Thu 31 May 2012
Filed under: Business / Trade
SINGAPORE: Hoteliers are eyeing a slice of Myanmar’s hospitality sector.With many economic sanctions being lifted, more investors are beginning to make their first trips to the newly opened country.
Experts said they expect demand for hotel rooms to grow at levels that the country has never seen before.
Myanmar’s reforms are coming in thick and fast.
This has caught the attention of hospitality players who are zooming in on the fact that the country only has 8,000 hotel rooms, compared to neighbouring Thailand, with more than 230,000 rooms.
Speaking at the Myanmar Summit organised by Blue Track Centre and Business Monitor International, Eric Levy of hospitality investment firm Tourism Solutions International said that Myanmar only has 187 hotels with 8000 rooms.
Thai-based hotel management company Onyx is one player that’s keen to get into Myanmar.
Simon Allison, chief development officer and executive vice president, Onyx Hospitality Group, said: “We see enormous potential across the whole country. We’d love to have two or three properties in Yangon at different levels – five, four and three stars. We’d like to be in the key tourist locations – Bagan, Mandalay. I think the only place we wouldn’t be too keen on is the capital Naypyidaw because I think there is too much supply.”
Myanmar has seen unprecedented political reform since last March, when its first civilian President, ex-military man Thein Sein assumed office.
Since then, democracy leader Aung San Suu Kyi has won a seat in parliament, and as recent as last month, the West European Union and the US suspended economic sanctions on the country.
Thura Soe-Paing, managing director, All Myanmar Investment Partners, said: “Politically we’ve seen huge changes – we didn’t expect this to happen so fast, so soon. On the economics side, because most of the reform in Myanmar has been led by the political reform, the economic laws have slightly lagged behind. So some of the laws such as the new (foreign direct investment) FDI law have been delayed from March and now we expect it in July.”
Mr Soe-Paing started investment and advisory firm All Myanmar Investment Partners early this year. The firm looks at foreign direct investment opportunities as well as private equity with its partner Dragon Capital through an Indo-China Opportunities fund.
Analysts said investment returns for hospitality investors look high, but that may not include risks such as unclear ownership laws, and regulations on profit repatriation.
Robert McIntosh, executive director, CBRE Hotels Asia Pacific, said: “Foreign investors will be looking for return on equity certainly in excess of 20 per cent. But there’s quite a bit of risk attached to that. And there’ll be some projects that’ll make quite a bit more, some that make substantially less. But certainly we need to achieve quite high rates of return.”
Simon Allison said: “In terms of rule of law, investment and so on, clearly the rules are changing week by week. There’s still a lot to do. Until investors really know that they can secure a tenor, and – I know the government is saying it won’t nationalise anything under the new foreign investment law – but until there’s a slightly clearer picture of where the trend is going, and how easy it is to set up foreign business – that’ll all be obstacles.”
Analysts said some US$40 billion of foreign direct investments have poured into Myanmar since the start of the year.
This has mainly gone into the oil and gas sectors.