Despite recent growth, tourism in Myanmar faces near-term challenges

Text size +-
Share

Myanmar’s tourism sector performed strongly in the first half of 2017; however, concerns over internal conflict have raised questions over investment and visitor numbers in the near future.

While arrivals figures for the period January-August have yet to be consolidated, data from the Ministry of Hotels and Tourism (MoHT) indicates that between 2.2m and 2.8m foreign tourists visited Myanmar in the first eight months of the year, representing a year-on-year (y-o-y) increase of more than 20%, according to local media reports.

Of these, an estimated 1.4m entered the country via Myanmar’s land borders with China and Thailand, and a further 830,000 arrived through international airports in Yangon, Mandalay and Naypyidaw, representing a 10% y-o-y rise in air arrivals.  

Ministry officials forecast full-year numbers will surpass 3.5m, which would represent a 21% increase on 2016.

The figures come amid rapid expansion in the sector in recent years; official statistics show that international arrivals rose from 1.1m in 2012 to a high of 4.7m in 2015. While this dropped to 2.9m last year, the MoHT attributes the decline down to the adoption of a new counting system that excluded day trips.

Unrest a potential threat to growth

While the strong start to the year has provided a solid platform for the industry, there are concerns that security issues, namely, the rising unrest in the northern part of Rakhine state, could hinder growth later in the year – traditionally the sector’s peak season.

The concern was underscored by the release of a World Bank economic update in October, in which Hans Anand Beck, lead economist for Myanmar, warned that conflict in the country could affect its investment potential, citing booking and tour cancellations in the sector.

While arrival and bookings data for the third quarter has not yet been released, local and international media have reported that inbound traffic and reservations have fallen in the wake of increased coverage of the refugee crisis.

Oversupply placing strain on tourism operators

These security concerns come amid an increased provision of services and offers in key tourism segments.

The opening up of Myanmar’s economy in recent years, which included the easing of travel restrictions, has led to a boom in tourism-related construction, with new hostels, hotels and luxury accommodation options being established, along with expansion of the hospitality segment.

This rapid development of infrastructure and services – combined with social unrest and extreme weather events such as flooding and earthquakes – has placed a strain on some operators, however, with local media reporting in September that hotels in the key tourism hotspot of Bagan were registering occupancy rates below 30%.  

Although well placed for when demand increases, as it is forecast to do in the medium term, this oversupply of accommodation could slow the pace of new investment.

Calls for aviation consolidation amid congested market

Another area experiencing overcrowding is aviation. Rapid expansion in recent years has placed pressure on the profitability of some small operators.

With 10 domestic carriers active in the country, competition is strong, while high operating costs and low load numbers make many routes unprofitable, according to Kyaw Nyein, CEO of private carrier Golden Myanmar Airlines.

“There are too many small players in the market with only one, two or three aircraft,” he told OBG. “The market is too small and overcrowded, and would benefit if some of these players came together to form a larger airline company.”

Consolidation and more competitive prices would encourage foreign visitors – who pay a higher rate than locals – to fly domestically, and would improve internal mobility options for foreigners and nationals, as well as the margins for local airline companies, Kyaw Nyein added.

However, an earlier attempt to create a larger aviation player took a step back in November, when All Nippon Airways (ANA), Japan’s largest airline, pulled out of a $25m agreement to create a joint venture with Myanmar’s Golden Sky World. The joint venture, established last year, would have seen ANA take a 49% stake in the airline.

Share

Covid-19 Economic Impact Assessments

Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.

Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.

Register Here×

Product successfully added to shopping cart

Read Next:

In Myanmar

Asia: Economic Year in Review 2020

– Thailand and Malaysia led the region in terms of government stimulus

– Key digital solutions were developed in food delivery, education, health care and finance

– Despite falling...

In Tourism

Will a Covid-19 vaccine cure tourism's pandemic woes?

Tourism has been hit harder than most industries by the coronavirus pandemic. However, news that an effective vaccine could soon be available has raised hopes that a recovery may come sooner than...

Latest

Covid-19 Economic Impact: Latin America and the Caribbean Year in...

– Latin America has been particularly vulnerable to the effects of Covid-19

– The pandemic has spurred the development of digital ecosystems

– Innovative solutions have been key to...