The tourism sector has long been the focus of Oman’s efforts to diversify the economy away from a reliance on hydrocarbons. After slow but steady growth throughout the 2010s, the tourism sector’s contribution to GDP reached a high of 2.9% in 2019. However, restrictions imposed due to the Covid-19 pandemic weighed on the sector’s performance for much of 2020. As part of its long-term economic diversification strategy, Oman Vision 2040, the Ministry of Heritage and Tourism (MoHT) and the Oman Tourism Development Company (Omran) are pursuing sector expansion with renewed vigour.
Tourism has been earmarked for 21% of the OR11bn ($28.6bn) in investment opportunities promoted under the National Programme for Investment and Export Development (Nazdaher) for the 2021-25 period. Tourism rebounded strongly in terms of visitors and expenditure in 2022, and government investment in hotel capacity and niche markets such as integrated tourism is helping the country make progress towards its 2040 goals.
Oversight
The tourism industry is overseen and regulated by the MoHT. As of February 2022 Salim bin Mohammed Al Mahrouq, appointed in March 2020, was serving as the minister of heritage and tourism. Omran was established in 2005 as the executive arm responsible for delivering the objectives contained in the National Tourism Strategy 2040 (NTS), and to separate the roles of regulation and executive management. The entity owns and is responsible for developing most of the country’s tourism infrastructure.
Government-owned Oman Airports administers and operates the airports in the sultanate and manages related infrastructure. The ports, meanwhile, are controlled by Marafi, which is the port management arm of the government-owned holding company Asyad Group. This includes the two main ports: Port Sultan Qaboos and the Port of Salalah.
Strategies
Tourism policy is guided by several development initiatives and strategies that have been rolled out in recent years to encourage growth. Every five years, the government launches a new five-year plan (FYP). The ninth FYP, which focused on the concept of Tanfeedh, or execution, ran from 2016-20 and called for a doubling of government investment to support private sector development and boost growth in strategic segments of the economy. The same year Oman unveiled the NTS, which aims to increase the tourism sector’s GDP contribution from 6 to 10%, create 535,000 jobs, boost room nights to 14m and bring in 11m international tourists annually. It calls for $51.9bn in investment over the life of the plan, 85-90% of which should come from the private sector, and seeks to spread tourism more evenly across the sultanate, instead of being concentrated in the Muscat area.
In 2020 the new ruler of Oman, Sultan Haitham bin Tarik Al Said, approved Vision 2040, which went into force in January 2021. The plan will encompass four FYPs between 2021 and 2040. The Supreme Council of Planning is overseeing the implementation of the plan, which focuses on five key sectors: tourism, manufacturing, mining, fisheries and logistics. Since Vision 2040 includes a comprehensive development plan for heritage and tourism, previous initiatives like the NTS have been modified in line with Vision 2040.
The tourism development plan features 194 projects and centres around several primary axes, including governance, management, capacity-building, planning, development and investment, quality, sustainability, competitiveness, local added value, tourism products and experiences, the labour market, support for local products and tourism promotion. For the first phase of the plan, the ministry is focusing on developing tourist sites in Muscat, Al Dakhiliyah, Al Sharqiyah South, Dhofar and Musandam. In subsequent phases, it will expand its focus to the other governorates. The strategic plan aims to reach OR3bn ($7.8bn) in tourism investment by the end of 2023. As of August 2022 Oman had attracted $4.4bn, or just over half of this goal.
In line with both the NTS and Vision 2040’s goals for improved governance, the MoHT has taken steps to update the regulatory framework. In May 2022 the ministry streamlined several regulations, standardising licences for Omani and non-Omani tour guides and camping sites. Additionally, it has rolled out licences to establish timeshares at existing hotel facilities. It is also recruiting artists and art management experts through the Creatourism programme, which was launched in September 2022.
Digitalisation
Vision 2040 seeks to improve the process of planning, development and investment by creating a geographic database and an electronic planning system that includes platforms for tourism land management, monitoring and follow-ups, as well as investor support. Envisioned as a digital link between travel and tourism service providers and commercial trade partners in key target markets to stimulate business opportunities, VisitOman.com was launched in June 2021.
The MoHT has collaborated with Omran and the Ministry of Commerce, Industry and Investment Promotion (MCIIP) to ramp up investment in the sector, in line with Vision 2040. In July 2022 the three government bodies launched five investment opportunities worth OR960m ($2.5bn) for the private sector and foreign investors. These projects include the development of a national leisure and tourism centre at Barka in Al Batinah South; an urban development project, Yiti-Yenkit, in Muscat Governorate; the smart city Madinat Al Irfan; an integrated tourist complex called Rawasi in the wilaya (province) of Bausher; and the Musandam Adventure Centre in the wilaya of Khasab. These efforts are part of the MCIIP’s goal to promote new foreign direct investment in Oman (see Economy chapter).
Omran is the largest hotel investment company in the country, with a portfolio of 27 hotels and resorts, five master plans, and five nature and heritage attractions. Since the launch of Vision 2040 it has developed tourism infrastructure at a rapid pace, with many projects in the pipeline across multiple governorates, including several parks in Al Sharqiyah South, additions to the popular Mughsail Beach and Al Hafa Waterfront development in Salalah, the second phase of the Yiti Integrated Tourism Development and the Musandam Adventure Centre.
Size & Performance
Increasing the tourism sector’s contribution to GDP is a recurring goal in previous FYPs. The number of arrivals nearly doubled between 2012 and 2019 due to significant government support and concentrated strategic efforts to support the industry, although tourism’s contribution to GDP hovered between 2% and 3% during that period. Understandably, progress has been impacted due to the pandemic. In March 2020 Oman stopped issuing all visas, and a ban on all international flights was in place until October 2020. The pandemic had a detrimental impact on the country’s hydrocarbons-dominated economy, with oil prices briefly dropping below zero.
Tourism was one of the most severely impacted sectors. Its contribution to GDP fell from 2.9% in 2019 to 2.6% in 2020. Furthermore, inbound visitors declined from a high of 3.5m in 2019 to 869,000 in 2020. Total inbound expenditure dropped from OR620m ($1.6bn) to OR290m ($753.7m). However, average expenditure per person nearly doubled from OR180 ($460) to OR340 ($880).
Additionally, the tourism downturn had a negative impact on employment. According to World Tourism & Travel Council (WTTC), 146,700 people were employed in the tourism sector in 2019, representing 6.8% of all jobs in the economy. By 2020 the number of people employed in the sector had declined to 114,900, or 6.2% of the workforce.
Though pandemic-related restrictions were generally less strict worldwide in 2021, tourist arrivals to Oman continued to decline, as the sultanate suffered record Covid-19 cases following the emergence of the Omicron variant. In 2021 both the number of visitors and their spending in the country fell further to 652,000 and OR225m ($584.8m), respectively, resulting in a relatively lower contribution to GDP of 2.4%. Mirroring a pattern seen in many markets, however, domestic tourism increased substantially. Domestic spending grew to account for 58% of the industry’s total revenue in 2021, up from 35% in 2019.
Recovery
Though Oman had yet to release comprehensive tourism statistics for 2022 as of March 2023, tourism continued to show signs of a strong and steady recovery. In late 2021 arrivals to Oman started to pick up for the first time since the beginning of the pandemic, increasing by 209% in the fourth quarter from 129,269 to 399,529. In 2022 the sultanate received 2.9m visitors, representing an increase of 345% over the previous year. This tally corresponds to 83% of pre-pandemic arrivals, as recorded in 2019. In December 2022 inbound tourism increased to 382,000 visitors, as the 2022 FIFA World Cup taking place in nearby Qatar helped increase international arrivals.
Official data for tourism’s contribution to GDP in 2022 had not been released as of March 2023; however, the substantial increase in arrivals and hotel occupancy is indicative of a sustained recovery. This trend aligns with the optimistic projections made for Middle East tourism. The WTTC expects tourism growth in the region to significantly outpace GDP between 2022 and 2032, rising by 7.7% each year compared to 2.5% for the regional economy. At the current pace, by 2032 tourism is likely to contribute 10.1% to the total regional economic output.
Visitor Numbers
In January 2021 the government announced visa-free entry for eligible citizens of 103 countries for a stay of up to 10 days. This was likely a factor in the sharp rise in arrivals during the fourth quarter of 2021. Oman’s major airports experienced a surge in arrivals in 2022 due to the easing of Covid-19 restrictions as well as newly inaugurated flight routes to various countries.
Muscat International Airport (MCT), which was renovated in 2018, has a 580,000-sq-metre passenger terminal and two 4-km runways suitable for wide-body aircraft. It can handle 20m passengers per year. In 2020 the Oman Aviation Group revealed plans to build a 3.3m-sq-metre Muscat Airport City, which will include a free zone, logistics hub and retail zone, in line with the National Aviation Strategy 2030 unveiled in February 2020. In the first 10 months of 2022 MCT handled 6.7m passengers, corresponding to an increase of 142% over the same period of the previous year. International and domestic flights grew by 117% year-on-year (y-o-y) to reach 54,165.
Salalah, in particular, benefitted from new khareef (monsoon) season flights in 2022. The khareef season covers Salalah in mist and feeds waterfalls and fast-flowing rapids in the region’s valleys, providing welcome respite from the hot, dry summers elsewhere in the Middle East.
Several international airlines rolled out special flights to Salalah during the khareef season, including Hungarian budget airline Wizz Air, with two weekly flights from Abu Dhabi, and Gulf Air, with two weekly flights from Bahrain. Qatar Airways, Sharjah-based Air Arabia and flydubai already operated year-round flights to Salalah but increased their frequency for the 2022 khareef season. Likewise, Oman Air and Oman’s budget airline SalamAir increased their frequencies to 12 and nine domestic flights per day, respectively. The total number of flights to Salalah International Airport in the first nine months of 2022 increased by 82.8% y-o-y to 6674.
Other airports in Oman are Khasab Airport in the Musandam exclave, Duqm Airport – 14 km from the Duqm Special Economic Zone – and three additional airports used by Petroleum Development Oman. The total number of passengers handled by all airports rose to 7.8m in the first 10 months of 2022, an increase of 153% y-o-y.
The last three years have been challenging for Oman Air. In 2021 it announced it was scrapping plans to increase its fleet to around 70 aircraft and expand long-haul routes due to the pandemic. As travel resumed, however, the airline announced renewed expansion in May 2022. It will operate an additional 18 flights per week across nine Indian destinations, making a total of 122 trips per week from Muscat. The airline also increased the frequency of its flights to South-east Asia and opened a new route to Trabzon, Turkey.
Lastly, in June 2022 Oman Air signed an agreement at the annual general meeting of the International Air Transport Association to join the oneworld Alliance in 2024. This will incentivise frequent flyers of some of the world’s largest airlines, including American Airlines, Cathay Pacific and Qatar Airways, to fly on Oman Air. It will provide oneworld benefits to passengers, and members of Oman Air’s frequent flyer programme, Sindbad, will be able to earn and redeem miles on oneworld member airlines. Due to these initiatives the airline had managed to restore 65% of its pre-pandemic network by November 2022.
Source Markets
In 2022 the top-five markets for arrivals to Oman were the GCC (1.5m), India (355,000), Yemen (107,000), Germany (82,000) and Pakistan (75,000). By contrast, in 2021 the key source markets were the GCC (293,000), India (106,000), Yemen (42,000), Pakistan (19,000) and Egypt (18,000). GCC visitors accounted for 52% of total arrivals in 2022, up from 45% in 2021.
Oman also benefitted from Qatar hosting the 2022 FIFA World Cup in December. European visitors increased by 93% y-o-y that month, the most of any GCC country other than Qatar, according to Spain-based travel analytics company Forward Keys.
Before the pandemic, Oman was working to attract Chinese tourists. Overseas spending by Chinese tourists stood at over $255bn globally, which is nearly twice the amount spent by US citizens. In 2016 Oman Air added four weekly flights to Guangzhou and in 2018 China was added to the list of countries that do not need a visa to enter the country. The number of Chinese visitors rose by nearly 130% to 44,580 over the same year. During the pandemic, Chinese tourism halted almost entirely due to the country’s strict zero-Covid policy.
In 2022 at the annual Arabian Travel Market, an international travel trade event, national travel and tourism operator Visit Oman signed a memorandum of understanding overseen by Omran, with Beijing Spring Travel Services, China-based travel and tourism operator, to promote Oman as a tourist destination for Chinese travellers. The easing of pandemic travel restrictions in China in December 2022 presents a promising opportunity for Oman to increase arrivals from China and diversify source markets further in 2023.
Hotel Infrastructure
The sultanate had 30,203 hotel rooms across 658 hotels in 2022, up from 29,056 rooms across 612 hotels in 2021. According to the National Centre for Statistics and Information, 1.1m guests stayed in Oman’s hotels in the first eight months of 2022, down slightly from 1.3m in 2021. Hotels earned OR185.8m ($482.9m) in 2022, up from OR122.8m ($319.2m) the previous year. In the first eight months of 2022 domestic guests comprised 42% of total stays, compared to 53% during the same period of the previous year. In 2021 Muscat had about one-third, or 205, of the total hotels in Oman. The second-highest number of hotels are situated in Al Sharqiyah (127), home to the popular Wadi Bani Khalid, followed by Al Batinah (87).
Hotel revenue in the three- to-five-star category rose by 82% in 2022 to reach OR186m ($483.4m), up from OR102m ($265.1m) the previous year. In 2021 average revenue per available room (RevPAR) was $37, down from $83 in 2019. Even before the pandemic, hotel owners operated in a competitive market that was oversupplied with rooms. The pandemic lowered demand without a corresponding decrease in supply, placing further pressure on RevPAR. In 2022 the figure was expected to increase by 83.7% to reach $68, nearly on a par with pre-pandemic levels. According to Dubai-based investment bank Alpen Capital’s “GCC Hospitality Industry Report” published in August 2022, Oman’s hospitality industry is expected to grow at a compound annual growth rate of 6.3% from 2022 to 2026 to reach $900m.
The MoHT has signed several land lease contracts to develop hotel capacity in the sultanate. In June 2022 it signed seven usufruct contracts, including a four-star hotel in the wilaya of Mirbat in Dhofar Governorate. In August of the same year the ministry signed a further nine usufruct contacts, which include three-star hotels in Dhofar and Wadi Bani Khalid, a three-star resort in Wilaya of Jabal Akhdar in Al Dakhiliyah, and tourism camps in Al Sharqiyah South and Al Dhahirah.
In a significant development for the luxury hospitality segment, Dubai’s Jumeirah Group opened its first luxury resort, the five-star Jumeirah Muscat Bay, in Oman in December 2022. The 32,000-sq-metre resort, built at an estimated cost of OR60m ($155.9m), has 206 rooms. The expansion of hotel capacity resulting from the land lease agreements signed in 2022 could open Oman to a broader range of tourists, paying dividends for the wider economy. “Tourism can become a catalyst for growth in other sectors, such as retail, construction, and food and beverage,” Rishi Khimji, managing director at airport food and beverage company Ajit Khimji Group, told OBG. “Oman is looking into developing more hospitality infrastructure, especially three-star and four-star hotels, to cater to a wider range of markets. The country is still seen as an expensive destination, which may lead some travellers to choose more affordable options for their next trip.”
Niche Markets
While the country has a relatively established hospitality segment, it is still a smaller player in the region’s cruise tourism landscape. Oman attempted to gain a larger foothold in the market before the pandemic, targeting 360 cruise ship visits for the 2019/20 season. The number of visitors increased by 45% in the 2018/19 season compared to the 2017/18 season. While cruise tourism was suspended during the pandemic it resumed in November 2021. After receiving 278 ships in 2019 and 101 in 2020, Oman welcomed 99 during the 2021/22 winter season.
Oman’s busiest cruise ports are Port Sultan Qaboos, the Port of Khasab and the Port of Salalah. In 2018 construction began on the Mina Sultan Qaboos Waterfront Regeneration port project, which is being developed by Omran. Slated for completion in 2027, the project is being built on a total area of 451,000 sq metres, including 3300 sq metres of retail space, residential zones and six hotels.
Efforts in the meetings, incentives, conferences and exhibitions (MICE) segment are centred on the Oman Convention and Exhibition Centre (OCEC) in the Madinat Al Irfan near Muscat. The OCEC held more than 50 events in the last quarter of 2022. These included a special event for football fans during the 2022 FIFA World Cup, the Oman Tourism Forum, the Regeneron International Science and Engineering Fair Middle East awards, the Oman Maritime Confex and the 89th UFI Global Congress.
Oman markets itself as an attractive MICE destination due to its reputation for neutrality and hospitality and the fact that it is within seven hours of air travel time for half of the world’s population.
Integrated tourism is a niche market singled out in Vision 2040 as an area for development. As of March 2023 there were 21 integrated tourism complexes (ITCs) in Oman, 11 of which are situated on land owned by the MoHT. Hawana Salalah, the largest ITC in the country, welcomed 30,532 visitors in the first six months of 2022. In April 2022 Omran launched the first phase of Yiti Integrated Tourism Development, a $1bn sustainable project on the Sea of Oman being developed in partnership with Dubaibased Diamond Developers. This phase will include 1657 energy-efficient residential units. It will also feature shops, sport facilities, schools, an equestrian centre and a laboratory to showcase sustainability solutions like renewable energy technologies, indoor vertical farming and humidity harvesting. The project, expected to be completed in 2025, will grow its own vegetables, recycle water and waste, and have car-free zones within the facility where only autonomous shuttles are allowed (See analysis).
Marketing
In August 2022 the MoHT stated that it is seeking to open more tourism representative offices in target countries and give diplomatic missions a more significant role in promoting Oman as a tourist destination. During the khareef season, the Directorate General of Heritage and Tourism in Dhofar, which is part of the MoHT, coordinated with airlines and hotels to create a joint promotional campaign for the three-month season. The ministry launched special television programmes and engaged Gulf and Arab influencers to promote khareef in Dhofar on social media.
Tourism officials attended several important international tourism events in 2022. For the first time, Oman hosted the Global Travel Week Middle East, showcasing tourism offerings to 70 international buyers, predominantly from India, Europe and the Middle East, as well as 38 domestic buyers. In May Obaid Al Mahrouqi, CEO of Omran, participated in the Oman Tourism Forum 2022 held at the Arabian Travel Market in Dubai. Several hotels also attended to showcase their products and packages.
Outlook
With rising energy prices propelling Oman towards its highest trade surplus in over a decade, tourism was expected to take a backseat on the agenda. However, this appears not to be the case so far, as the government continued to prioritise developing tourism infrastructure throughout 2022.
Tourism industry’s revenue is still below its pre-pandemic levels, yet its recovery should be helped in 2023 by a friendlier global climate for tourism. Indeed, the UN World Tourism Organisation projected that tourism arrivals will reach 80% to 95% of pre-pandemic levels in 2023. A large part of this recovery is likely to stem from the resumption of Chinese tourism. Oman is working to cultivate this market further, as it did before the pandemic, by adding new flight routes that were postponed by the crisis. Ambitious projects such as the Yiti Integrated Tourism Development have the potential to attract tourists from all over the world. With the tourism sector well on the way to recovery, 2023 will be a crucial year to see if Oman’s tourism can continue to build on its previous achievements.
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