Blessed with scenic wadis (valleys), natural caves, islands, beaches and mountain ranges, and known for its ancient culture and hospitality, Oman has a lot to offer tourists. Its expanding economy and reputation for stability also draws visitors for meetings, incentives, conferences and exhibitions (MICE) from the region and beyond. The sector is central to government efforts to diversify the economy, and authorities have worked in recent years to streamline regulations and fast-track infrastructure developments to facilitate visitors, such as a new international airport and an international convention centre in Muscat. A steady stream of private investment in the hospitality sector is also contributing to improved services. A drop in visitors in 2018 – largely due to a decrease in tourists from the GCC – has led Oman to promote itself to different source markets. While there have been some challenges, such as building the auxiliary infrastructure needed to accommodate tourists at increasingly busy sites and human resource capacity, the sector looks set to grow.
Structure & Oversight
Oman’s tourism sector is overseen and regulated by the Ministry of Tourism (MoT), which is led by Ahmed bin Nasser Al Mahrizi, the minister of tourism since 2012. The MoT develops and implements sector strategy and regulations, issues licences for tourism-related activities, and monitors compliance. The ministry also operates promotional campaigns both at home and abroad, and represents the industry within the government.
Another key body is the Oman Tourism Development Company (Omran). Established by a government mandate aimed at separating executive and legislative management of the sector in 2005, Omran is responsible for developing the country’s tourism infrastructure. Omran currently manages the Al Hoota Cave complex and Aber rest area in Al Dakhiliyah Governorate, the Raz Al Jinz turtle reserve, and the Nizwa Fort and Harit Al Bilad heritage sites. The company is the country’s largest investor in hotels, with a portfolio of 16 hotels, including Alila Jebel Akhdar, three Crowne Plaza hotels in Muscat, Duqm and Salalah, and a range of resorts and midscale hotels under the names Atana and Atana Stay, respectively. It is also a minority stakeholder in the Mina Sultan Qaboos Waterfront, a $1bn integrated port and lifestyle project, and a number of other integrated tourism complexes (ITCs) such as Muscat Bay, Ras Al Hadd and Almouj Muscat.
Oman Airports, the government-owned company responsible for the management and operation of the sultanate’s civilian airports, is also relevant to the tourism sector. The largest airport in the country is Muscat International Airport, formerly known as Seeb International Airport until a name-change in 2008. The upgraded terminal was completed in November 2018 at a total cost of $1.8bn, and today the airport comprises a 580,000-sq-metre passenger terminal with an annual capacity of 20m passengers and two 4-km runways suitable for wide-body aircraft. Salalah International Airport, the country’s second international airport, was renovated in 2015 and caters to 2m passengers a year via regional flights and chartered intercontinental flights from Europe. Three additional airports receive limited tourism throughout: Sohar Airport, Oman’s third-largest international airport; Khasab Airport, in the Musandam exclave; and Duqm Airport. Cruise ships that dock in Muscat’s Port of Sultan Qaboos or at the Port of Salalah are managed by Marafi of state-run holding company Asyad and Salalah Port Services Company, respectively. Land crossings from the UAE and Saudi Arabia are overseen by the Royal Oman Police (ROP).
Diversification
Tourism is one of the pillars of the government’s ninth five-year development plan (FYP), which runs from 2016 to 2020. The FYP falls under the National Programme for Enhancing Economic Diversification, or Tanfeedh (Arabic for “implementation”). Despite Oman’s natural attractions, strategic location and rich cultural heritage, tourism was failing to live up to its potential. Indeed, the sector’s contribution to GDP averaged 2.2% between 2010 and 2015. As such, Tanfeedh called for an increase of public investment in the sector, as well an overhaul of regulations such as licensing and permissions that had previously hampered growth. It also identified adventure, MICE and leisure tourism as segments with significant potential, and, as such, were targeted for development. Tanfeedh’s initiatives are supported by the National Tourism Strategy 2040 (NTS). Launched in early 2016, the NTS is the MoT’s long-term vision for the sector and features a number of key targets. These include boosting the number of annual arrivals from the 2015 total of 2.6m to 11.7m by 2040, creating 535,000 jobs and growing the sector’s contribution to GDP to over 6%.
Performance & Size
Tanfeedh’s focus on tourism has resulted in increased government support, and these concerted strategic efforts have been rewarded, with contribution to GDP averaging 4.5% between 2016 and 2018. Nonetheless, 2018 was a challenging year, as a decrease in visitors from the GCC hampered the overall growth trajectory. Arrivals fell from 3.3m in 2017 to 3.2m in 2018, according to the National Centre for Statistics and Information (NCSI). Of those who visited in 2018, around 193,000 arrived via cruise ships. The downwards trend is not expected to be long lived, as Colliers International predicts arrivals will have a compound annual growth rate of 5% between 2018 and 2023.
Direct contribution to GDP rose from OR1.2bn ($3.1bn) in 2017 to OR1.3bn ($3.4bn) in 2018, and is expected to hit OR1.4bn ($3.6bn) in 2019, according to the World Travel & Tourism Council (WTTC). Direct contribution to employment dipped from 111,000 jobs in 2017 to 109,000 jobs in 2018, but the WTTC expects this figure to rise to 112,000 in 2019, signalling a recovery. Total contribution to employment fell slightly, from 210,000 in 2017 to 209,900 in 2018. According to the WTTC, tourism accounted for 4.8% of direct jobs and 9.2% of indirect jobs in 2018.
Visitors & Source Markets
The sector’s subdued performance in 2018 was largely due to a fall in GCC visitors, of which the number dropped from 1.6m in 2017 to 1.5m in 2018, according to the NCSI, drawn away to competing regional destinations. “A lot of GCC nationals and residents who used to go to Oman found it cheaper to go to Turkey due to the country’s currency devaluation,” Zoltan Kali, senior vice-president at Omran Hospitality, told OBG. “There was also an increase in connectivity between the Middle East and destinations such as Georgia, Montenegro, Bosnia-Herzegovina and Serbia that widened the options for travellers from the GCC.”
While fewer GCC nationals visited Oman, the country saw an 8.8% uptick in visits from nationalities outside the region. The top source market for nonGCC arrivals were India, with 385,682 visitors; the UK, with 151,271 visitors; Germany, with 146,488 visitors; and Pakistan, with 90,824 visitors. France, with 59,183 visitors, was the fastest-growing of these sources, with arrivals rising 21%.
The increase in European visitors in recent years can partly be attributed to the emergence of Salalah and the wider Dhofar Governorate as a popular destination for winter tourism. According to local media, 44,420 tourists arrived in Dhofar between October 2017 and May 2018, the majority of which were from Europe, helping to push hotel occupancy rates across the governorate up to around 80-100%.
China, Russia and Iran are three markets that are yet to break into the top five but are witnessing significant growth, thanks to changes to eased visa requirements implemented by the ROP and an increasing number of flights to and from these destinations operated by Omani carriers. In May 2018 the ROP added the three countries to the list of those that no longer required an Omani sponsor to visit for tourism. The change had an almost immediate impact on arrivals in 2018, with the number of Russian visitors growing by 161.7% to reach 10,877; China’s visitor numbers growing by 128.7% to reach 44,580; and Iran’s increasing by 47.2% to reach 33,468.
The flag carrier, Oman Air, launched a daily flight to Moscow in October 2018 and the airline has been running flights to Guangzhou, China four times a week since late 2016. Growth in visitor numbers from the three countries is expected to continue, with Omani low-cost carrier Salam Air launching a Muscat-Tehran service three times a week in June 2019. The budget airline has been running flights two times a week to Shiraz since February 2018.
Real Estate
Tourism infrastructure is an important vehicle for foreign investment, and ITCs play a central role. Characterised by a unique legal status that allows non-Omani nationals to purchase property and subsequently apply for a residency visa, ITCs were initially intended to combine hotels and tourist rentals with holiday properties but have evolved into a profitable element of the residential real estate market. Nonetheless, some ITCs are true to the original vision: Muriya’s Hawana Salalah and Jebel Sifa developments, for example, combine freehold properties with upmarket hospitality options.
Some observers note there is some room for improvement in the level of communication and collaboration that occurs between the public and private sectors. “General managers from the luxury hotels in Muscat meet regularly to share opportunities, challenges and market trends with the aim of supporting tourism in Oman,” Thomas Guss, general manager of Jumeirah Muscat Bay, told OBG. “All brands have their strengths and set strategies to promote the destination and their properties. However, I believe we could be more effective if the sector organised regular roundtables via the MoT that included the whole hospitality industry, including airlines, hotels, airports, travel agencies and the ministry.”
Hotels
There has been an uptick in hotel construction in recent years. There were 412 hotels in Oman in 2018, up from 359 the previous year, an increase of 14.8%. By contrast, between 2016 and 2017 the number of hotels increased by 5.5%. The facilities were centred around Muscat, with 155 new hotels, as well as Al Sharqiyah South (52), Al Dakhiliyah (41), Dhofar (34) and Al Buraimi (28).
According to the NCSI, Omani hotels hosted 3.5m guests in 2018, up from 3.3m in 2017. Omanis made up the largest contingent (1.2m), followed by Europeans (1m), Asians (618,000) and GCC nationals (335,000). Overall hotel revenue reached OR259.6m ($674.2m), up from OR236.1m ($613.2m). Occupancy rates, however, fell from 45.2% in 2017 to 38.4% in 2018. This pattern was mirrored at the regional level, with occupancy in Muscat falling from 55.3% to 54.8%, from 42.5% to 41.8% in Al Batinah South, and from 35.2% to 25.7% in Musandam. Only Al Batinah North (which held at 44.3%) and Al Sharqiyah South (from 34.3% to 37.9%) bucked the trend.
New Keys
The MoT announced in May 2019 that it expected the country to add 3264 hotel rooms over 31 hotels in 2019, of which over 80% would be three stars and below. By developing hotels with fewer stars authorities are hoping to make travel more affordable and cater to a wider market. Colliers noted in its second quarter 2019 “MENA Review” that the MoT signed a $11.7m deal with 10 investors to build new hotels, restaurants and resorts across the sultanate, with a focus on three-star hotels in outlying regions. The project is expected to create jobs and encourage sustainable development.
Muscat is expected to lead the region in terms of new hotel rooms, accounting for 5854 out of 11,353 new keys to be added in the MENA region through 2021. This could allow Muscat to overtake Manama as the largest market by branded hotel supply.
Revenue
Revenue of three-to-five star hotels increased by 8% year-on-year during the first nine months of 2019 to hit OR155.2m ($403.1m). The number of guests grew by 18.7% over the same period, with Europeans making up the largest portion of guests at 398,013, with Omanis coming in at a close second, at 387,914. Colliers, however, expects average revenue per available room (RevPAR) to decline due to additional supply. Not all observers, however, think the additional stock will have a negatively impact the sector. “We need to build rooms in order to become more attractive to travel agencies and tour operators. Particularly in the case of Salalah, the establishment of hotel infrastructure has allowed the destination to flourish,” Ahmed Dabbous, CEO of tourism developer Muriya, told OBG.
Luxury
Even as authorities are targeting the affordable segment, luxury hotels are set to expand. “Brands need to stay true to their strengths,” Guss told OBG. “There is space to increase the hotel supply in the coming years, but it will be necessary for hoteliers to differentiate themselves. Whether you are running a city hotel or a resort, it will be important to stay authentic.” A 320-key JW Marriott will open adjacent to the Oman Convention and Exhibition Centre (OCEC) in Madinat Al Irfan in 2020, while a 206-room Jumeirah Muscat Bay resort with conference and banquet facilities is scheduled to open in the third quarter of 2020. Marriott will also partner with the Alfardan Group to open the first St. Regis Hotel in Oman, which will be a 271-room, five-star property located in the Muscat Al Mouj ITC. The property will feature 170 branded residences including apartments, penthouses and town houses. The facility was on schedule as of December 2019 and is expected to be completed by the end of 2022.
Cruises
While the country has a relatively established hospitality segment, it is still a smaller player in region’s cruise tourism landscape. Even so, the segment’s impact on the sector is steadily growing. During the 2018-19 cruise season (from October to April), 298 ships docked in Oman, an increase of 106 from the 2017-18 season. Muscat’s Port of Sultan Qaboos is the top docking port and welcomed 147 ships during the 2018-19 season, while 72 docked in Khasab and 79 in Salalah. The MoT expects 360 cruise ships to visit during the 2019-20 season.
The long-term prospects for the cruise segment are helped by ongoing progress on the Mina Sultan Qaboos Waterfront Regeneration port project, led by the UAE’s Damac Properties and backed by Omran. In July 2019 it was announced that construction consultancy SSH had won a $2bn contract to provide planning, infrastructure completion and design consultancy services for the project. It will also provide design consulting for Zone 1 – Bab Al Mina, a 15-ha zone with a four-star hotel, 430 residential units, and retail and entertainment facilities. Ground was scheduled to be broken for the project in late 2019.
Business Tourism
With many visitors coming to Oman for business, the sultanate is growing its MICE offerings. A major step forward was made in October 2019 with the completion of the final stage of the OCEC. The final stage was the three-storey Madinat Al Irfan Theatre, which can accommodate up to 3200 people. The 22,396 sq-metre centre is just 4 km from Muscat International Airport in the Madinat Al Irfan mixed-use development. Exhibition and convention attendees are currently served by a four-star Crowne Plaza hotel, with a JW Marriott property opening in 2020. Additionally, a three-star Ibis hotel was the tendering stage in the third quarter of 2019. OCEC developer Omran is hoping the launch of the convention centre will be a catalyst for Oman’s emergence as a MICE destination. “The pre- and post-conference opportunities for visitors – whether it is sun and sea, cultural tourism or adventure tourism – create significant return-visit possibilities,” Kali told OBG.
Marketing
Authorities have tapped advertising campaigns as a way to attract both domestic and international tourists to the country’s various hotels and sites. In March 2020 the sultanate will participate as an official country partner at ITB Berlin, the world’s largest tourism trade fair. The event is one of the most important for tourism, and as a country partner Oman will have the opportunity to organise the opening ceremony, and the event will provide a full programme of events that can be utilised to promote the country as a destination.
In July 2019 the “Within Oman” campaign was launched with an aim to encourage domestic tourism and combat low occupancy rates in Omran-affiliated hotels during the slow summer months. During the summer of that year, Omani nationals were given 50% off standard room rates. Uptake was further incentivised through packages that included free accommodation for children under 12, breakfast and dinner deals, and spa discounts. Kali told OBG that the promotion and been successful, and that the group would repeat it in 2020.
Outlook
Arrivals are likely to pick up and contribution to GDP is expected to increase in the short to medium term on the back of renewed marketing campaigns, as well as efforts to diversify source markets. The Dubai Expo 2020 will drive an influx of visitors to the region, and Oman hopes to the event will have a spillover effect as tourists look to add to their itineraries (see analysis).
In the long term Salalah’s appeal will widen as its hotel infrastructure broadens to include more options in the three-star-and-below category. Meanwhile, hoteliers waiting for a resurgence in RevPAR may have to wait until supply stabilises around 2023. Strategically, the decision to invest in niche tourism is likely to reap rewards, with business tourism centred around the OCEC and adventure tourism sites such as Musandam and Jebel Akhdar facilitating expansion.
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