Jun 12, 2013

Marriott plans first agreement for Myanmar hotel in 6 months

Marriott International Inc., the largest publicly traded US hotel chain, expects to seal its first agreement for a property in Myanmar in the next six months as the country opens its doors to foreign investors.

“The company’s first hotel in the Southeast Asian nation will probably be a Marriott or Courtyard,” Asia-Pacific president and managing director Simon Cooper said. “It’s in four or five discussions with partners for locations including Yangon and Bagan,” he said on Thursday.

“The conditions at the moment are right and we’re certainly enthusiastic about the opportunities in Myanmar, no two ways about it,” he said in an interview with Bloomberg Television’s Haslinda Amin in Naypyidaw, where he’s attending the World Economic Forum. “They have a masterplan for tourism, which clearly includes international brands, and we would like to be one of them.”
Marriott is seeking investments in Myanmar as President Thein Sein allows more political freedom and loosens economic controls since coming to power two years ago. That has prompted nations including the US to ease sanctions and attracted companies such as Ford Motor Co., MasterCard Inc. and Unilever NV. The country needs to spend $320 billion by 2030 to achieve economic growth of 8% a year, according to a report by McKinsey Global Institute released last week.

Catch Up

Myanmar’s efforts to catch up with the world around it after half a century of military rule has drawn delegates including Cooper as a summit of government and business leaders fills its hotels for the three-day event.
“The Bethesda, Maryland-based company operated a Renaissance hotel by Inya Lake in Yangon in the old days,” Cooper said. “In some ways, we’re coming back,” he said.

Thein Sein signed a foreign investment bill in November to woo overseas companies into spending more. Companies scouting opportunities or striking development agreements also include closely held hotel chain Best Western International Inc.

“Everybody’s very interested in it, but everyone is still waiting for further development of the infrastructure, like banking, that would certainly make hotel development easier to take place,” said Jonas Ogren, Singapore-based Asia director at STR Global, a hotel research company. “Having stability in all those types of elements will be of concern.”
Modernization Plans

Modernization plans for one of Asia’s poorest countries include upgrading its financial system, building roads and airports, as well as giving the nation’s 64 million people greater access to mobile phones.

Gross domestic product may grow 6.75% this fiscal year, the International Monetary Fund (IMF) said in a report last month. “The economic expansion pushed property prices higher, a key challenge for hotel owners,” said Andrew Langdon, a Bangkok- based senior vice-president of strategic advisory at Jones Lang LaSalle Hotels.

“Essentially, rising land costs is a problem in maintaining the feasibility of a project,” he said. “However, land prices in Yangon have peaked. We are seeing them level out a bit now.”

The economy could more than quadruple to $200 billion with an 8% annual growth rate, according to McKinsey Global Institute, almost double the pace from 1990 to 2010.

Xi’s Frugality

The interest in Myanmar also comes as growth in China slows. China’s gross domestic product expanded a less-than-estimated 7.7% in the first quarter and analysts last month trimmed forecasts for the April-June period to a median projection of 7.8%. A campaign by President Xi Jinping to reduce graft and crack down on extravagance at official events also eased spending in the country.

“Certainly, Xi Jinping’s frugal approach to business impacts the hospitality business,” Marriott’s Cooper said. “We’re definitely seeing things slowing in China. But we’re not seeing a slowdown is outbound Chinese travel—they’re still No. 1 in the Maldives, No. 2 in Phuket.”

Chinese airlines have also expanded their fleet, and the country is expected to have 4,200 commercial aircraft in 2020, compared with the current fleet size of 2,001 with 46 airlines, according to Civil Aviation Administration of China.

Massive Supply

“Everyone in the population wants to travel and that will increase,” said Nigel Summers, Hong Kong-based director of Horwath Asia Pacific, which tracks the hotel industry. “Still, the sector faces a massive supply coming on all at once and there will be a supply imbalance in the next couple of years.”

Among hotel companies eying at Myanmar, Best Western will open its first Myanmar property in 2013 to take advantage of a shortage of rooms. The Phoenix-based group is considering locations including Yangon and Mandalay, the nation’s two largest cities, Glenn de Souza, Bangkok-based vice-president of international operations for Asia and the Middle East, said in January.
“For Marriott, the strategy is to start with the capital or cities where tourists travel to and branch out from there, instead of having just one hotel,” Cooper said.

“We would love to be in Myanmar as soon as it’s appropriate,” he said. “The will is there but the momentum is there as well.”

Source: Bloomberg