In a country the size of Poland, Oman’s rugged, varied and dispersed terrain has historically constituted a challenge to development. For the tourism industry, though, such dramatic scenery has proven to be a strategic advantage, especially as other GCC countries develop their own potential for tourism. Although its neighbours can lay claim to greater numbers of hotels and shopping malls, the mountainous skyline of Muscat, temperate weather in Salalah and numerous historic sites across the country have put Oman in a favourable position to capitalise on a growing tourism base.
As a pillar of the government’s Vision 2020 plan for economic diversification, the tourism sector has achieved several big milestones in recent years. Revenue from international tourism has reached new highs, the peak khareef monsoon season in the south broke records for number of visitors, and thousands of new hotel rooms are under construction. Further, the sector’s contribution to overall GDP and employment has increased considerably. Continued growth is projected over the next 10 years.
The government’s tourism strategy targets all sub-segments of the industry – from leisure, luxury and cruise ships to eco-, cultural and educational tourism – offering attractive investment opportunities to service providers and developers operating within Oman’s integrated tourism complexes (ITCs). Although uncertainty over the execution of ambitious expansion plans, construction delays, and human resources challenges have affected growth, the government’s proactive promotion strategy, coupled with new investments in hotels, conference centres, training programmes and infrastructure, look set to help the sultanate reach its goal of attracting 12m visitors annually by 2020.
Within the government, the Ministry of Tourism (MoT) is the chief formulator of policy, promotion and development, with its development and investment arm, the Oman Tourism Development Company (Omran), acting as the driving force behind ongoing projects and workforce training. The MoT’s main objective is to drive sustainable growth in the sector, promoting the sultanate in a number of international markets while trying to increase the proportion of nationals employed in the industry. “Tourism is the key to economic diversification, infrastructure development and job creation. The entire country will benefit from development within this sector,” Khalid Al Zadjali, director of tourism events at the MoT, told OBG.
The industry has shown substantial growth in recent years. Inbound tourist numbers grew by nearly 50% to 2.06m in 2012, according to the MoT, up from 1.34m in 2011. According to the World Travel & Tourism Council (WTTC), the direct contribution of travel and tourism, comprising revenues generated by hotels, travel agents, airlines, restaurants and leisure industries, reached OR893.4m ($2.31bn), or 3.1% of GDP in 2012. This is forecast to rise by 7.6% to OR961.5m ($2.5bn), or 3.2% of GDP, in 2013 and to grow by 5.1% annually to OR158.12bn ($409.5bn), or 3.6% of GDP, by 2023.
Revenues from international visitors passed $1bn for the first time in 2012, according to the UN World Tourism Organisation (UNWTO), jumping from $996m in 2011 to $1.09bn. Meanwhile, UNWTO’s “Tourism Highlights 2013” report notes that other MENA countries posted only marginal growth in 2012, some showing a decline in arrivals due to regional tensions. Oman now has the fourth highest international tourism revenue in the MENA region, after the UAE, Saudi Arabia and Qatar, whose receipts in 2012 totalled $10.4bn, $7.43bn and $2.85bn, respectively.
Domestic tourism is also growing, especially in the southern Dhofar governorate, home to Salalah, Oman’s second-largest city and unique in the Gulf for its khareef, which runs from late June to mid-September. While temperatures in other parts of the Arabian Peninsula regularly climb as high as 50°C, Dhofar rarely exceeds 27°C thanks to the cool, wet monsoon season.
International passenger arrivals in Salalah grew by 14% year-on-year (y-o-y) between January and July 2013, reaching 36,600, while domestic passenger arrivals rose by 7.8% y-o-y in the first half of 2013, to 156,000. These figures do not include the 2013 khareef season, which started slowly but finished as one of the most successful in recent history, with 433,639 visitors between June 21 and September 21, representing a 23.5% increase from 2012, and the highest number of visitors since a peak of 450,511 in 2008. Of these, 66.3%, or 298,749, were Omanis. In fact, domestic tourism makes up the majority of tourism revenues in Oman, with the WTTC reporting that this segment generated 54.5% of the industry’s direct GDP contribution in 2012. Domestic spending is projected to grow by 12.2% in 2013, reaching OR862.9m ($2.23bn).
In June 2013 Omran announced that its investments in the tourism industry had reached OR600m ($1.55bn), spread between projects managed by the company in various governorates. Investment opportunities abound, both in the construction and services sub-segments: according to the Public Authority for Investment Promotion and Export Development, there are investment opportunities in tourism worth an estimated $20bn, primarily in the marketing, operating, and management segments. Special regulations within a number of ITCs permit foreign ownership, which is an attractive prospect for hoteliers hoping to enter the market.
The industry has seen strong growth in capital investment. According to the WTTC, Oman’s tourism industry is expected to have attracted capital investment of OR3.65bn ($9.45bn) in 2012. This figure is forecast to rise by 9.9% in 2013, and grow at an annual rate of 6.4% to OR7.45bn ($19.3bn) in 2023. The WTTC estimates that tourism’s share of total national investment will increase from 5.2% in 2013 to 6.5% in 2023.
Growth in the industry is led largely by investment in, and a greater supply of, hotels. The total number of hotels in Oman rose from 248 to 258 between 2011 and 2012, according to the MoT, with the total number of beds increasing 4.1% to 20,061 in 2012, up from 19,265 in 2011. The number of guests at four- and five-star hotels in the sultanate increased by 8.8% y-o-y between January and June 2013, reaching 301,346 guests compared to 277,070 in the same period in 2012. Over 3000 new hotel rooms are due for completion by the end of 2014, with room capacity slated to grow by 5.3% annually until 2016. The country currently has 5331 rooms under development, 7% of the GCC’s expected supply, and the government hopes to see a total of 26,492 rooms by 2015.
New hotels will have a big impact on the tourism industry. According to Kumar Bulathsinhalage, general sales manager at Oman Hotels and Tourism Company based in Muscat’s Al Falaj Hotel, rooms are in short supply, especially during high season. “We are already fully booked from November to February. Currently Al Falaj has 100 rooms running, and only two rooms still available,” Bulathsinhalage told OBG in September 2013.
A number of new facilities opened in 2013, including the 68-room Golden Tulip Khasab Resort, the 74-room City Centre Hotel in Seeb and the 40-room Musab Al Alawi Hotel Apartments near Muscat International Airport. Large-scale industrial developments at Duqm have brought with them a number of new hotels, including the 218-room Crowne Plaza Duqm, which is one of the city’s first luxury accommodations, and Carlson Rezidor’s Park Inn by Radisson Hotel & Residence, which is due to open in early 2014.
Hotel operators are rushing in to meet fresh demand. They are building new hotel rooms in the hundreds, many set to open in 2014, including the Holiday Inn Muscat Airport, with 187 rooms, and the Muscat Grand Millennium Hotel, which will be the sultanate’s first alcohol-free five-star hotel. The Coral Plaza Qurum, EWA Mandha Hotel, and Swiss-Belinn Ghubrah Muscat are together scheduled to add 363 rooms in 2014.
Other major hotels and resorts slated to open between 2014 and 2017 include the Missoni Sifah and the W Hotel Muscat, each with 250 rooms; Kempinski Hotel: The Wave, with 309 rooms; the InterContinental Blue City Beach Resort, with 248 rooms; and the Shaza Salalah, with 200 rooms and 70 villas. As an increasing number of visitors choose Oman for business and leisure travel, hotel revenues are rising in kind. According to the MoT, revenues at four- and five-star hotels grew 13% y-o-y in the first eight months of 2013, rising from OR82.51m ($213.7m) in January-August 2012 to OR93.22m ($241.44m).
Rooms themselves are getting more profitable. The UNWTO found that revenue per available room (revPAR) in Muscat and Salalah grew by 1% and 12%, respectively, in 2012. According to the June 2013 “Hotel Benchmark Update” published by Ernst & Young, Oman’s hotels continued to perform well in the first half of 2013. In Muscat, occupancy rates rose by 2% y-o-y between June and January to an average of 73%, room rates grew by 1.7% to an average of $207 per night, and room yield grew by 5.7% to $155.
According to Bulathsinhalage, however, average overall occupancy rates can be misleading. Occupancy rates in Muscat stay near 100% during the November to February high season, but this high demand is offset by the city’s long, hot summer season, when occupancy at some hotels tends to average between 27% and 30%. Government figures support these claims: the National Centre for Statistics and Information found that annual occupancy rates averaged 46.9% in 2012, an 8.1% increase over the 2011 average of 43.4%. “For three to four months, your business is maxed out, every hotel in the city is full. But you can’t run on those profits for the other eight months of the year,” said Bulathsinhalage.
At the InterContinental Hotel in Muscat, general manager David Todd argues that some hotels are affected by the low season, but five-star outfits with a steady flow of business guests do not feel the effects as strongly. “In downtown Muscat, where the core business hotels are located, we see a relatively steady occupancy rate of about 70% throughout the whole year,” Todd told OBG.
As part of an effort to boost overall capacity and add to the sultanate’s supply of hotel rooms and visitors, the government has launched a number of large ITC developments that encompass hospitality, retail and recreational activities. Major ITC projects currently under way include Jebel Sifah, a fully integrated town south of Muscat; The Wave, a luxury housing project in Muscat proper; Salalah Beach in the south; the City Walk in downtown Muscat; As Sodah Island; and Salam Yiti, a $1.7bn project being developed by Sama Dubai between the Al Hajar Ash Sharqi Mountains and the Gulf of Oman.
The biggest of these is Salalah Beach in the south, a 15.6m-sq-metre beachfront development that will include freehold properties, villas, five-star hotels, golf courses, retail space, restaurants and a marina. Muriya Tourism Development is leading the project, of which 30% is owned by Omran and 70% by Orascom Development Holding, a Switzerland-based investment firm.
Although the government has banned foreign property ownership generally, ITCs fall under special regulations, offering foreigners 100% ownership, zero property and income taxes, and, at select locations including Jebel Sifah, Muscat Hills, Barr Al Jissah and Salalah Beach, rights to Omani residency upon purchase.
ITCs offer a new experience to holidaymakers in the sultanate, says Bahaa Hefzalla, the marketing director at Muriya, the entity responsible for developing Jebel Sifah, Salalah Beach, As Sodah Island and City Walk. “It’s a lifestyle we’re selling, more than properties or hotels, and it’s a lifestyle which is accessible to everyone, from high-net-worth individuals to retirees,” he told OBG.
ITCs have seen steady progress so far. In June 2012 the 65-room Juweira Boutique Hotel opened in Salalah Beach, with marina apartment blocks finishing construction shortly afterwards. Jebel Sifah recovered from a flood in 2010, with the Sifawy Boutique Hotel opening in 2011 and the marina opening in 2012. Villa and apartment handovers have been ongoing since 2012.
However, delays caused by the global financial crisis have affected ITCs adversely, with developers pulling out as the crisis took hold and holding back a number of projects. “The crisis slowed construction a bit,” said Hefzalla. “It hit Oman because developers from neighbouring countries pulled out. We’ve slowed down, but even with the crisis, we’ve continued to grow.”
Recovery has indeed picked up. Within Muriya’s network of ITCs, Jebel Sifah will welcome the Banyan Tree Hotel and Resort, Missoni Hotel, and Four Seasons. The Salalah Rotana Resort, set to open its 400 rooms on Christmas Day as of mid-December 2013, will more than double the number of rooms available in Salalah. The 391-room Mövenpick Hotel and ClubMed are among the five-star developments planned at Salalah Beach.
Further supporting the sustainability of the industry are large planned infrastructure upgrades, including a number of road projects that will cut down on traffic times and improve safety. Muriya has helped travellers bypass the 60-minute drive from Muscat to Sifah by introducing a water taxi service, while the government’s planned road upgrades between Yiti and Sifah, including the construction of a modern carriageway complete with lighting, will be an added draw for ITCs located outside city centres. “When the Sifah upgrade is complete, for example, it will reduce travel time to 30 minutes. Small changes like these go a long way to enhancing our offerings,” Hefzalla said.
Airport upgrades may have the biggest impact. With up to 2.6m international passenger arrivals, 2012 was a record year for Muscat International Airport, as the country saw an increase of 8% in passenger arrivals over 2011. An expansion of the airport has been under way since 2008, including construction of a new terminal with a floor space of 334,995 sq metres and an initial capacity of 12m passengers per year. The work is likely to finish in 2015, with other facilities such as a second runway set to be operational in late 2014. According to Vic Allen, acting CEO of Oman Airports Management Company, the new Muscat airport will allow the sultanate to easily meet, and even exceed, its visitor targets. “If the new airport were operational now, I believe that Muscat International Airport would have 12m passengers by 2015. It will have an enormous impact on the tourism industry here,” Allen told OBG.
Outside Muscat, too, infrastructure upgrades are moving forward. The khareef season, along with Salalah’s reputation as a green oasis with an agreeable climate, has put increasing pressure on Oman’s transport networks. During the 2013 khareef, for example, 370,836 people travelled overland to Salalah, 55,746 flew via Muscat, and 7057 flew directly from international destinations. To cope with this mounting pressure on its infrastructure, work is under way on the new Salalah Airport. Projected to begin operation in 2014, it will have an annual passenger capacity of 1m.
Highways in Dhofar are also improving, as the government rolls out ambitious land transit upgrades. These include a OR104m ($269.36m) paving of an 87-km stretch of highway between Hasik and Al Shuaimiyah, scheduled for completion by 2014, and a OR15.8m ($40.92m) paving of a 62-km highway between Aidem and Heroib. Upcoming endeavours include constructing a 36-km dual carriageway between Taqah and Mirbat, and a rehabilitation project on 125 km of highway running between Mirbat and Hasik.
The meetings, incentives, conferences and exhibitions (MICE) segment has grown as the sultanate moves to boost revenues from business travel and maintain visitor numbers through the low season, despite relatively limited space. According to the WTTC, spending on business travel accounts for 35.2% of overall tourism revenues, and is expected to have grown by 12.5% in 2013 to OR560.2m ($1.45bn), more than double the rate of return from leisure travel. Business travel spending is projected to rise further at an annual 4.2% until 2023, to a total value of OR843.3m ($2.18bn).
The Oman International Exhibition Centre (OIEC), built in 1985 and the only facility in the sultanate of its kind, is a 15,000-sq-metre centre with 12,000 sq metres of exhibition space. The OIEC has maintained steady growth for the past three decades, hosting 2m visitors and an average of 35 to 40 events annually. “Exhibitions in Oman are increasing, and the new airport will bring in yet more business travellers. We’re getting a handful of new events each year, and we forecast that growth to continue into 2014 and 2015,” Sakhar Al Manthari, OIEC sales and marketing manager, told OBG.
The MICE segment is forecast to see substantial growth as the government moves closer to opening the $1bn Oman Convention and Exhibition Centre (OCEC) in Muscat, a clear push to enhance development in the business travel market. With tiered auditorium seating for 3200 people and more than 22,000 sq metres of exhibition space, the OCEC will include a five-star hotel, two four-star hotels, one three-star hotel and serviced apartments, offering 1000 hotel rooms within the precinct, and a shopping centre. “MICE is not just exhibitions and business meetings. To tackle the business tourism industry, you have to be prepared from the infrastructure point of view,” said Al Zadjali.
The international firm AEG Ogden will manage and promote the new centre, due to open in 2016. In June 2013, Omran announced it had awarded a contract worth OR78m ($202m) to Carillion Alawi for phase two construction of OCEC’s exhibition halls, car park facilities and a district cooling plant. Construction of phase two is expected to wrap up in early 2015.
The government and private sector are working hard to draw in tourists looking for a range of experiences, including outdoors enthusiasts, culture seekers, and those working in health and education. “Tourism is based on creating a destination for consumers, Michael F Lenarduzzi, CEO of The Wave, told OBG. “The opportunities lie in providing plenty of options. This will lead to steady and sustainable growth.”
A number of major cultural attractions have helped the sultanate lure more visitors in recent years. Oman is home to a sprawling archipelago of forts and castles, which draw in thousands of tourists with their well-preserved offerings, including the Bahla Fort, a UNESCO World Heritage Site offering visitors traditional souks (open-air markets), old alleys, ancient mosques and a 13-km wall dating back to the pre-Islamic era. The government also has plans to construct an archaeological park and a museum at the recently discovered Friday Mosque in Qalhat, near Sur. The impact of cultural tourism is already being felt: visitors to Oman’s forts and castles increased 5.3% between 2011 and 2012,