Diversifying the economy and reducing reliance on revenue from the hydrocarbons industry is a critical component of Oman Vision 2040. The government has identified tourism as one of the key sectors that can deliver this objective and help to create a more resilient and sustainable economy. The sultanate’s tourism development plan encompasses updating the legal framework, modernising tourism laws and their executive regulations, implementing an effective governance system for the industry, and renewing the cultural heritage law and associated structures which grant incentives for investment projects. Oman aims to enhance its tourism offering by differentiating itself in an increasingly competitive region.
Recovery
As of August 2022 the sultanate had attracted $4.4bn of the $7.8bn in tourism investment being targeted between 2021 and 2023 as part of its development strategy for the sector. The government aims to increase the sector’s contribution to GDP from 2.4% in 2021 to 5% by 2030 and 10% by 2040. Another target is to raise the number of visitors to 11.7m by 2040 with more than $51bn in investment. The increase in investment is expected to generate more than $22.5bn annually in tourism revenue.
Oman’s plans to boost tourism come at a time when the GCC’s tourism and hospitality is on an upward trajectory, recording 74.8% growth and revenue totalling $26.3bn in 2022, according to Dubai-based investment bank Alpen Capital. The region’s tourism industry is expected to record a compound annual growth rate (CAGR) of 6.6% between 2022 and 2026, to reach $34bn. Like Oman, other GCC governments have adopted plans to increase tourist arrivals and diversify their tourism offerings, increasing regional competition in the sector. According to Alpen Capital, Oman’s tourism and hospitality industry is on track to record a CAGR of 6.3% between 2022 and 2026, which would be the third-fastest growth rate. In comparison, Saudi Arabia is expected to record a CAGR of 8%, Kuwait is forecast to achieve 7.1% growth, while tourism revenue for the UAE and Bahrain is expected to grow by 5.5% and 2.9%, respectively. Growth in Qatar is likely to moderate after the 2022 FIFA World Cup, with a CAGR of 4.3% between 2023 and 2026. To help distinguish itself as a viable international destination, the sultanate has undertaken reforms to make the country more friendly to business and leisure tourism.
Reform Process
The government has taken several decisions to boost investment in the sector and enhance and diversify the tourism offering. In January 2021, as part of this strategy, all tourism properties owned by the Oman Investment Authority (OIA) were transferred to the Oman Tourism Development Company (Omran), the country’s tourism development arm. The measure came shortly after Omran became a subsidiary of the OIA. The shift is part of the government’s investment policy established in the 10th five-year development plan for 2021-25. Additionally, to reduce unnecessary spending, the OIA launched the Rawabet programme in 2020. It aims to enhance the corporate governance of all government-owned organisations and link their policies and systems with those of the OIA. It will also help align them with Vision 2040.
Omran’s new framework is based on four pillars: tourism, development, hospitality and development partnerships. The company owns, administers and invests in numerous tourist assets across the country, including 26 hotels and resorts with over 3800 rooms, ranging from luxury hotels and beach resorts to conference hotels and city-centre business hotels, as well as heritage and environmental destinations.
In August 2022 the Ministry of Heritage and Tourism updated a regulation issued in November 2021 on the construction of hotel establishments. The regulation aims to improve tourism development in Oman by enhancing the quality and efficiency of the hospitality sector; offering accommodation options for citizens, residents and tourists; and increasing the number of establishments that can create job opportunities and raise the sector’s contribution to GDP. The number of rooms in Oman already exceeds the target set by the tourism strategy, with 30,203 rooms in operation in 2022 against a target of 26,314 rooms by 2025. While this indicates progress in attracting investment and executing projects, it also raises a potential risk if demand does not keep pace with supply. For this reason, policymakers are working to develop new markets to sustain demand throughout the year.
Niche Markets
One segment targeted for growth is luxury tourism, which requires product development, intense marketing, brand promotion and personalised service to attract high-spending visitors. Prior to the pandemic, the average daily expenditure by tourists increased from OR140 ($360) in 2015 to OR200 ($520) in 2019, as efforts by the authorities to attract more affluent tourists began to pay off.
With global travel on an upward trajectory after the pandemic, 31% of international travellers planned to spend more in 2023 than in 2022, according to a report by the World Travel & Tourism Council and Trip.com Group. The report projected that global luxury hotel sales would reach $92bn by 2025, up from $76bn in 2019. Prospects are being further enhanced by the end of China’s strict “zero-Covid” policy in late 2022, which should see the world’s largest pre-pandemic outbound tourism market return to growth in 2023.
Oman hopes to capture some of this high-end demand through developments such as Nikki Beach Resort & Spa Muscat. The luxury development in Yiti Bay is being developed through a partnership between Omran and the international luxury lifestyle and hospitality brand, Nikki Beach Global. It is scheduled to open in the third quarter of 2023.
Additionally, the sultanate has laid out plans to establish 13 tourism-related investment clusters where entertainment, leisure and natural attractions would help to draw visitors to different parts of the country. Although progress on some of these projects stalled due to the pandemic, development of five of these clusters is progressing. In December 2021 the Environment Authority offered three nature reserves as investment areas to specialised institutions and companies that manage ecotourism projects. This initiative comes as part of the agency’s plans to obtain financial returns to sustain the local economy in fields focused on research and study on nature, plants and animals. The country has 25 nature reserves that receive an average of 15,000 tourists annually.
Major Projects
In 2022 Omran launched the first phase of the Yiti Integrated Tourism Development project, in partnership with UAE-based Diamond Developers. The $1bn fully integrated complex aims to achieve social and economic development through sustainable tourism projects that attract foreign direct investment in line with Vision 2040 and the National Tourism Strategy 2040.
Scheduled for completion in 2025, the 1.5m-sq-metre tourism complex will feature 1657 eco-friendly and energy-efficient residential units, including 300 villas. In addition, the development will house shops, schools, an equestrian centre and a lab focused on green technology. The complex will be fully powered by solar and biogas upon completion, and it will grow much of its own vegetables, recycle its water and waste, and have car-free zones where only autonomous shuttles are permitted. The project will support Oman’s goal of reaching net-zero emissions by 2050. Much of its appeal is based on the natural landscape, comprising mountains and the sea. The first phase of the Yiti Integrated Tourism Development project is expected to generate 900 direct and indirect jobs, open avenues of cooperation with the private sector and local companies, and provide entrepreneurial opportunities for small and medium-sized enterprises.
Another notable project in the pipeline intended to enhance Oman’s tourism offering is the Oman Botanic Garden, developed by the Diwan of Royal Court at a total cost of $175m. The 423-ha garden, located 35 km from Muscat in Al Khoud, will be one of the largest botanical gardens in the world upon completion by the end of 2023. The park will contain a nursery, a visitor centre, a research and field studies centre, outdoor areas and an education park. In addition, there will be places for children, family gatherings and spaces for relaxation. The garden will also encompass one of the largest seed banks in the country. The seed bank project is supervised by an Omani team whose mission is to preserve endangered plant seeds using modern scientific methods. Over 700 multidisciplinary engineers and designers are involved in the project and environmentally sustainable materials are used in the construction. Besides becoming a tourist attraction, the garden aims to inspire people to preserve biodiversity and enhance Oman’s plant heritage.
Indeed, several projects have been designed to capitalise on natural attractions and an investment environment that promotes sustainable tourism should help Oman distinguish its offering from regional markets.
