Planning and investment are leading to sector growth

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Stretching from the heart of what was once known as “Arabia Felix” (Happy Arabia) to the craggy, flooded coastlines of the Musandam Peninsula, the sultanate of Oman possesses an enormous variety of landscapes and environments. It also has a population known for its great friendliness to visitors, its tolerance of different faiths and beliefs, and for its great pride in its long tradition and heritage.

With such attributes, the fundamental ingredients for success for the local tourism industry are already in place. Today, Oman is looking to leverage these benefits more effectively as it tries to secure its long-term, post-hydrocarbons future. Indeed, tourism is seen by the government and the majority of Omani businesses and people as a major part of the country’s future economic development, providing jobs for an expanding population and revenue for a growing nation.

Facts & Figures

One good measure of Oman’s increasing popularity as a tourism destination is the number of passenger arrivals at the country’s two international airports, Muscat International (MCT) and Salalah International (SLL). According to figures from the Oman Airports Management Company (OAMC), the government entity that manages and operates the sultanate’s civilian airports, MCT handled some 8.31m passengers in 2013, up from 7.56m in 2012 and 6.48m in 2011.

Figures from the National Centre for Statistical Information (NCSI) further state that in the year through end-July 2014, MCT had handled 4.65m passengers on international flights, up from 4.35m for the same period in 2013. During those first seven months of 2014, MCT also handled 454,079 domestic passengers, up from 423,722 in July 2013.

At SLL, passenger numbers have also been rising steadily. The OAMC figures show that in 2013 Salalah handled 746,994 passengers, up from 629,305 in 2012 and 513,278 in 2011. The NCSI data then adds that in July 2014, 131,786 passengers arriving from international flights passed through the airport, up from 79,429 in July 2013. In terms of domestic passengers, the numbers were also up, from 2884 in July 2013 to 3024 in July 2014.

Up In The Air

The flight data also show an increase in aircraft movements, year-on-year. At SLL these went from 6175 in 2012 to 7944 in 2013, while at MCT the number of civilian aircraft movements reached 81,244 in 2013, up from 73,842 in 2012. Not only more people are using the airports, then, but more planes and more airlines.

Indeed, the year 2013 saw Qatar Airways begin regular direct flights from Doha to SLL. In addition, Oman Air (OA), the national carrier, is planning to add flight routes to both Manila and Jakarta by year-end 2014, while doubling its scheduled flights to India, Sri Lanka and Nepal in 2015.

Riding The Air

Meanwhile, the number of passengers arriving by sea has been steadily rising as well. Oman is a feature on many international cruise ship routes, with Khasab, on the Musandam Peninsula, Port Sultan Qaboos (PSQ) in Muscat, and Salalah being the main destinations.

Definitive, up-to-date statistics on sea passenger arrivals are difficult to find, but according to data in the local press from Khasab port officials, the January-April 2014 season saw 52,240 passengers disembark from cruise ships at the port from 29 cruise calls. A further 19 cruise calls had already been booked for the October-December 2014 season. The officials said that in 2012, 46 cruise ships had docked, with that number climbing to 51 in 2013, bringing 62,305 total passengers in 2012 and another 60,136 in 2013.

These press reports also indicated that the Port of Salalah received 25,397 passengers in 2013 from 34 cruise ships, up slightly from 33 cruise calls in 2012, but down slightly in passenger numbers, from 28,159 passengers. PSQ, meanwhile, received 115 cruise calls in 2013, up from 111 in 2012, when it handled 183,449 passengers, according to the same press reports. However, the number is estimated to be even higher, with the Times of Oman quoting the Ministry of Transport stating that passenger arrivals at PSQ had reached 321,317 in 2013.

At the same time, Muscat is just four hours by car from Dubai, making the land border with the UAE also a popular means of arrival. The UN World Tourism Organisation (UNWTO) global rankings for 2012 thus put Oman seventh in the Middle East region for that year, after some 48% growth in international arrivals from 2011. For 2013, provisional figures in the UNWTO’s 2014 “Statistical Highlights” report suggested 8% growth on top of that, the third-highest figure after Dubai and Palestine A LAND OF GREAT VARIETY: Many of those tourists originating from the UAE head not only to Muscat, but also further south – to Salalah and its surrounding province of Dhofar. This area is one of the most exceptional in the region, thanks to the Indian monsoon. Known locally as the khareef, this weather system impacts the province of Dhofar from roughly June to mid-September. Rainfall during this time spikes from the Omani annual average of 80mm-100mm to some 750mm, covering the previously blackened hills with lush, green vegetation.

Dhofar therefore has annual temperatures much milder than elsewhere in the country. In Muscat, the annual range is from around 40°C in June to 25°C in January, while in Salalah, the range is from a maximum of 32°C in June to a minimum of 18°C-19°C in December and January.

According to NCSI data, some 431,105 people visited Dhofar province during the khareef season in 2014, slightly down on the total of 433,639 seen in 2013, but still illustrating the attraction of this remarkable natural phenomenon.

Mountains & Valleys

Much of the interior of Oman is also mountainous, with the rugged hills of the Hajar range mixing in with the buildings and highways of Muscat, while the Jebel Qara rises straight up behind Salalah. Further beyond those seasonally green hills, one encounters the sands of the Empty Quarter, along with the Saudi border.

Elsewhere, much of the stretch between Muscat and Salalah is rocky desert, while north of Muscat, the Musandam peninsula has quite a different geology and ecology. There, the coast is one of flooded wadis, or river valleys, giving the entire area the feel of a fjorded seascape, and leading to it being dubbed the “Norway of the South”. There are also a number of offshore islands that are noted for their attractiveness as dive sites. The Daymaniyat Islands are one such group, not far off the coast near Muscat, along with Fahal, or “Shark Island”.

At the same time, many cultural cross-currents have left their mark on Oman – a factor also highlighted by the local attitudes of openness and religious acceptance. A majority of native Omanis are adherents of the Ibadhi branch of Islam, which is both traditional and conservative, but also highly tolerant of other branches of the faith – Sunni and Shiite – and of other faiths in general, making Oman welcoming to tourists from many cultures.

Thus, the sultanate has invested in the physical remains of its past, restoring old fortresses and constructions, including the ancient irrigation system, known as Al Falaj. Many such monuments have been turned into museums, providing Oman with a strong sense of continuity with the past, a factor that clearly distinguishes it from some of its regional neighbours who have struggled to preserve traditional or historical sites and traditions.

Sector Bodies

In 1995 the government unveiled Vision 2020, a blueprint for the country’s future development, which singled out tourism as a major plank of future economic growth.

The Vision’s long-term strategy breaks down into a succession of five year plans, with the current plan – 2011-15 – due to end in the coming year. The vision led to the creation of the National Tourism Development Plan (NTDP), which stresses sustainability, preservation of cultural integrity as well as environmental protection as missions and objectives. At time of print, the country’s “Vision 2040” was being prepared, along with a new five-year plan. A new tourism strategy was also being drafted at the same time by external consultants, according to sector officials who spoke to OBG.

In 2004 a government decree established the Oman Ministry of Tourism (OMT) to oversee sector affairs, assuming the responsibilities that had previously been under the Ministry of Commerce and Industry. Within the OMT are directorate-generals (DGs) for tourism promotion and development, investor services, administration and finance, and a special DG for tourism in the Dhofar Governorate.

Step By Step

In 2005 the government set up Omran, a development company tasked with managing the tourism sector’s infrastructure. Omran has also recently undergone a restructuring, with an eye to adding more value-added projects to its portfolio.

Omran has three subsidiary companies: one specialising in project management, the second in heritage management and the third in hospitality. The agency also manages several three- and four-star hotels in Oman, such as the Intercontinental in Muscat, which are to be brought together into a new brand in the near future. Omran is currently involved in 10 resort-style projects worth some $10bn.

Meanwhile, Vision 2020 set some formidable targets for sector growth. By the end of the period, tourism is to contribute 9.2% to the country’s GDP. In terms of direct impact, however, according to the World Travel & Tourism Council (WTTC), the figure in 2013 was around 3%, or OR982.8m ($2.54bn). The WTTC forecast growth of 10.4% in the sector in 2014, to OR1.08bn ($2.8bn), which would likely outstrip overall GDP growth. This was around 4.6% in the first quarter of 2014 at market prices, according to the NCSI, with the hotels and restaurants segment showing identical growth. The WTTC also forecasts a 3.9% direct contribution to GDP by 2024, at OR1.83bn ($4.7bn).

Ripple Effect

If the indirect benefits of the sector are also factored in, the figure rises considerably. The WTTC has estimated travel and tourism – in the widest sense, including investment effects, supply chain boosts and other elements – to be worth OR2.08bn ($5.4bn) in 2013, or 6.4% of GDP. The WTTC’s prediction for 2024 rises to an estimated 8.2% contribution to GDP from the sector.

In terms of other economic impacts, the WTTC states that the sector also directly accounted for around 3.3% of all jobs, or some 37,000 people, in 2013. This includes restaurants and leisure facility staff directly supported by tourism, in addition to hotel, travel agent, airline and passenger transportation service staff. When a wider, more indirect view is taken, the total number swells to around 72,000 jobs in 2013, or 6.4% of total employment, the WTTC data show. The Council’s long-term, wider accounting forecast is 116,000 jobs and 8.4% of total employment by 2024. These figures are significant and give Oman a respectable ranking amongst its regional peers. In terms of direct contribution to GDP, for example, Oman’s tourism sector comes in behind Bahrain at 4.1% and the UAE at 4%, yet the sultanate ranks higher than Qatar (1.8%), Saudi Arabia (1.7%) and Kuwait (1.5%).

Strategies For Success

A fundamental part of the tourism strategy is development of the physical infrastructure necessary. This covers the transportation network, as well as the construction of resort facilities, hotels, leisure and entertainment centres. Transportation has thus seen a major surge in government investment in recent years (see Transport chapter). Highlights in this programme, which saw some $20bn allocated to transport during the 2011-15 five-year period, include a OR6bn ($15.54bn) allocation for a national rail project, OR2.4bn ($6.2bn) for airport expansion and OR1.2bn ($3.12bn) for road network development. “Making tourism a success means enhancing integration between the transportation and tourism sectors. National flagship tourism projects will not achieve the desired effect if the transportation network is not in place and connected to get people around,” Mehdi Al Abduwani, chairman of the National Ferries Company, told OBG.

MCT and SLL are both undergoing major expansions, with a new terminal currently under construction at MCT that is to have a capacity for 12m passengers per annum (ppa) by the end of its first stage of development. Further stages could later boost this to 48m ppa. The new terminal will also have 10 aircraft stands, a 4000-by-60-metre runway capable of accommodating the largest aircraft, as well as a 90-room airside hotel. The terminal project has hit some delays, however, with some claiming that the most likely date for opening would be 2016.

SLL, meanwhile, is also seeing a boost to its current capacity, which will rise up to 2m ppa at the end of its first expansion phase. This number can also be escalated up to 6m ppa in the years to come. The new airport will also have a 4000-by-60-metre runway, 10 contact stands and boarding bridges and hanger capacity for wide-bodied aircraft.

A Wider Berth

In addition to these two major expansion projects, three regional airports are also being built. The first of these is at Duqm, which is being rapidly transformed from a fishing village half way between Muscat and Salalah into a busy port and industrial hub. Indeed, an entirely new city is under construction at Duqm, aiming to leverage the strategic location close to Oman’s oil and gas reserves, alongside an deep water harbour. Duqm already has one of the region’s largest dry docks in operation and is ramping up its container traffic. New hotels are also springing up, with the Crowne Plaza, City Hotel and Park Inn by Radisson Hotel and Residence now in operation.

To feed the new city, a new airport is being established, with the 4000-by-60-metre runway complete at the time of writing and services ramping up. The $94.2m terminal had yet to be completed, with passengers being processed in temporary facilities. The airport is due to be fully operational by 2016.

Another new regional airport is Sohar. This too is being developed as a major global maritime port, receiving the bulk of container traffic that previously went through PSQ. Located 220 km northwest of the capital, Sohar is also en route to the Musandam exclave, making it a potential starting point for tourism in the peninsula. Connected by a major highway to Muscat, it can also serve as an overflow airport for the capital.

When completed, the new Sohar airport will have a 250,000-ppa capacity and two aircraft stands. By September 2014 the civil and infrastructure work on a 4000-by-60-metre runway, rainwater protection and service roads had already been completed. The third new regional airport is Ras Al Hadd, located near Sur, on the coast southeast of Muscat. This airport is likely to cater almost entirely to tourism, as it is near a series of beaches and ecologically important coves where marine turtles come to lay their eggs. The new airport will be similar in size and capacity to Sohar, with runway and airside infrastructure work underway at the time of writing.

Soaring Higher, Further

The capacity of the national carrier OA is also being expanded in line with the overall tourism strategy. As of August 2014, OA’s fleet stood at 30 planes, consisting of seven Airbus A330s, 17 Boeing B737s, four Embraer E175s and two ATR42s. The airline was connected to some 43 destinations worldwide. OA was due to see the arrival of the first new planes in a recent expansion programme later in 2014, with OA having placed orders for 20 new aircraft. These include three Airbus A330s, 11 Boeing B737s and six Boeing B787 Dreamliners. With the new aircraft, OA plans to add routes and increases flight frequencies in the year ahead.

OA has also received major cash injections from the government in recent years, covering losses incurred during recent expansion. OA began long-haul services in 2007, after Oman pulled out of Gulf Air, originally a joint venture with Bahrain, Qatar and Abu Dhabi, but has since remained on in Bahraini hands. In 2013 OA saw revenue rise 10% year-on-year, and traffic climb 13% to around 5m passengers.

Laying The Tracks

Meanwhile, another major future infrastructure project that will have significant tourism implications is Oman Rail. The rail network will eventually see some 2244 km of track laid across the sultanate, connecting its major ports and cities with the neighbouring UAE and becoming part of a pan-Gulf rail network. Passenger trains with speeds up to 220 km per hour will be installed on these tracks, creating huge potential for Oman’s tourism sector. At time of writing, bidding for the first phase of development – on the track from Sohar to Sunaynah on the UAE frontier – was underway.

Transport developments at PSQ are also significant. Under the sultanate’s transport plans, PSQ, which is in the heart of Muscat, has ceased to operate as a cargo and container port and instead will operate as a dedicated cruise liner terminal. This increases access capacity at a stroke for the cruise liner business, while also enabling easier access to and from the quayside for tour groups. A master plan for redevelopment was unveiled in May 2013, including marina facilities, terminals for third-generation cruise ships, shops, hotels and recreational outlets. The existing terminal will be refurbished, along with the construction of new terminals, boosting passenger handling capacity for up to three 11,000-passenger ships. A floating dock for 150 yachts and other boats will also be constructed.

At the same time, a major road programme is also under way across the sultanate, with 67 major road projects under construction at the start of 2014, according to the Ministry of Transport and Communications. Highlights include the OR1bn ($2.59bn) Al Batinah Expressway, linking Muscat to Khatmat Malaha on the border with the UAE via Sohar, and the Diba-Lima-Khasab road project, a 65-km coastal road through the Musandam exclave.

Integrated Approaches

Boosting the stock of accommodation available to tourists when they have arrived is also a major part of the NTDP.

One way the government is addressing this issue is through Integrated Tourism Complexes (ITCs), first unveiled in 2006. These are specially designated, gated communities where high-end real estate is combined with new hotel and entertainment facilities aimed at tourists. The real estate, typically villas, town houses and apartments, is available for sale, freehold, to non-Omanis – the only places in the sultanate where this is possible. The idea is that developers wishing to capitalise on international real estate sales will thus be tied to developing the country’s tourism infrastructure.

Four ITCs are currently active: The Wave, on the coast near MCT; Muscat Hills, above the capital; the Jebel Al Sifah resort, southeast of Muscat; and Barr Al Jissah, close to the capital. The Wave and Muscat Hills have Professional Golf Association (PGA)-standard 18-hole golf courses. The Wave is now also adding three large hotels to its portfolio, with the Kempinski being the most advanced in construction and due to open by year-end 2015. The enclave is also developing a 400-berth marina and a major shopping and entertainment venue, The Walk. Barr Al Jissah, meanwhile, has two five-star and one seven-star Shangri-La hotels on site, with plans to add a new marina and shopping complex. Jebel Al Sifah has the boutique Sifawy Hotel and is also seeing a 200-room Four Seasons and a Banyan Tree hotels under construction, the latter due to open in 2015.

Jebel Al Sifah is being developed by Muriya, the largest tourism developer in the country, and backed by Egypt’s Orascom, which is also behind the Salalah Beach ITC. This is to have two 18-hole golf courses, with seven hotels planned. Two of these are already open – the boutique Juweira and the Rotana – with a Mövenpick and Club Méditerranée also booked.

In addition, the ITC project took a step forward in September 2014 with the launch of sales for a new complex, Saraya Bandar Jissah, to be built in a neighbouring bay to Barr Al Jissah.

Bed Count

The ITCs are thus boosting the high-end hotel room tally for the sultanate considerably. Yet the number of hotels and motels in the country has been steadily rising. The most recent NCSI data shows 248 hotels and motels in 2012, up from 235 in 2011 and 219 in 2009. Monthly data for four- and five-star hotels from the NCSI shows occupancy rates in this category averaging 58.3% in 2013, with the first half of 2014 up on this, at 64.6%. The number of guests staying follows seasonal cycles, with the high season being the winter, peaking in the first half of 2014 in March, with 71,225 guests in the four-and five-star bracket that month. The stock of high-end hotels has also grown with the soft opening of the Alila Jebel Akhdar Resort in the second quarter of 2014 and completion of Atana Musandam, a 110-room waterfront hotel on the peninsula. Atana is the first Omani hotel brand of the Omran portfolio.

According to figures from Omran, more high-end hotels are also due to open in the next two years. In 2016 the 210-room Shaza Salalah, the 100-room Crowne Plaza Salalah extension, the 115-room Anatara Hotel Resort and Spa and a 160-room hotel in Azaiba are all due to open. Also under Omran management and due to come online are a 300-room JW Marriott and 300-room Crowne Plaza at the new Oman Conference and Exhibition Centre (OCEC). The following year, the 300-room W Resort Muscat is slated to open, along with the 250-room Muscat Hills Intercontinental, the A and B phases of the Saraya Hotel Jumeirah, and a new, 140-room hotel in Qurum.

In terms of room rates, a study run by the travel website hotels.com in 2013 found Oman to be the second-most-expensive country in the world, after Monaco, for average hotel prices, at $297 a night.

MICE

The $1.8bn OCEC is to be the flagship of a new surge into meetings, incentives, conferences and exhibitions (MICE) tourism by the sultanate. According to the WTTC, overall mix of business and leisure traveller expenditure – both inbound and domestic – in 2013 came to around 64.9% leisure versus 35.1% business. Growth in both segments was expected to be around 10%, year-on-year, in 2014. Oman already has some experience in the MICE field; the five-star Al Bustan Hotel in Muscat, for example, was originally built to accommodate the 1985 GCC summit, with many of its high-end hotels also offering MICE facilities. A 2013 Colliers International report suggested that 2014 would see some 12-15% growth in Oman’s MICE sector, in terms of inbound arrivals.

Sizing Up

The Al Bustan’s Majan Ballroom has a 900-seat theatre style capacity, while Oman Auditorium offers seating for 628. The Crowne Plaza Muscat also has a 600-person reception style facility, along with outdoor room for up to 1000 guests, while its sister in Salalah offers facilities for 600 people indoors and 2500 outdoors. Muscat’s Intercontinental also has capacity for meetings of up to 500. Many other hotels offer conference and meeting rooms, though generally with a capacity of less than 100.

Conscious of the global growth in MICE, Oman decided with the NTDP to create a stronger presence in this field, with the OCEC to place the sultanate in a strong position to compete with regional rivals. Located in Muscat, the centre is due for completion in 2016. It will then unveil a 3200-seat, three-tiered theatre, complete with an orchestra pit, two ballrooms, 14 meeting rooms and five exhibition halls. A total of 22,000 sq metres will thus be on offer.

The OCEC’s developer is Omran, with Australian firm AEG Ogden managing the project. The latter told local press in February 2014 that it had already identified events as far ahead as 2024 with a potential for being held in Oman. The OCEC is also located within the Al Irfan Urban Development project area, near to the new airport terminal in what is planned to become a major new suburb of the capital.

Challenges

A current matter of debate is how to boost destination management. While the services for bringing in tourists are currently being radically expanded, along with the amount of accommodation available, the journey from airport to hotel, as well as the range of activities available at the hotels themselves, are often highlighted as requiring further development.

A further challenge in such an expanding sector is human resources. While the global market can provide employees, the sultanate wishes to maintain a policy of Omanisation – ensuring that Omani nationals comprise the majority of the workforce. Sector professionals often reported that this was a challenge, with the private services sector not seen as attractive by many Omanis. These factors will likely be addressed further in the next five-year plan and in the new tourism strategy currently under development. As such, the sector looks set to continue expanding its global footprint steadily, but surely.

Competition within the region is also high, yet Oman has some clear advantages over its neighbours. In the south it has a unique environment, lushly green in the summer months, in contrast to the blistering heat of other Gulf countries. The terrain is also quite different, giving a variety often absent elsewhere, alongside a more relaxed, getaway-from-it-all atmosphere.

Outlook

The NTDS has been instrumental in the growth of the sector to date, bringing together hotel and resort construction with national schemes for transport infrastructure and regional development. The NTDS has also emphasised developing Oman as a high-end tourism destination, concentrating on the luxury, four- and five-star end of the market.

Today, however, there is a growing debate within the sector over where to go next with the strategy. Some suggest that a shift to three-star accommodation might significantly boost the number of arrivals, creating increased employment opportunities and an even greater sector contribution to GDP.

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The Report: Oman 2015

Tourism chapter from The Report: Oman 2015

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