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Myanmar Tries to Ease Soaring Travel Costs

Posted Date: Friday, 6-Jul-2012

Travelers to Myanmar have faced an unusually difficult few months with packed flights and rising hotel rates, which some economists believe to be early signs of an inflated market as investors and tourists flock to the once-reclusive country.
Now Myanmar’s government is trying to control the country’s tourist bubble, with plans to develop a second international airport in Yangon and, more controversially, caps on hotel room rates.

Last week, the Ministry of Hotels and Tourism warned foreign-owned hotels to comply with new rules that say rates of standard hotel rooms in the country should not be higher than US$150. The measure was initially announced in late June to cool the overheated hotel market.

Speaking to representatives from the hotel industry recently in Myanmar, Minister for Hotels and Tourism U Tint Hsan said that prices at well-known business hotels – having doubled or tripled in recent months – could hurt the industry and nation as a whole and slow down the government’s reform efforts, according to The Myanmar Times.

Price caps are almost always controversial, at least among economists, who generally believe caps don’t work and can add new distortions to an economy that lead to more problems down the road. Many argue a better solution is to add more supply so that prices can come down naturally – but that could take time in Myanmar, especially since the government has yet to pass a new foreign investment law clarifying the rules for foreign companies that want to do projects there.

Myanmar is also looking for private investors to help develop a second international airport to serve the business capital of Yangon.

Yangon International Airport has been bustling since Myanmar’s emergence from decades of international isolation over the past year, as government leaders ease restraints on dissidents, open up the media and invite more overseas investment. The country is increasingly playing host to more aid workers, investors and international politicians, as well as throngs of tourists.

But travelers have had trouble getting seats on some flights. Travel within the country is especially hard, with old and rickety planes – coupled with an extremely low density of paved roads – leaving travelers with limited options for getting around.

The new proposed airport, Hanthawady International Airport, would be built on an airfield left behind by the Japanese during World War II near Bago, north of Yangon. Adding more space could make it easier for more airlines to expand in the country, which in turn would likely help bring air fares down and make it easier for travelers to find seats.

Private investors and airlines – particularly those with deep roots in Southeast Asia – are keen to expand in the country. Airlines including Japan’s All Nippon Airways and Korean Air plan to resume direct flights between Tokyo and Seoul and Yangon; previously, travelers from those countries had to fly through Singapore or Bangkok. Qatar Airways has also announced plans to resume direct flights to Yangon starting in October.

Southeast Asia’s budget airlines, too, are stepping up their connections to Myanmar. Tiger Airways, though declining to elaborate further on specific plans, said it is “keen to fly to more popular destinations, particularly those in the Asean region.” The carrier, which is headquartered in Singapore, does not currently fly between Singapore and Yangon.

Thai AirAsia, which operates two daily flights between Yangon and Bangkok, has indicated that other popular cities in Myanmar – particularly Naypitaw, Bagan and Mandalay – are “very attractive,” with a spokesman adding that opportunities to fly there “are looking good,” though the carrier has not made formal announcements on adding routes.

Hotel operators, though, are less enthused about the government’s initiatives to control the country’s booming tourism sector. Many hotels suffered from extremely low occupancy rates during the past decade, as Western nations shunned Myanmar and its former military regime, which means many now are seeing healthy profits for the first time in years.

Responding to queries from Southeast Asia Real Time, Didier Belmonte, general manager of The Strand in Yangon, said that supply and demand for hotel rooms in the city “is finally slated in favor of hotels,” with room rates ticking up.

At the Strand, for example, hotel occupancy was over 80% in May and June this year – compared to rates of between 15 – 20% during the same period just a year ago. The hotel, once popular primarily with wealthy European leisure tourists, says that 80% of its bookings have been with business clients. The lowest-price room available online on some dates in the coming weeks is priced at $333, including taxes.

“The ministry is trying to calm the market… to reassure leisure travelers and keep them from thinking of alternate destinations,” Mr. Belmonte said.

It was unclear whether the ministry’s directive would impact The Strand or other similar hotels in Yangon like The Governor’s Residence, which have always been considered luxury hotels and whose rooms would cost far more than $150 in most other Southeast Asian markets.

Sourced: blogs.wsj

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