Encompassing some of the most spectacular sites in Arabia, a fascinating ancient culture and a worldwide reputation for hospitality, the sultanate of Oman has a lot of advantages as a leisure destination. At the same time, the country is an important regional economy with a thriving business sector, which has strengthened its position as a centre for meetings, incentives, conferences and exhibitions (MICE). Oman is also regarded as a place of stability and impartiality in MENA, making it an ideal gathering ground. Unsurprisingly, then, the tourism sector continues to flourish. Despite the general economic downturn in the region, robust growth has been logged over the last few years and more is promised.
There are challenges, of course, such as matching that expansion with supply and developing auxiliary infrastructure for the country’s increasingly popular sites. Human resources, too, continues to be an issue, with the task of attracting young and talented Omanis to the industry an ongoing one. The next couple years will nonetheless see expansion in the sector, with additional hotels, vacation apartments, MICE events and more planned for Oman.
The year 2018 has already seen success, with the opening of the new Muscat International Airport, phase two of the Oman Convention and Exhibition Centre and a boom in visitors to one of the country’s star attractions, the city of Salalah and its annual khareef (monsoon) season. One trend to watch going forward is the subtle transformation occurring in the leisure segment, away from the high-priced, more exclusive destination of the past towards one with a wider reach and more affordable accommodation.
Sector Structure
The main government institution for the industry is the Ministry of Tourism (MoT), which is currently headed by Ahmed bin Nasser Al Mahrizi. The MoT has the mandate of developing and implementing sector strategy and regulations, while also issuing licences for tourism-related activities and monitoring compliance. The ministry also operates promotional campaigns domestically and abroad, and represents the industry within government.
Role of Omran
Another key body is the Oman Tourism Development Company (Omran), which was established by government mandate in 2005, and was aimed at separating the roles of legislative and executive management between the MoT and Omran, with the latter to be responsible for developing the country’s tourism infrastructure. The MoT has already transferred a number of assets and projects to Omran, such as the Al Hoota cave complex and Al Wafiyah rest area in Ad Dakhiliyah Governorate, the Scientific Centre in Raz Al Jinz, the Al Ashkharah rest area in Ash Sharqiyah South Governorate and the Salalah rest area in Dhofar Governorate. The plan is for Omran to manage all tourism real estate currently under the auspices of the MoT.
Omran’s board of directors includes the minister of tourism, the deputy chairman of the Supreme Council for Planning – who is also the current minister of commerce and industry – the minister of finance, the minister of housing and the minister of transport. This government team oversees the corporation, which is the master developer of a wide range of tourism, heritage and urban projects, including the Alila Jebal Akhdar hotel, the W Hotel Muscat, and the Oman Convention and Exhibition Centre (OCEC). Omran also forms partnerships with major regional developers on large-scale projects such as the Mina Sultan Qaboos Waterfront and Madinat Al Irfan mixed-use complexes.
Another organisation pertinent to the sector is the Oman Airports, which is a government-owned company responsible for the management and operation of the sultanate’s civilian airports. Cruise ships, meanwhile, largely dock at Muscat’s Port of Sultan Qaboos or at the Port of Salalah, which are managed by Marafi of state-run holding company Aysad and Salalah Port Services Company, respectively. Land access – from the UAE or Saudi Arabia – is overseen by the Royal Oman Police.
Tourism Strategy
The MoT’s primary long-term vision is laid out in the National Tourism Strategy 2040 (NTS). Launched in early 2016, the NTS sets a number of key targets for the sector. These include boosting the number of annual arrivals from the 2015 total of 2.6m to 11.7m by 2040 and growing the sector’s share of GDP to over 6% – up from 2.6% when the plan began. Achieving these goals is likely to take a multifaceted approach. “The tourism industry should be one of Oman’s major economic resources and contributors to GDP. Oman has a lot to offer in terms of history, culture, landscape and infrastructure. However, we need increased effort from various players within the industry, among them hotels, tour operators and the ministry of tourism, to position the country as a tourist destination,” Osama Maryam, CEO of Al Hosn Investment Company, told OBG.
The NTS requires a planned investment of around OR20bn ($51.9bn) over its lifetime, with the bulk of this – 85-90% – to come from the private sector. While promotional activities are included in the budget, infrastructure receives the majority of funds. The strategy envisions a significant increase in the number of hotel rooms available and advocates for a more uniform spread of facilities around the sultanate, rather than simply concentrating on Muscat and a handful of other popular cities. Some 80,000 new keys are planned for Oman over the period – 33,373 hotel rooms, 29,287 vacation home rooms and 17,262 rooms in integrated tourism complexes – but the share of all lodgings located in Muscat should drop from 53% of the total in 2016 to 30.8% by 2040.
Omanisation
One of the principle rationales for the government’s support of the NTS is its potential for job creation. The number of people employed in tourism, either directly or indirectly, when the plan began in 2016 was 89,413, and it is hoped that another 500,000 positions will be added to this figure through to 2040. This will make the sector a major employer, with the expectation, too, that Omani nationals will be a large part of the workforce.
Travel and tourism – as with all industries in the sultanate – is subject to the country’s Omanisation policy, meaning that a set percentage of native Omanis are required in any tourism company’s workforce. Administered and supervised by the Ministry of Manpower (MoM), previous targets for Omanisation were established for employment in five types of sector businesses: airlines; tourist restaurants; travel agencies and tour operators; hotels (those with three to five stars); and car rental companies.
In 2005 the MoM set targets for 2010 ranging from 85% Omanisation in hotels to 95% at travel agencies and tour operators. These were not achieved, however, with data from May 2010 showing a range of 36% in tourist restaurants to 60% at airlines. The Implementation Support and Follow-up Unit (ISFU), which is part of Tanfeedh – a government outfit that links diversification strategies for the tourism, manufacturing, fisheries, transport and logistics, and mining sectors – suggested in its latest annual report that the level of Omanisation in the tourism industry as a whole stood at approximately 35.1% in 2017. This was higher than the 23% in manufacturing and 14.1% in logistics, but still some way off the target.
To address the low rate of nationals in tourism, the MoM held a meeting in October 2018 with a range of sector professionals to discuss new targets for Omanisation and a plan to raise performance. However, some firms in the sector have achieved quite positive results already: Oman Air, for example, reported a 67% Omani workforce in 2017. Pressure on young Omanis, in particular, to find jobs in the private sector has been growing, given the cloudier economic climate of recent years and fewer traditional sources of employment for nationals now available. The years ahead may therefore see a shift in attitude among many younger Omanis towards seeking employment with private firms.
Wide Tourism Portfolio
However, new entrants to the labour force have an increasingly vast range of exciting attractions to work at. Indeed, travel company Lonely Planet placed Oman on its worldwide list of the top-10 places to visit in 2017. In the north of the country, the exclave of Musandam Governorate has 2000-metre-tall mountains that tumble straight down into sea fjords, with diving, boating and – in the winter months – climbing all possibilities for tourists. Khasab is the territory’s central port city, connected to the rest of the sultanate by both sea and air, while roads passing through the UAE also link it to the rest of the country.
The northernmost governorate of the main part of the country is Al Batinah. This land stretches along the Gulf of Oman and includes the busy and historic port of Sohar, along with a maze of villages and towns in the mountainous interior. To Al Batinah’s south is Ad Dakhiliyah Governorate, which includes the Jebel Akhdar mountain range and Nizwa, the ancient capital, with its UNESCO-protected fort. To the west and also below Al Batinah is Ad Dhahirah Governorate, home to caravan routes and world heritage sites such as the Bat Tombs. The small Al Buraimi Governorate that broke from Ad Dhahirah in 2006 centres on the oasis city of the same name, shared with the UAE city of Al Ain.
Of course, this northern section of the country also includes the capital, Muscat, with its historic forts and palaces, opera house, souqs (marketplaces) and modern conveniences. The capital also hosts the primary gateways to the country: the international airport and cruise terminal.
South of Muscat Governorate, past the port city of Sur and the famous turtle beaches around Ras Al Hadd in the Ash Sharqiyah Governorate, Oman has a fairly empty middle – the large governorate of Al Wusta. This territory has the Arabian Sea to the east and the Empty Quarter desert in its west. In recent years, however, the governorate has seen the emergence of a brand new port city – Duqm – which has also developed its own tourism sector.
The southernmost governorate is the equally large Dhofar region, which is home to the famous khareef season. Touched for a few weeks during the summer months by the tail end of the Indian Ocean monsoon, the area is transformed into a lush, green paradise in stark contrast with the Empty Qurater, which can be reached just a few miles further inland on the other side of a major mountain range. Dhofar’s capital is Salalah, which has its own year-round attractions too, including beaches, markets and a range of hotels and entertainment facilities.
Building GDP
These offerings have been known to a generally small group of international tourists for some time now, but their popularity has been growing in recent years. In consequence, visitor numbers have increased, yet the sector’s contribution to the sultanate’s GDP has not seen major expansion. Data from the National Centre for Statistics and Information (NCSI) for the first quarter of 2018 show hotels and restaurants as contributing OR97.5m ($253.2m) to GDP at market prices, up from OR90.9m ($236.1m) in the first quarter of 2017. With total GDP standing at some OR7.034bn ($18.3bn) in the first three months of 2018, these industries represented roughly 1.4% of the entire economy, fairly similar to the proportion at the beginning of 2017.
For the sector as a whole, the NCSI states that tourism GDP dropped slightly from 2.8% of the total in 2016 to 2.6% in 2017; however, the direct value added of the sector rose from OR714.9m ($1.86bn) in 2016 to OR728.3m ($1.89bn) the following year. The World Travel & Tourism Council (WTTC) also weighed in with its “Travel and Tourism Economic Impact 2018 Oman” report.
The organisation estimated that Oman’s tourism sector directly accounted for 3.2% of total GDP in 2017, while forecasting that its contribution would rise to 4.3% of total GDP by the year 2028. When indirect contributions were added, the figure was placed at 6.6% of GDP in 2017, rising to a predicted 8.9% in 2028. The WTTC also estimated that the sector directly accounted for 3.4% of total employment in 2017, with this to rise to around 4% in 2028. When indirect jobs were accounted for, the respective figures were 6.6% and 8.2%.
Ranking
Put in a global perspective, the WTTC report ranked Oman’s travel and tourism sector 92nd in the world in terms of the absolute size of its overall contribution to GDP, while it ranked 28th in terms of its 2018 growth forecast and 18th when considering its long-term growth forecast for between 2018 and 2028. The report also looked at types of travel and who spent money around the country, noting that nearly 73% of the sector’s contribution to GDP in 2017 stemmed from leisure travel, while 27% came from business trips. Some 70% of the total spend was made by foreigners and 30% by local residents.
Arrivals
One important illustration of sector growth is visitor numbers. This figure rose from 1.9m in 2013 to 2.2m in 2014, 2.6m in 2015, 3.2m in 2016 and 3.3m in 2017, according to the NCSI. The organisation also reported that some 2.3m visitors came to the sultanate between January and September 2018. Statistics for the khareef season show that over 826,000 people went to Salalah between June 21 and September 21, 2018, which represented a rise of 28% on the same period of the previous year, when there were 644,900 visitors.
Visitor numbers to Oman witnessed average annual growth of 14% between 2014 and 201 and are expected to increase by 13% per year, on average, from 2018 to 2021. In terms of source markets, a total of 58% of visitors came from the Middle East, 20% from Asia Pacific, 18% from Europe, and 2% each from Africa and the Americas.
Figures from the MoT show that the highest number of visitors from any single country in 2017 came from India, at 321,161 – up from 297,628 the year before. The UK was the second country for arrivals at 143,224 – up from 137,170 in 2016 – and next came Germany with 102,203 visitors compared to 72,566 the year before. These figures are reflected in the January to September 2018 period as well. The other five nations of the GCC made up the largest group of arrivals at 1.18m out of 2.3m, while India, the UK, Germany and Pakistan followed with 252,265, 106,155, 96,314 and 66,612 visitors, respectively.
Flying In
The majority of international travellers arrive by air, and there are five main airports within the sultanate: Muscat International Airport (MIA), Salalah International Airport, Khasab Airport, Duqm Jaaluni Airport and Mukhaizna Airport. The first two cater to international traffic, while Khasab, in the Musandam exclave, and Duqm are currently only served by Oman Air domestic flights. Mukhaizna Airport serves the Mukhaizna oilfield.
According to the NCSI, some 4.65m international passengers flew into MIA in the first eight months of 2018, up from 4.19m in the same period of 2017. The number of international departures was also higher in 2018, at 4.7m compared to 4.19m. Domestic arrivals and departures were both down year-on-year. Salalah, meanwhile, saw international arrivals fall from 206,823 to 158,009. Domestic passenger arrivals increased, though – from 326,038 to 331,530 – suggesting that Muscat is the primary airport for international visitors going on to Dhofar.
MIA Upgrade
MIA was recently revamped, with the opening of a new passenger terminal in March 2018. The facility, which cost $1.8bn, has the capacity to handle 40 flights per hour, and includes 86 check-in counters, 40 gates, 29 aircraft stands with air bridges and a new control tower. “With the opening of the new airport, there will be a definitive surge in the inflow of tourists, which in turn will boost direct and indirect economic contributions from the tourism sector,” Ajay Ganti, CEO of Al Seeb Technical, told OBG. The first phase of the major upgrade to the airport began in 2014 with work on a new runway, civil aviation building and tower, while future phases aim to further enlarge capacity.
The new terminal currently has a 12m-passenger capacity – up from 1.2m at the old terminal – but future upgrades are set to increase that upper limit to 24m, then to 36m and ultimately to 48m, according to media reports, although no timeline was given for these. The old airport, which had been in operation since the 1970s and was known as Seeb International Airport up until 2008, is set to be re-purposed for low-cost carrier (LCC) operations.
Salalah International Airport, meanwhile, opened in 1977 but did not begin international flights until 2003, when it launched its first service to Dubai. In 2015 a new passenger terminal was completed, with capacity for 2m people, in addition to a new 4-km-long runaway capable of serving the largest aircraft available. These upgrades cost over OR300m ($779.1m), and in September 2018 the facility also completed work on a new cargo terminal. This is part of a larger initiative by the Oman Aviation Group to increase cargo handling in the sultanate to approximately 730,000 tonnes per year by 2030, up from 210,000 tonnes annually in 2017.
In terms of airlines, Oman saw its first LCC launch in January 2017, when SalamAir began commercial operations out of MIA. SalamAir started flying with three leased Airbus A320s from Chile’s LATAM Airlines, and has plans to operate a fleet of 12 aircraft by 2020. According to the operator’s website, the line provides a total of 116 flights per week to seven destinations. The airline is owned by the Muscat National Development and Investment Company, also known as ASAAS, whose shareholders are an alliance of government pension funds and private investors.
Oman Air
The main airline in the sultanate, however, remains the national carrier Oman Air. Rated four-star in the Major Regional Airline category by the Airline Passenger Experience Association in October 2018, it was also voted Best Airline in the Middle East, Africa and Europe at the Seven Stars Luxury Hospitality and Lifestyle Awards that same month.
The airline is currently working to widen its portfolio of international routes, announcing in September 2018 that it would be adding Athens to its daily flight portfolio as of June 2019, along with other destinations planned for that year. The airline’s expansion programme has the goal of offering 60 destinations by 2022 to be serviced by around 66 aircraft – up from 51 in September 2018. That month Oman Air’s fleet consisted of four Boeing 787-8s, four Boeing 787-9 Dreamliners, six Airbus 330-300s, four Airbus 330-200s, five Boeing 737-900s, 21 Boeing 737-800s, four Embraer 175s and three Boeing 737 MAX 8s. In October 2018 local media reported that the airline would be receiving two more Boeing 787-9 Dreamliners by the year’s end – one of which will feature eight private first-class suites – and nine additional Boeing 737 MAX 8s are to be delivered during 2019.
According to the airline’s 2017 annual report, the carrier boosted its number of flights by 8% that year – from 30,978 in 2016 to 33,491 – while passenger numbers rose 11% to nearly 8.6m. Average load, meanwhile, remained at around 74%. The report further states that the airline contributed approximately OR600m ($1.6bn) to the sultanate’s economy in 2017, up from OR420m ($1.1bn) in 2014 and OR333 ($864.8m) in 2011. This growth was achieved despite stiff regional competition, with the firm’s strategy of continuing expansion aiming to establish Oman – and MIA in particular – as an international air transit hub.
MICE
With many visitors coming to Oman for business purposes, the sultanate is growing its offerings in the MICE tourism segment. A major step forward in this regard was made in early 2018, with the opening of the second phase of the OCEC. Located just 4 km from MIA, the centre hosts 22,396 sq metres of uncolumned exhibition space, two tiered auditoriums capable of seating 3200 and 450 people, a grand ballroom that can accommodate up to 1200 guests, 20 meeting rooms varying in size from 25 to 360 seats, a VIP pavilion, 10 hospitality suites and parking space for up to 4000 vehicles. Its two main halls can also be combined to provide theatre-style space for as many as 10,000 people.
Beyond its various event areas, the OCEC is also a major triumph of sustainable construction, as it is LEED certified by the US Green Building Council. The centre is part of a complex that includes JW Marriot and Crowne Plaza hotels, a business park, and a nature reserve that surrounds the whole venue with wetlands. The complex – Madinat Al Irfan – is owned by Omran, while the OCEC is managed and operated by AEG Ogden, an Australian venue organiser.
The landmark events centre is just one part of an initiative under the NTS to develop the sultanate’s MICE profile, with this also the main job of the Oman Convention Bureau (OCB), which was established in 2016 and is supervised by the MoT. The OCB crafts global promotion programmes for the segment, which have been aided in recent times by improved international links in the capital, such as the MIA upgrade. Muscat is roughly a seven hours’ flight from around 50% of the world’s population, with the airport now a destination for 29 international airlines. The capital is also only an hour away from most of the GCC’s major cities, and Oman’s position of neutrality in many regional disputes makes it an ideal ground for bringing businesspeople together.
Integrated Tourism
While Madinat Al Irfan is the sultanate’s largest mixed-used development at present, the country is also home to several other real estate projects with a travel and tourism aspect, called integrated tourism complexes (ITCs). Such developments include high-end hotels, marinas, entertainment venues, shops and restaurants, but what distinguishes these is that their residential component of villas, townhouses and apartments are available for freehold purchase by non-Omanis, who can then obtain residency rights.
Al Mouj (formerly known as The Wave) was one of the first ITCs in the capital, with Muscat Hills following. The Shangri-La/Barr Al Jissah ITC and the Jebel Siffah Boutique Hotel are two other projects under the programme, along with Saraya Bandar Jissah and, in Dhofar, the Salalah Beach Resort. In January 2018 work commenced on a $1bn ITC in Quriyat, which will expand to include one three-star, one four-star and one five-star hotel, a golf course, water park and some 3000 residential units. Demand for property – often for holiday homes or residences of more affluent expats – has reportedly been increasing in recent times. Media reports in June 2018 stated that the number of GCC nationals which own properties in Oman increased by 9% in 2017. The ITC concept aims to boost foreign investment in the country, while also securing a strong and stable inflow of guests for hospitality establishments built within the complexes. The gated nature of the ITCs also helps address one long-standing concern of the authorities – that tourism should not be allowed to develop in a way that undermines traditional culture.
Outlook
In the past, Oman has tended to market itself to wealthier foreigners interested in an immersive cultural experience, but today there is a movement to broaden the appeal with the introduction of relaxed visa regulations for generally less-wealthy markets in Eurasia (see analysis), along with accommodation that fits a wider range of budgets. This pivot is still in its early days, and a number of reasons remain as to why Oman first emerged as a luxury travel spot. “Oman is best positioned as a high-end destination for various reasons, not least of which is the rial’s peg to the dollar and the impact it has on local prices,” Firas Matraji, CEO of luxury development Barr Al Jissah, told OBG. Still, in the coming years the country will likely increasingly work to engage with a wider range of source markets.
Development of the infrastructure around popular venues is also likely to be a focus going forward, as destination management remains fairly underdeveloped – particularly beyond Muscat. In the northern region, the capital remains the hub for excursions, with relatively few visitors staying outside Muscat and Nizwa. In the south, Salalah dominates the market. Spreading out from these bases is a primary goal of the NTS, thus a bloom of major developments in secondary cities is anticipated in the years ahead.
Meanwhile, travel and tourism growth will largely depend on the overall economic well-being of the region – as well as on its political stability – with signs in 2018 signalling that the recent regional economic downturn could be bottoming out. With GCC travellers such a significant part of the Omani tourism market, this is welcome news. At the same time, growth of MICE in Muscat looks assured with the OCEC, which is well-timed for economic resurgence.
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