parties contemplating joint ventures with Myanmar entities," he added.

This is a key limitation for high profile institutional investors whose appetite remains strong for the destination. Foreign direct investment (FDI) into hospitality assets remains sidelined in many cases with concerns over the lack of a debt market and a slow government approval process.

A highlight of the report is the focus on the current transition period that Yangon is undergoing and stress that an open economy which has seen a massive influx of new automobiles, is having on the city’s transportation infrastructure.

Add into the mix a new international gateway airport in Bago which expected to open in 2017 and hotel investors are increasingly having to take a forward looking view of where the dust will settle on Yangon’s changing landscape.

Barnett added "the hotel storyline is not all rags to riches as there remains a keen level of trading volatility given tourism seasonality and the impact of the annual monsoon season. Once new inventory starts entering the supply side rates will start to normalize and the industry’s challenge will be on growing sustainable demand."

At the moment the country has retained strong investor interest but converting this into more tangible results is going to take longer than the market has expected.


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