Mar 26, 2012

Myanmar lures hoteliers

Myanmar is stepping up auctions of land plots in prime locations in Yangon for hotel development.
Authorities are rushing to address a room shortage as foreign investors and tourists begin flocking back to the country.

Myanmar is embarking on reforms and opening up after 50 years of isolation under military rule.
The country will also be the site of the SEA Games 2013 and the Asean Summit 2014, creating even more demand for hotels.

Thinn Htut Thidar, CEO of Myanmar-based Universal Link Service Co Ltd, a business consultant and expert on the country, says all land plots and properties the government selected for bidding are in prime locations in Yangon.

In the first phase of the bidding in late January, 25 properties were offered. Some of them were old buildings suitable for either renovation or new construction while some were vacant plots. Only two were reserved as heritage sites and allowed only for renovation.

"There will be many more buildings or land plots the government plans to open bidding for in the next phase. They need hotels, as the current supply is not enough."
In Myanmar, all land is owned by the government, which in turn leases it to the private sector for 30, 60 or 90 years.

"Among all property segments in Yangon, hotels are the most attractive for investors as the supply, particularly four- to five-star, is scarce," Mrs Thidar told the Bangkok Post.

Myanmar now has about 25,000 hotel rooms nationwide. Most are three- to four-star establishments, while five-star ones account for 5%. This year, international chains such as Sofitel and Marriott will enter the former capital.

Mrs Thidar said foreign investors were welcome in the property sector but they need to form joint ventures with local companies. Foreign shareholding can be up to 99%.

"Land prices and value in Yangon are soaring, like in Hong Kong and Singapore," she added. "Another interesting sector for investment is industrial estates in economic zones."

Mrs Thidar is a former deputy director of the International Trade Promotion Department, Ministry of Commerce of Myanmar. Her company is a group of experts and experienced retired senior government officials from the trade and investment sector.

According to research by the property consultant Colliers International Thailand, there are 1,730 upscale hotel rooms in downtown, inner-city and outer areas of Yangon, compared with Bangkok and its more than 15,000 upscale or luxury hotel rooms on offer.

No new hotel rooms have been added in Yangon since 1998, while serviced apartments number just 700 units, unchanged from 2003.

Paradorn Kunkongkaphan, managing director of the Myanmar-based MK Group of Companies, says the group wants to invest in and develop a five-star hotel in Yangon this year.

"For the past decade, there have been no new hotels in Yangon. Only a handful of the existing ones are four- to five-star with only five sites," he said. "Most hotels were invested in by foreign investors."

The group will invest through a subsidiary, as it has had a presence in Myanmar for two decades. With a total of 29 subsidiaries and 400 employees, it has expertise in retailing and is a distributor for the Thai consumer product giant Saha Group's ICC International and the Thailand-based retail giant Central Marketing Group. It also has a joint venture in Myanmar with Berli Jucker, owned by Charoen Sirivadhanabhakdi.

"The business growth rate in Myanmar was around 5-10% a year until 2008. In the past few years, it was in an astounding range of 50% and 100%. We see positive growth and a bright future," Mr Paradorn said at a seminar with Myanmar experts held last week by Colliers International Thailand.

Throughout its 20-year presence in Myanmar, MK Group faced many obstacles, particularly logistic ones and high transport costs, as well as currency fluctuations.

In the retail sector, Colliers reports that the average occupancy rate of retail space in downtown Yangon, inner-city and outer-city areas rose less than 1% over the past six months. The outer-city areas were the most active, with an occupancy rate of almost 99% in the second half of 2011.

For the condominium sector, the average selling price of newly launched units in 2010 and 2011 increased from US$1,000 per square metre to $1,300 downtown and from $1,000 per sq m to $1,100 in outer-city areas but dropped from $1,300 to $1,000 in inner-city areas.

"The definition of condominium in Myanmar is unlike that in Thailand. They call it a condominium if it has an elevator but call a building an apartment if has no lift," said Tony Picon, associate director at Colliers. Units on the ground and second floors have higher prices than upper floors, the reverse of what is typical in Bangkok.

Office space in Yangon is also limited. There was 60,000 sq m of space last year, with 17,000 sq m added in 2010 alone. The total office space across Yangon was only half of what is offered at Bangkok's Empire Tower, at more than 140,000 sq m.

Source: Bangkok Post