Feb. 4 (Bloomberg) -- Best Western International Inc., the world’s second-largest closely held hotel chain, will open its first Myanmar property in 2013, taking advantage of friendlier investment rules and a shortage of rooms in the country.
The Phoenix-based group is considering locations including Yangon and Mandalay, the nation’s two largest cities, for the hotel, Glenn de Souza, Bangkok-based vice president of international operations for Asia and the Middle East, said in an e-mailed response to questions on Jan. 31.
Myanmar’s President Thein Sein is seeking to transform the Southeast Asian nation into a democracy and modernize its financial and private infrastructure after five decades of isolation. He signed a foreign investment bill in November that cleared the way for multinationals to spend more in the formerly military-run nation.
“There are huge opportunities in the country, following new investment regulations,” de Souza said. “The hotel sector is severely under-supplied, especially in the mid-scale segment, so there will be big opportunities for first movers.”
International visitor arrivals to Myanmar, excluding border crossings, more than tripled to 593,381 in 2012 from 2008, figures from the nation’s ministry of hotels and tourism show. The total number of hotels in the country climbed 27 percent to 787 in the same time, the data shows.
Yangon will see a “major shortage” of hotel rooms for the next five to 10 years, as visitor arrivals outpace the supply of hotels, Andrew Langdon, Bangkok-based senior vice president at Jones Lang LaSalle Hotels, said in a telephone interview.
The average daily room rate surged more than 350 percent to $130 for four- and five-star hotels in 2012 from 2008, and will climb as much as 25 percent this year, he said.
The government is planning a new 200-acre hotel zone in Yangon to boost the supply of hotels as the nation prepares to host the 27th Southeast Asian Games in December, Xinhua news agency reported last month.
“Myanmar’s becoming the next hot place for the adventurous international guest,” Langdon said. “International hotel groups are just now going through the learning phase, learning about the market, its opportunities and risks.”
Myanmar’s president has said he will start a political dialogue with 10 of the 30 ethnic minority groups that have resisted central government control since the nation gained independence from Britain in 1948. A proposed cease fire by the Kachin Independence Organization, one of the groups, could lead to a resumption of peace talks, the government said on Feb. 1.
Best Western, which manages more than 4,000 properties worldwide, has been discussing franchising and ownership options of the hotels in Myanmar with potential investors, said de Souza, declining to provide further details. The group will decide on the brand -- Best Western, Best Western Plus, or Best Western Premier -- depending on the suitability for the location chosen, he said.
Eight overseas airlines have begun services in Myanmar, and existing ones have increased offerings, raising international capacity by 64 percent since April, according to figures from industry consultant CAPA Centre for Aviation last month. Domestic services will also grow as carriers seek to cater to growing demand within the country, and Golden Myanmar Airlines, the nation’s first low-cost carrier, begins operations, the group said.
Asian discount airlines will add about 750 new airplanes, worth about $47 billion, over the next decade as they bet on surging travel demand in the region. Asia will account for a third of global passengers in 2016, according to the International Air Transport Association.
Across Asia, Best Western plans to open about 55 hotels by the second quarter of 2015, de Souza said. In Southeast Asia, Indonesia and Thailand will have the most number of rooms, he said.
In Indonesia, which is driven by domestic demand, the focus will be on mid-market offerings. The group will open 15 hotels by January 2015 in emerging cities including Semarang, Samarinda and Benjamasin, as well as the capital Jakarta and the resort island of Bali, he said.
While major Thai cities such as the capital Bangkok and the beach-resort island of Phuket have seen a large number of new hotels opening, Best Western still expects opportunities in the “mid-scale sector,” de Souza said. The company plans to open seven hotels by the first quarter of 2015 in Thailand, he said.
The group remains wary about challenges including rising supply of hotels in many “gateway cities” in Southeast Asia, floods and political risks that drive down rates, de Souza said.
Still, “Southeast Asia is undoubtedly one of the world’s most attractive hotel markets right now,” de Souza said. “The region’s tourism sector is buoyant, with inbound arrivals seeing double-digit growth in 2012.”
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