Ministry warns hotels to follow room rate cap

By Zaw Win Than
Volume 32, No. 633
July 2 - 8, 2012

Staff at Yangon's Chatrium Hotel.
Pic: Kaung Htet

THE Ministry of Hotels and Tourism will meet with travel agents in Nay Pyi Taw this week to discuss pricing issues following a recent warning to foreign-owned hotels to observe a new US$150 room rate cap for standard rooms.

The cap was put in place because of fears skyrocketing prices were damaging the industry, Minister for Hotels and Tourism U Tint Hsan said.

A spokesperson from Union of Myanmar Travel Association (UMTA) said the association’s executive committee members and individual agents would attend the meeting in Nay Pyi Taw on July 5.

“Firstly the ministry only invited the executive committee members of UMTA but today the ministry also invited other interested travel agents to attend the meeting,” he said.

The meeting comes after U Tint Hsan met representatives from the hotel industry in Nay Pyi Taw on June 26 to announce the price cap.

U Tint Hsan told hoteliers the ministry would not accept any situation that had the potential “to destroy the image of Myanmar as a tourist destination” and “severe action” would be taken against those that failed to heed the warning.

The profiteering, which has seen prices triple to above $250 a night at some well-known business hotels, was a problem not only for the industry but the nation as a whole and could slow down the government’s reform efforts, he said.

The minister said the ministry would not recommend visa extensions for the general managers of hotels that failed to observe the limit, while lease extensions permitted under the foreign investment law could also be threatened.

Action will also be taken against general managers and parent companies of hotels that provide incorrect room and occupancy rates to the ministry, he added.

U Tint Hsan told hotel managers they should set prices in line with the market rates in neighbouring countries.

While hotel managers have said the high prices are simply because of lack of supply, U Tint Hsan said the ministry had recently sent inspection teams to the hotels and found that not all were 100 percent occupied as they claimed.

The meeting also touched on some hotels’ refusals to sign contracts with travel agents to lock in room rates, with the minister instructing managers and tour company representatives to discuss to reach an agreement on hotel reservations at “reasonable” room rates. A certain number of hotel rooms should be reserved for tour companies, he said.

A spokesperson for Yangon’s Traders Hotel said the company was planning to adjust the room rate to meet the conditions outlined by the ministry.

“We will adjust the price. I don’t know how much the standard price will be but we are working on it and we will fix the new rate soon,” the spokesperson said.

The pricing issue has rocked the industry in recent months, and the June 26 meeting took place after more than 30 leading travel agents signed a petition outlining their grievances with the hotels and sent it to President U Thein Sein.

Dr Aung Myat Kyaw, chairman of industry body the Myanmar Marketing Committee (MMC) and managing director of Orchestra Travel, said the profiteering hotels had taken a “short-sighted approach” in jacking up prices dramatically.

“This increase was expected but not to that extent. Here we are not only talking about irresponsible pricing but irresponsible practice too, like changing contracts continuously. Some hotels have revised their contracts four times,” he told The Myanmar Times.

“What is happening now is a very short sighted approach to maximise profit but it will have long-term unwanted effects on Myanmar as a tourist destination,” he said.

“The good image, the good reputation of the destination is damaged already, especially for this coming season.

“I feel this situation shows the need for a proper consumer law to prevent such irresponsible practices that damage the destination’s image and the country’s reputation.”

The high room rates have caused some travel agents to lose bookings because of “misunderstandings” with partner agents outside Myanmar, said Daw Su Su Tin, managing director of Exotissimo Travel.

“Before we got a contract for about one year but now we only get it for six months so they can raise the price again and again. Even after they agreed the contract rate for the booking, they increased the rate. This situation is really hard for us and some cancelled their packages because of it. Our partner agents from foreign countries are really fed up with this situation and they said Myanmar is too hard to do business with,” she said.

Ma Susie Moe Aung, director of sales at The Governors Residence, said the ministry’s decision was fair.

“If further action was not taken, this situation would ruin Myanmar tourism. The actions taken by the ministry are fair I think. We know some [foreign owned] hotels really increased their room rate quite frequently and that made it really hard for the travel agents when they are selling their package tours,” she said.

She said The Governor’s Residence had not received any complaints about its pricing because it was transparent about increasing rates.

“We have a system; for example, we just increase the room rate 5pc or 10pc once a year. We don’t change the prices frequently,” she said.

The ministry also announced it would instruct delayed hotel projects in Yangon to stick to their original completion dates in order to ease the hotel room shortage.

According to ministry figures, the hotels sector had received $1.144 billion in foreign investment over 36 properties. Singapore was the major source of investment, accounting for $597.8 million with 12 properties, followed by Thailand with $263.3 million with 11 properties.

Meanwhile, figures from the ministry show that the number of foreign visitors arriving in Myanmar through the Yangon gateway increased 36.47pc over the first four months of the year to 175,930, up from 128,910 in the same period.

More than half of visitors were from Asian countries, including about 28,852 from Thailand – the largest single group by nationality – followed by China with 13,689, Japan with 12,319 and Korea with 10,666.

European nationals accounted for 50,128 travellers, representing 28.5pc of total arrivals. France led the way with 11,873 visitors, followed by Germany (8197) and the United Kingdom (7973).

The figures also showed that foreign independent travellers made up the single largest group with 74,228, followed by package tourists (46,665), business travellers (32,949) and social visa holders (12,386).