For a little more than half a decade after 2011, Myanmar was Southeast Asia’s golden child, becoming a more democratic nation and desired destination, with travelers champing at the bit to visit and hoteliers ramping up development there.

But that all changed in 2020 and 2021, as Myanmar — formerly Burma — experienced disputed elections and a return to a dictatorship government. Now the country’s hotel and investment challenges have reached a height with the suspension of development of the city of Yangon’s star project, the Peninsula hotel.

Myanmar's government has gone through significant changes of late, but at one time it did institute a democratic government, and global hotel companies were interested in the development opportunities there. Former U.S. President Barack Obama visited the historically politically unstable Myanmar on two occasions, in 2012 and 2014. Later, Obama lifted sanctions on the country in December 2016 following new foreign-investment legislation months earlier.

In early 2017, Gaurav Bhushan, co-CEO of Accor lifestyle brand division Ennismore, told Hotel News Now that Accor planned to double its hotel count in Myanmar to more than 10 assets, including a MGallery in Inle Lake and Pullman properties in Yangon and Mandalay.

Currently, Accor has seven hotels open in the country, with an eighth, Ibis Styles Mandalay Center due to open this year.

Asia-Pacific hotel companies also quickly announced new projects in Myanmar. Thailand-based Dusit Hospitality announced in April 2018 it would open a hotel in Yangon. In March 2019, Rosewood Hotels & Resorts announced a hotel under development in Yangon, and two months later Thailand’s Centara Hotels & Resorts announced it would debut in Myanmar with six upscale and upper-upscale hotels in the country's major cities.

None of those hotels have opened or appear to be continuing with development.

Most of those dreams, if not all, withered in 2020 following a disputed general election in Myanmar, when the National League for Democracy party increased its majority in parliament over the military-backed Union Solidarity and Development party. Before that election, concerns had grown with Myanmar’s democratic government — which was led by State Counselor and former Nobel Prize winner Aung San Suu Kyi — over the treatment of the country’s Rohingya Muslim population.

Tensions boiled over within months, resulting in Myanmar's military removing the ruling National League for Democracy party in a coup d’état in February 2021.

In the eyes of the West, Myanmar was now closed for business once again.

The latest casualty of the last few years of Myanmar's political instability is the paused development of a proposed new luxury hotel.

In mid-March, Hong Kong & Shanghai Hotels, owners of the Peninsula Hotels brand, announced in its earnings release it had decided to write off 670 million Hong Kong dollars ($85.5 million) in investment in the ongoing transformation of Yangon’s former Myanmar Railway Co. headquarters — which dates to the 1880s — into a luxury hotel.

The report said the hotel firm “entered into a shareholders’ agreement with conglomerate Yoma Strategic Investments and First Myanmar Investment Public Company in January 2014 to acquire a 70% majority interest.” Construction on the project was suspended in June 2021 “due to the unfortunate situation in Myanmar."

Clement Kwok, CEO of Hong Kong & Shanghai Hotels, said in an interview with Hotel News Now that his firm has “put a considerable amount of effort, resources, design and planning into this project, which we signed in 2014 and [that] is now 70% completed." But for now, it's best that the project be put on hold.

“We do not take lightly the decision to giving up our investment. We cannot continue at the moment and have temporarily stopped work as a prudent business decision, with no exact time frame available on how long this might last," Kwok said. “We are still hoping to be able to serve the people of Myanmar and visitors one day."

In its earnings statement, Hong Kong & Shanghai said the “fair value” of the Peninsula hotel, which was due to have 88 rooms, “has been deemed to be lower than its book value. … The impairment represents about 85% of the project's book value.”

Kwok said the firm has not completely walked away from the project, but it is on hold as he and other executives monitor the situation in Myanmar. Executives at Yoma have not commented on the status of the Peninsula hotel development as of press time.

Hong Kong & Shanghai Hotels' Peninsula project wasn't the only hotel poised to be developed on the site of the former railway company headquarters. Back in 2019, Marriott International announced it had signed an agreement with Yoma to develop a Westin hotel, complete with 281 hotel rooms and 90 serviced apartments.

Bill Barnett, founder of Phuket, Thailand-based hotel consultancy C9 Hotelworks, said he does not have high hopes for Myanmar given its recent political strife, adding international investors and travelers are likely to stay away.

“The political issues in Myanmar essentially were a death blow to foreign investment in the country pre-pandemic, and over the period of COVID-19 the country has continued to be secluded and off the radar of international tourism,” he said.

Hotel companies in the Asia-Pacific region have also taken a step back from Myanmar, he said.

“Given the removal of the democratically elected movement, there is little appetite not only from Western countries, but it has rubbed off on even its Asian neighbors. Little activity, poor sentiment,” Barnett said.

Over the last six years, both Yangon and Myanmar had their best years in terms of hotel occupancy in 2017, according to data from STR, CoStar’s hotel analytics firm. Countrywide, Myanmar's hotel occupancy was 47.8% that year, and Yangon hotels reported 50.8% occupancy. Average daily rate for both Myanmar and Yangon peaked in 2016 and slowly declined with each passing year.

A combination of the COVID-19 pandemic and the political unrest saw Myanmar hotels achieve its lowest performance across occupancy, ADR and revenue per available room in 2020.

All metrics for both Myanmar and Yangon improved slightly in 2021 but occupancy remains at approximately 50% of the 2017 peak.

Barnett said the only upside is that there are geopolitical headwinds throughout the Asia-Pacific. For example, Sri Lanka’s current issues might move Myanmar off the bottom ring in terms of volatility.

“China has its own problems, and [as it] reopens it will prioritize more Belt and Road-centric markets like Cambodia. The Chinese specter is in the background of Sri Lanka and Myanmar [in terms of a] longer-term bailout, but not at the moment,” he said.

Currently, the United Kingdom’s Foreign, Commonwealth & Development Office “advises against all but essential travel to Myanmar, based on recent political events,” while the U.S. Department of State Bureau of Consular Affairs advises Americans “do not travel to [Myanmar] due to COVID-19, as well as [to] areas of civil unrest and armed conflict.”

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