Situated in the north-west of South-east Asia, and sharing borders with India, Bangladesh, Thailand, Laos and China, Myanmar is one of the last frontiers of Asian tourism. Offering pristine beaches, abundant cultural and natural attractions, and a warm, hospitable population, the country has significant potential – especially considering the thriving travel markets in neighbouring states. Following its opening as a travel destination, the sector experienced impressive growth in both arrival numbers and foreign direct investment (FDI). However, unrest in Rakhine State in 2017 and the international media coverage that followed have negatively impacted the sector, diminishing the flow of visitors from Western countries. Visitor demographics have since changed and the sector is undergoing a gradual recovery, with sizeable growth stemming from Asian source markets. Tourism has been supported by a number of government reforms and initiatives, and efforts are under way to establish new flight routes to the country.
Nevertheless, if Myanmar is to bolster its offerings and attract arrival numbers high enough to counter its overcapacity of accommodation, major issues will need to be overcome. These include the overhaul of the country’s transport infrastructure to boost both national and international connectivity, and initiatives to increase the impact of tourism spending on the local economy. Furthermore, with only $300,000 allocated to the sector, there is considerable scope for the government to work more closely with the private sector.
Structure & Oversight
The Ministry of Hotels and Tourism (MoHT) is the department responsible for overseeing the sector. The primary policy framework guiding the industry is the Tourism Master Plan 2013-20, which aims to ensure the industry achieves a positive economic multiplier effect and supports sustainable development. The Myanmar Tourism Federation (MTF) – a group of 11 tourism-related business associations – also plays an important role, acting as an essential connection between the public and private sectors.
In response to the business community’s concerns over foreign investment legislation, the government recently passed a number of reforms. The Companies Law came into effect in August 2018, permitting 35% foreign ownership of any Myanmar company – while still recognising it as a domestic firm – and in September of the same year the new Tourism Law was passed by Parliament. This statute empowers regional governments to develop marketing strategies and to issue accommodation licences. Notably, a fifth classification of licence has been introduced, which covers the offering of homestays for domestic tourists, foreign students and package tourists. This constitutes an important step in the MoHT’s bid to drive community-based tourism and broaden offerings. The MoHT is also encouraging regional and state authorities to promote sustainable tourism and new destinations, seek investment, and implement marketing campaigns. The new Gambling Law, originally planned for May 2019 but not in effect by December, permits hotels to operate casinos for non-Myanmar patrons, a move that is expected to draw significant investment (see analysis).
As part of a broader national initiative to make credit more accessible to small and medium-sized enterprises (SMEs), the flagship branch of the Myanmar Tourism Bank (MTB), located in Yangon, was opened in May 2019. A private sector commercial enterprise backed by the MTF, the MTB provides lowcost, long-term financial assistance to entrepreneurs and SMEs seeking to enter, or already operating in, the tourism market. “The new bank presents an excellent opportunity for SMEs to expand their operations, not only those in the cities, but also in many other regions and destinations,” Daw May Myat Mon Win, general manager of the Chatrium Hotel, Yangon, and chair of the Myanmar Tourism Marketing Association (MTM), told OBG. Branches in Mandalay and Naypyidaw are also now in operation, and the MTB hopes to open a further seven branches. The bank offers a range of services including payment solutions, fixed-deposit loan services, special interest rates on savings and online banking. In addition, 5% of the MTB’s annual profits will be reinvested in the tourism promotion budget.
In August 2019 the MoHT launched a new website – tourism.gov.mm – and unveiled plans for a greater focus on digital marketing. The site promotes Myanmar’s tourism attractions and acts as a one-stop booking portal from which visitors can plan their travel itineraries. However, government support continues to be needed on more traditional channels such as trade shows. Meanwhile, an increasing number of start-ups and tech-savvy entrepreneurs are entering the market, highlighting the opportunities that exist for firms willing to leverage technology. Myanmar’s low levels of digital banking penetration and credit card ownership mean that online travel agents based within the country must coordinate large-scale cash courier services between domestic customers and suppliers. This exemplifies how wider deficiencies in infrastructure continue to adversely affect SMEs, and how public and private investment in these areas could significantly improve efficiency.
Social media sites in particular present opportunities for industry players to market the country’s tourism offering to potential visitors worldwide. “MTM is currently collaborating with the MoHT to develop digital strategies,” Daw May Myat Mon Win told OBG. “Social media marketing is particularly useful in inspiring travellers to come to the country, and we are currently working with influencers and bloggers to promote their experiences and photographs of Myanmar. Instagram has proven particularly effective in this respect.” As in many other markets, e-visa processes – which were first introduced in September 2014 – along with the ongoing digitisation of administrative procedures are similarly helping to streamline travel to the country.
Performance & Size
The sector’s total contribution to GDP – including both its direct and indirect impact – stood at $5bn in 2018, a 3% increase on the previous year, according to the World Travel & Tourism Council (WTTC). The sector’s direct contribution to GDP rose by 2.1% to $2.1bn in 2018, which equated to 2.8% of total GDP. This figure is expected to rise further, to $5.5bn by 2029. The industry’s direct contribution to employment stood at 615,600 in 2018, or 2.7% of the total workforce, marking a 0.2% increase on 2017. This is forecast to rise to 1m by 2029, or 3.8% of total employment. It is hoped that recent initiatives including the creation of a public-private partnership centre and the online tendering platform will stimulate investment in the transit network, thereby improving access to tourism attractions (see Transport & Infrastructure chapter).
However, according to figures from the Directorate of Investment and Company Administration (DICA), FDI in the tourism sector amounted to $177m in FY 2017/18, which was less than half the $404m registered in FY 2016/17. Furthermore, DICA’s records show that between the beginning of FY 2018/19 and August 2019 approximately $63m of FDI had been approved for the hospitality and tourism sector, indicating that interest from foreign investors is still in decline, though domestic investment is, nevertheless, on the rise.
Despite the drop in Western arrivals, the sector continues to grow thanks to a shift in source markets. Total arrivals rose from 3.4m in 2017 to 3.6m in 2018, according to the MoHT, and in the first eight months of 2019 Myanmar welcomed 2.8m visitors, a 25% year-on-year (y-o-y) increase. Notably, 2019 has seen double-digit increases in arrivals from several European countries, most significantly Italy, which registered 19% growth. This rise is largely attributed to the opening of direct flights between Milan and Yangon by Italian airline Neos in November 2018.
In a bid to stimulate further growth, and in an effort to reinvigorate a selection of stagnant or receding source markets, Myanmar began to grant visas on arrival to visitors from Spain, Italy, Germany, Russia, Australia and Switzerland as of October 1, 2019. Although further y-o-y decreases in UK (-10%), German (-1%) and French (-2%) arrivals were evident in the figures for the first eight months of 2019, the pace of these declines has slowed considerably, suggesting there could be cause for optimism regarding a revival in visitor numbers from Europe over the longer term.
Current momentum is driven by visitors from Asian markets. The number of Chinese travellers rose to 460,000 in the first eight months of 2019, a 161% y-o-y expansion, with China overtaking Thailand as the primary source market. South Korean arrivals also grew during the same period, up 77%, while the number of Japanese visitors rose by 24%. With the exception of the Philippines, visitors from ASEAN countries registered slight decreases, though the numbers remain high. In addition, arrivals from the Middle East increased by 3% y-o-y in the first eight months of 2019. This latter trend is expected to continue following the announcement that flydubai would take over Emirates’ direct flight from Dubai to Yangon, starting December 2019, and increase the service from four times a week to daily.
While the rapid growth of the inbound Asian tourism market has supported the growth of the sector, the drop in Western visitor numbers has come at a price. According to the MoHT, average daily tourist spending per capita was $122 in 2018, down from $154 in 2016. In 2016 visitor arrivals numbers were 600,000 lower than those in 2018, yet total visitor exports for both years came in at $2.3bn, according to the WTTC. Furthermore, the average length of stay has fallen from 11 nights in 2016, to nine nights in 2018. While this drop may be attributed in part to different levels of disposable income across source markets, it is also connected to the business model employed by Chinese travel companies. Many, though certainly not all, Chinese tourists arrive as part of large tour groups whose bookings and itineraries are wholly organised by the tour operators. These packages are sold at low prices and operators take visitors on prearranged shopping trips to outlets connected to the companies.
Many of the purchases are made with Chinese currency or online payment platforms, providing little financial benefit to the local economy. Additionally, unlicensed guides with minimal knowledge of Myanmar’s culture and history risk contributing to an inauthentic and disappointing experience. This has led to concern among industry players that these business models may reduce the potential of repeat visits from China. “We want to ensure that we can diversify the areas tourists can visit and offer them the experiences they come for,” Daw Kyi Kyi Aye, senior adviser to the MTF and former director of the MoHT, told OBG. “If we are not able to do that, people may form negative impressions.”
The experience of the Thai tourism authorities may be able to assist Myanmar in effectively tackling these issues. Thailand experienced similar problems with low economic impact tour operators, and while such travel agencies still operate in the country, their overall share of the market appears to be decreasing. In January 2018, 60% of Chinese tourists entering Thailand were classified as independent travellers, with this figure predicted to rise to 70% in the short term, according to local media. This growth in independent Chinese travellers has been attributed in part to their increasing use of smartphone booking applications. Furthermore, Myanmar’s ongoing move towards digitalisation and the launch of the MoHT’s new website may therefore be steps in the right direction to help the industry capitalise fully on the increase in traveller numbers from the world’s largest outbound tourism market, the value of which is expected to exceed $270bn by 2025.
While occupancy rates are low in Myanmar’s hotel segment, investment remains steady. The total number of hotel rooms at the close of 2018 was 68,167, with over 21,000 situated in Yangon, according to the MoHT. However, occupancy rates in Yangon stood at 40% in the second quarter of 2019, down from 46.5% for the same period in 2018, according to figures from real estate consultancy Colliers International, though industry stakeholders suggest these figures may be lower. While the drop in visitors from Western countries has played a significant role in this decline, Chinese visitors and tour operators’ preference for Mandalay is another important factor. While the number of international visitors is lower during the country’s rainy season – which lasts from May until October – a rise in domestic holidaymakers has partially offset this. Indeed, in 2018 many of Myanmar’s hotels were fully booked during domestic holiday weekends.
While occupancy rates remain low, hotel investment and construction continue apace, highlighting investor confidence in the longer-term potential of the tourism industry. For example, Hong Kong and Shanghai Hotels and local player First Myanmar Investment are currently developing the Peninsula Yangon luxury hotel, which is due for completion in 2021. Meanwhile, a memorandum of understanding was signed in May 2019 between domestic company KMA Hotel Group and Thailand’s Centara Hotels and Resorts for a joint investment of $63m in several new and existing Myanmar hotels. In addition, a $1.6bn tourism development project has been proposed by Singapore’s Huacheng International and Shanghai Bright Industry to the local government of Rakhine State. Overall, 2018 saw 68 confirmed investments in hotels and commercial complexes, with Singaporean projects accounting for around half of that figure, according to the MoHT.
Culture and heritage are the country’s major tourism attractions, with Myanmar offering an abundance of temples, monasteries, palaces, stupas and ruins. In July 2019 the ancient city of Bagan – home to over 3500 religious structures – was recognised as a UNESCO World Heritage site. Due to the expected increase in tourist traffic and direct flights from regional cities following the announcement, work to increase capacity and upgrade facilities at its Nyaung U Airport are expected to commence in the near future.
Myanmar’s diverse natural features also give it a significant advantage. Combining snow-capped Himalayas in the north, tropical waters and coral reef in the Myeik Archipelago to the south, and sprawling river and delta systems throughout much of the country, Myanmar has considerable potential as a destination for adventure and nature tourism. “Myanmar’s cultural and natural diversity means that undeveloped regions contain their own unique heritage, attractions and activities,” Daw Su Su Tin, managing director for Myanmar of regional tourism group EXO Travel, told OBG. “With much of Myanmar yet to be opened to tourism, it still has much more to offer visitors, but regional authorities must be involved to maximise potential.”
Myanmar’s array of regional festivals, crafts and cuisines offer attractive experiences for international travellers, with demand for authentic cultural activities on the rise. The question remains, however, of how best to implement effective destination marketing and management while maintaining the authenticity of locations and experiences. In June 2019 the fourth National Conference on Communities and Tourism was held in Loikah, Kayah State. The convention provided industry players with a forum in which to promote collaboration between regional governments and the private sector to boost the development of community-based tourism. Such initiatives are seen as a way to expand tourism stock in a sustainable and inclusive manner. Without the need for mega-projects – aside from transport – community-based tourism limits environmental damage and offers improved incomes and livelihoods to rural families and communities.
Business travel and the meetings, incentives, conferences and exhibitions (MICE) segment offer another potential growth area. As evidence of this, the aforementioned conference generated approximately $50,000 for Kayah’s economy due to the increased trade its 200 visitors brought to local businesses. In 2018 business travellers accounted for 18% of visitors.
The capital, Naypyidaw, could emerge as a significant MICE destination. The city was designed as an administrative centre by the former military regime and offers a high density of hotels, MICE facilities and supporting transport infrastructure. This offering expanded further in September 2018 with the opening of the multipurpose 9000-sq-metre Yangon Convention Centre.
While the decline in Western visitors adversely affected the sector and the industry continues to face significant challenges, signs of a recovery are emerging. The government has implemented a more accommodating legislative environment for investors and made efforts to decentralise oversight of the sector, while also working to digitalise travel services and foster public-private collaboration. In June 2019 the government announced the establishment of two new tourism zones in the Mandalay Region, with private firms invited to make bids. Time will be required for these new initiatives and reforms to bear fruit, but they bode well for the future of the industry. Ongoing efforts under way to boost connectivity with Western markets and improve the marketing of tourism offerings using social media may also revive visitor numbers. Greater efforts, however, will be needed to further develop offerings for new primary source markets in Asia and ensure that visitor spending benefits the local economy.
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