Consultancy PwC expects Muscat to overtake Dubai in hotel profitability growth rate this year.
Muscat on the fast track in hotel profitability growth
The Omani capital Muscat will overtake five gateway cities in the Arabian Gulf in hotel profitability growth rate this year and next, according to a report from PwC.
Among Dubai, Abu Dhabi, Doha, Riyadh and Jeddah, Muscat will grow the fastest in revenue per available room (revpar), one of the key measures of a hotel’s performance.
This year Muscat hotels are expected to show revpar growth rates of 6.6 per cent, followed by Dubai at 6.5 per cent and Doha at 5.4 per cent.
Room rates will drive the hotels’ bottom line in Muscat, said Alison Cashmore, the hospitality and leisure director at PwC Middle East.
The city, however, is still behind more mature markets such as Dubai, which leads the region in average daily room rates at US$255 and occupancy of about 79 per cent. It also leads the region in revpar at $206, according to PwC.
In comparison, Muscat’s occupancy is expected at 67.7 per cent this year, and revpar of $153 while its average daily rate stands at $226.
“Muscat, which has been seeing double-digit occupancy growth rate for the last two years, will see it slightly slowing down as the market nears maturity, and as there will be an increased level of supply,” Ms Cashmore said. “But it will be growing despite the new supply.”
About 3,000 hotels rooms, predominantly in the four and five-star category, are expected to come on stream this year and the next in Muscat.
For Riyadh, Jeddah and Abu Dhabi, where room rates are expected to grow slower, occupancy will be the main factor behind profitability.
Last year, 2.1 million tourists visited the sultanate, a rise of 10 per cent year on year. In the first three months of this year alone, some 389,191 guests stayed at its four and five-star hotels, marking an increase of 22.7 per cent on the same period last year, said Oman’s National Centre for Statistics and Information.
With that, hotel revenues grew 7.4 per cent to 48.22 Omani rials (Dh458) as occupancy rates touched 71 per cent up from 69 per cent during last year’s first quarter.
Tourists from Europe and other Gulf countries topped the list of the source markets. Domestic tourists also formed a key portion.
In line with Oman’s hotels outlook, several international chains are beginning to explore opportunities there.
Investments in the sector are expected to rise by 6.7 per cent every year over the next 10 years to touch 545.9 million rials in 2024, according to the World Travel and Tourism Council.
Singapore’s Alila Hotels and Resorts opened a luxury property atop Oman’s Jabal Akhdar, or the green mountain, this month. Owned by Omran, the Omani government’s tourism development and investment arm, the 78-room property is a couple of hours’ drive from Muscat and has room rates starting at 115 rials.
“I’ve been travelling to the Gulf a lot and it has been growing faster and less traumatically than other parts of the Middle East so we were naturally attracted to the Gulf area,” said Mark Edleson, the president of Alila Hotels and Resorts. “[Oman] is considered new territory for high-end travellers to explore.”
The group is already working on another project in Oman that is expected in mid 2016, and is in talks on another, he said..
Last year, Dubai’s Jumeirah Group signed a management agreement with Oman’s integrated tourism complex Saraya Bandar Jissah to operate luxury resorts in Muscat that are expected to open in 2017. One of the properties will have 206 rooms while the smaller one will have 106 rooms. These will be located in Bandar Jissah near Muscat.
Also in the pipeline are Element Muscat, Westin Muscat and W Muscat from Starwood Hotels and resorts in 2017, and another Ritz-Carlton in 2016.
The hotel operator Swiss-Belhotel International, based in Hong Kong, plans to open a budget property in Muscat this year. The 95-room hotel expects to attract corporate guests. The group is also in talks for a midscale resort property in Sohar.
“There is a lot of business travel in Muscat and the country can take in more rooms in the internationally-branded budget category,” said Priyanka Kapoor, the regional manager for sales and marketing for Swiss-Belhotel.
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