Sheer greed

Myanmar’s tourism industry is at risk of over-exerting itself, unless shortages are addressed quickly

February 17, 2014

Myanmar’s tourism industry is at risk of over-exerting itself,
unless shortages are addressed quickly

By Alison Smith
The opening of the so-called last-frontier market in Myanmar opened the floodgates to millions of tourists and business people eager to visit the country. The government wants to welcome more than seven million travellers a year by 2020, an almost five-fold increase compared with last year – but the country looks unprepared for such an increase.
“The biggest challenge for Myanmar is how not to ruin the country’s name as a tourist destination,” said Frank Janmaat, Managing Director at Lighthouse Hospitality Myanmar, a Yangon-based consultancy working in a joint venture with the Kaung Myanmar Association (KMA) group of companies. “Unfortunately for most of the hotel owners, besides raking in more money, it is still business as usual. Service level and facilities remain the same.”

Hard job: finding affordable hotel rooms  is a real challenge  in Myanmar
Hard job: finding affordable hotel rooms is a real challenge in Myanmar. Photo: Roger Price

Low arrivals during almost five decades of military rule, combined with a lack of investment in the education sector, means the tourism industry is straining to meet international expectations. Tour operators, some charging over $8,000 per person for a two-week trip – excluding flights – magnify those expectations.
“Everyone is charmed by the people, the culture and the scenery, less so by the bill at the end of their stay,” said Janmaat. “Most local hotels are family-run – people who do not really have an enormous amount of experience in running hotels.”
According to figures from the Ministry of Hotels and Tourism, arrivals have risen 83% since 2010. With 1.5 million tourists last year, Myanmar only has 787 hotels and guesthouses and just a few with five-star rating.
Upgrading the standard of accommodation has not been a priority for owners who have had little exposure to foreigners, and now the country is facing a backlash from discerning travellers unwilling to pay for an experience that does not match the sky-high price.
In 2012, per capita gross domestic product (GDP) was about $900, the lowest across Asean member states. If the government taps into the potential of the country’s key industries such as manufacturing, infrastructure, mining, telecoms and tourism, GDP per capita has the potential to increase to $5,100 by 2030, according to research by McKinsey Global Institute, the research arm of the global management consultancy.
In the Ministry of Hotels and Tourism’s 2013 to 2020 master plan, revenue from tourism could reach $10.18 billion by 2020, and the industry could account for 1.49 million tourism-related jobs.
A steady stream of travellers has put hoteliers at an advantage. Prices rose fast with demand far outstripping bed stock and many properties enjoy full occupancies for most of the year – regardless of the standard of the product.
In a 2013 report, the Ministry of Hotels and Tourism acknowledged value for money and standard of service are among the top ten reasons for visitor dissatisfaction.
Dangers ahead: despite plenty of tourist sights, high costs may frighten off visitors. Photo: AFP
Dangers ahead: despite plenty of tourist sights, high costs may frighten off visitors. Photo: AFP

While the government has been implementing policies and plans for sustainable growth, progress is slow. “Myanmar has to be careful not to out-price itself just because there is a shortage of rooms. That’s going to backfire eventually,” said Mark Van Ogtrop, Managing Director Southeast Asia at Golden Tulip hotel group.
Janmaat observed that although rates increased by 400% and overbooking was regular occurrence, properties have not adapted to being busy. “The local Myanmar hotel-owner mentality did not change a lot. Ordering tea and getting coffee, or nothing at all, is not funny when you are paying $300 a night,” he said.
The Myanmar government needs to build foreign investor confidence, said Van Ogtrop. “The market is ready, the demand is there, but no legal structure, lack of financing and inability to raise debt makes it very difficult.”
The 27th Southeast Asia Games in December 2013 prompted a flurry of hotels to be built to cope with the influx of spectators and athletes, yet it has still been difficult for foreign investors to get projects started.
“A lot of land owners want to become millionaires overnight. There is no sustainable way to build a hotel when land prices are over $10,000 per square metre,” Van Ogtrop added. “Development is not going to be as fast as people want it to be.”
Plans by the Ministry of National Planning and Economic Development may help. Officials reported recently that a revised Foreign Investment Law would reduce existing restrictions, although exact details and a timeline have not been confirmed. Currently, tourism projects must be joint ventures with local partners.
The two pressing issues facing the industry are how the current workforce is coping with the surge in demand and how to train new staff quickly to a high standard, according to the Ministry of Hotels and Tourism.
However, with an average education lasting only four years and the output of the average worker at $1,500 per year – 70% lower than the average of Asian countries surveyed according to McKinsey Global Institute – businesses are facing huge challenges in human resources.
“The government has an immense task to get the country ready, and general management skills are not something they have focused on,” said Michel van der Hoeven, Senior Vice President Development at Minor International PCL, one of the largest hospitality companies in the Asia-Pacific, operating over 80 hotels, 1,300 restaurants and 200 retail outlets in 22 countries. Skilled workers are in high demand – hotels are competing not just with other properties but with other service industries too.
Jobs are needed for Myanmar citizens, though a lack of training means management jobs may go to returning Myanmar exiles, many of whom have been trained in the Middle East and Singapore.
Despite a rocky start, experts see initial problems and market fluctuations ironing themselves out in the next five years. Service-minded people are the country’s biggest asset, said van der Hoeven. “The most important skill is hospitality – and that is certainly not lacking.”

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