Economic Update

Published 02 May 2018

The opening of the new Muscat International Airport (MCT), coupled with investments in hotel infrastructure, are expected to bring Oman closer to achieving its goal of more than doubling tourism’s contribution to GDP by 2040.

In late March operations began at the new MCT, which is based at the same site as the previous airport of the same name. The $1.8bn development features 96 check-in counters and two 4000-metre runways to accommodate the world’s largest aircraft, and has the capacity to handle 20m passengers annually.

In addition to accommodating higher numbers of visitors, the new airport has been named the Middle East’s Leading New Tourism Development Project at the 2018 World Travel Awards in April.

The opening comes on the back of a spike in travellers at both the former MCT and Salalah International Airport last year, with Muscat seeing a 16.6% increase in passenger numbers to over 14m and the latter a 24% increase to over 1.5m. Growth through Salalah followed the opening of a new terminal in 2015. Prior to that, throughput stood at 841,000 in 2014.

Growing economic contribution brings further investment

Expanded capacity at the airports is set to play a key role in the government’s long-term plans for tourism development. Under the National 2040 Tourism Strategy, Oman aims to attract 11.7m international visitors annually by 2040, up from the 3.3m recorded in 2017, and boost tourism’s contribution to GDP from 2.6% in 2016 to 6%.

Recently released statistics indicate progress is being made towards these goals. According to the National Centre for Statistics and Information, tourist numbers rose by 16.5% year-on-year (y-o-y) in January and February, while official data showed that full-year arrivals for 2017 also grew by 4.7%.

Of these 2017 arrivals, 48% came from the GCC, followed by visitors from India (10%), Germany (6%), the UK (5%) and the Philippines (3%), while a recent report from real estate firm Colliers International forecast tourist numbers to grow by annual rates of 13% between 2018 and 2021.

Supporting this trend, a newly released report from the World Travel & Tourism Council (WTTC) forecasts the sector’s direct contribution to rise by 6% this year, up from the OR849.5m ($2.2bn) recorded in 2017.

In a sign of sustained expansion, annual sector growth is expected to average 5.9% through to 2028, while visitor exports – the amount spent by international tourists in Oman – are forecast to increase by 6.5% in 2018 and 6.9% each year to 2028, when they are predicted to total OR2.1bn ($5.5bn).

In response to the expected demand growth, the hospitality industry is stepping up its investments in hotel infrastructure. A series of recent announcements by major hotel chains will take the total number of rooms in Muscat from 10,924 to 16,866 by 2021, an increase of 54%.

Early signs indicate ample visitor demand for new accommodation offerings, with three-, four- and five-star hotels recording an 11.4% y-o-y increase in revenues in January 2018.

Concerns raised over visa application changes

Within the context of rising arrivals, in March the government announced a rules change for e-visas, which it hopes will reduce processing times and improve the flow of traffic through the airport.

All international visitors are now required to submit an electronic visa application and payment in advance, and then present their e-visa to immigration officials upon arrival. The cost of a 30-day, single-entry tourist visa, the shortest option available, remains unchanged at OR20 ($52).

The move has sparked concerns among some tour operators that Oman’s competitiveness in attracting weekend visitors or day-trippers will be affected.

Prior to implementation of the new rules, Arundas Haridas, operations manager at Dolphin Khasab Tours, told local media that 30-40% of his customers make bookings less than 24 hours before their arrival, which some fear could dampen the appetite of potential visitors.