Financial Times: Hilton goes to Myanmar as tourism takes off Feb 28, 2013 1:53pm by Gwen Robinson You know that a country’s tourism industry is really taking off when a Hilton hotel moves in – particularly when that country has faced years of US sanctions. The buzz on the sidelines of Myanmar’s first tourism industry conference this week in Yangon was about Hilton Worldwide’s landmark deal to manage a 300-room hotel in the tallest building in central Yangon: Centrepoint Towers. Hilton is remaining quiet ahead of an announcement next month: “We can’t comment on any deals under negotiation,” said one Hilton executive. But Myanmar officials confirmed that Hilton Yangon is planning to open in early 2014, under a management deal between Hilton Worldwide and LP Holding Centrepoint Development, the Thai company that owns the building through a build-operate-transfer agreement with Myanmar’s tourism ministry. The two parties sealed the deal on Wednesday, said one official. The 25-storey mixed-use block, with a panoramic view over the city, is ostensibly new, although it has a seven-year history after the project broke ground in 2005. Construction was suspended several years back but recommenced in earnest last year. Already, international companies such as Standard Chartered bank and PwC have set up offices in the gleaming new building. For Myanmar’s reformist government, which is pushing rapid economic and political reforms after years of western sanctions, the deal is a diplomatic triumph. Hilton would be the first US hotel chain to move into Myanmar after Washington eased sanctions last year. What’s more, the new Hilton Yangon will add significantly to Yangon’s overstretched hotel capacity. There are currently about 8,000 rooms in Yangon, according to the Myanmar Tourism Federation, the key industry body. “But only half of those are for international market,” notes Kyaw Htun, the federation’s joint secretary-general, noting that Hilton’s entry to Yangon would help the federation’s goal to add 1,500 hotel rooms to Yangon by 2014. Elsewhere in Myanmar, key travel destinations such as Bagan, Mandalay and even the capital, Naypyidaw – popular mainly for business and official visitors – are struggling with similar problems. In a country of more than 60m people and numerous tourist destinations, Myanmar has only 600 hotels – only a fraction of them suitable for international visitors, say tourism authorities. The lack of hotel rooms alongside limited airline capacity and a shortage of trained hospitality personnel are also a drag on growth, U Htay Aung, minister for hotels and tourism, told beyondbrics. “Our first priority is hotel development, we need hotel rooms. We must be careful though of over-development – if too many hotels are built, we will have problems,” he said. “Today we have 21 airlines flying here, in the near future there will be more. But human resources is another obstacle, we need to train our people in hospitality and tourism-related industries,” he added. Under a tourism development plan now being drawn up, Myanmar will set up an international hospitality school, helped by Swiss and Thai groups as well as multilateral organisations such as the ADB, he noted. Myanmar last year surpassed 1m visitors for the first time in its history – and expects more than 1.3m this year. The figure is tiny compared with Thailand’s latest record of 22.35m visitors in 2012. But for a country condemned by the west as a pariah state just two years ago, it is a phenomenal turnaround. Overall, Myanmar is a tourism operator’s dream. Soaring arrivals have taken hotel occupancy rates from less than 50 per cent four years ago to nearly 100 per cent across all categories. Not surprisingly, hotel rates have surged accordingly, from less than $80 a night a few years ago for a room in a four-star hotel such as Traders, operated by the Hong Kong-based Shangri-la Group, to more than $300 a night today. In the two- and three-star category it is difficult to find a room for less than $100 a night. Warnings of over-development are echoed by hoteliers such as Kenneth Gaw, president of Hong Kong-based Gaw Capital, a fund management group, and managing director of Pioneer Global Group, a Gaw family company that owns several big hotels in Yangon in partnership with the Myanmar government. The group’s hotels include the top-end Strand Hotel, one of Yangon’s oldest, which now charges more than $500 a night and usually boasts a near-100 per cent capacity. “Yangon now is doing fantastically well but that’s mainly because there are not enough rooms – five years down the road it could be overbuilt,” Gaw said. Even so, he is keen to invest more in Myanmar and possibly expand into areas including real estate, infrastructure and agribusiness. Investors in Gaw Capital’s four funds, however, are possibly “not ready” for Myanmar investments and any expansion will take place through the family group, he added. One solution to the hotel capacity problem, the tourism federation’s Kyaw Htun told the conference, is the local industry’s plan for hotel zones, where local tourism companies with government help are securing land near main destinations, investing in basic infrastructure and selling leases on sites to hotels and other tourism-related businesses. One such zone is already operating in Naypyidaw, while three more are underway in Mandalay, Bagan and Yangon. But it will take much more than hotel space to alleviate Myanmar’s “tourism congestion”. A key but less visible factor in facilitating tourism will be the entry of electronic payment systems to Myanmar. Western sanctions prevented credit card companies and western banks from operating in the country. All that is about to change, Nagesh Devata, Mastercard’s vice president of acceptance and merchant development in Asia, Middle East and Africa, told the conference. “We are working with the banks here and an announcement will be coming within months,” he said. Indeed, Visa has already started issuing credit cards in Myanmar and has been signing up vendors to accept Visa payments, and marked the country’s first credit card transaction last month. Judging by the packed room at the first Myanmar Hospitality and Tourism conference this week at the Traders hotel in central Yangon, the country’s tourism boom is only just beginning. The forum’s organisers, Singapore-based Sphere Conferences, said that with about 300 tourism industry operators and officials coming from 17 countries, participation had been well beyond expectations. Some might do well to heed the words of Kyaw Htun, when he told the FT: “I do worry that greed could kill our industry – or at least damage it”.