Abu Dhabi, UAEFriday 22 March 2019

Muscat the focus of Oman's aggressive plan for a tourism push

Oman has long been a resort of choice for the world's jet-set. And now, the country's aim to boost tourism that was hit hard by the global downturn is getting back on track.
Backed by the corniche of Muttrah district, fishermen and delivery staff work near the Mina Sultan Qaboos in downtown Muscat. Silvia Razgova / The National
Backed by the corniche of Muttrah district, fishermen and delivery staff work near the Mina Sultan Qaboos in downtown Muscat. Silvia Razgova / The National

With its distant blue mountains encircling bays of azure seas and fortified by dozens of ancient stone fortresses, a stroll along the Muttrah corniche in Muscat is an enticing one for any visitor.

Men and women in traditional dress chat and pose gracefully around the souk, one of the oldest marketplaces in the Arab world, often seen with scarcely a guidebook -wielding tourist to get in the way of a camera shot.

But all that could be about to change is an aggressive plan by Oman's ministry of tourism finally comes off.

According to the property broker Cluttons, the number of hotel rooms in the Muscat governorate is set to double over the next five years from a current stock of about 3,750 to about 7,750 as the country finally realises long-held plans to quadruple the number of tourists it receives each year to 12 million.

Hotel developments include: the 309-room five-star Kempinski Hotel at the Wave, which is scheduled to be completed by the Omani Hospitality Company during the first half of 2015; the four-star Holiday Inn at Seeb, which is being developed for Action Hotels and is expected to open in the middle of this year; and The Panorama at Al Khuwair, which is being developed by Allied Real Estate.

"This number is just a conservative estimate taking into consideration the number of hotel rooms we think are either under construction or likely to get funding and to go ahead," says Matthew Wright, the associate director for strategic consultancy at Cluttons' Muscat office.

"The general trend in Muscat has been that, although this plan was announced in 2009, the financial crisis has meant it has taken a while to filter through. And now we are seeing much more hotel development actually taking place."

Hotel developers have been driven by a promise of rich takings. Room rates in Oman are some of the highest in the world. A 2011 survey by the hospitality website Hotels.com ranked Muscat the most expensive city in the world to visit with five-star room rates reaching US$344 a night - ahead of Monte Carlo, which charged US$290 a night. Since then Muscat rates have fallen to a still respectable average of about $260.

And traditionally the small stock of hotels in Oman has meant the country has enjoyed high hotel occupancy rates. Back in 2008, when many of the plans for boosting tourism were first formulated, the average occupancy for five-star hotels in the country was 68.1 per cent. That figure fell significantly in the downturn and today stands at 54.5 per cent.

According to National Bank of Oman vice chairman Mohammed Mahfoodh Al Ardhi, the chairman of the Omani hotel investor Sundus Investments, which is currently searching for partners to invest in the sector, returns on four and five-star hotels in the country currently stand at between 16 and 17 per cent due to a scarcity of stock.

Mr Mahfoodh Al Ardhi, who is developing the first Rotana in Oman close to Muscat International Airport, says Oman is set to increase its number of three, four and five-star hotel rooms by 16 per cent this year by adding 2,000 new rooms.

Sundus is investing $60 million in building its first 245-room, 20,000 square metre hotel project in Oman, financed by the National Bank of Oman.

Mr Mahfoodh Al Ardhi, a former chief of the Omani air force and the current board director of the alternative investments fund Investcorp adds Sundus is looking at developing four more hotels in Oman including an eco hotel on Jebel Akhdar in the Al Hajar Mountains, a resort in the Dhofar region and one in Sohar in the north-east of the country.

"Oman is a great opportunity now for tourism and investment," Mr Mahfoodh Al Ardhi says. "It's pretty much untapped. That's why we're investing in hotels in Oman. Oman is a fantastic country for tourism; the geography, the people, the topography," he says.

"We have all the ingredients that make it a hot destination. It is untapped still. It is stable. And the growth is fantastic. That is why we are investing in this."

The argument put forward by hotel developers is backed up by some serious government firepower.

In 2009 the government announced an ambitious strategy aimed at increasing the number of tourists visiting Oman from about 3 million a year in at the time to 12 million visitors a year by 2020.

By 2020 the government wants the country's sector to contributes 9.2 per cent to the country's GDP, up from 6.7 per cent in 2010. This will make tourism a main source of income for the country apart from oil.

The plan includes the construction of 10 new resorts across the country. These include the Wave, a £1.7 billion beachfront development of 4,000 properties located on the motorway between Muscat and Seeb. And the Lord Norman Foster-designed Al Madina A'Zarqa $15bn megacity complex spread along 16km of coastline at Al Sawaadi, 45 minutes drive from Muscat.

It also includes the development of a new airport capable of handling 12 million passengers a year which is scheduled to open next year as well as new roads, ports and other key infrastructure, which will cost $10bn.

And the government says it is increasing its spending programme further with another $3bn allocated over the next three to four years solely in the tourism industry; building resorts, partnering the private sector in building hotels and marketing the country.

Others are more cautious in their analysis of the sector. "The number of new hotel rooms is set to double over the next five years but will there be the number of tourists to fill them? I really don't know the answer to that question, it's a chicken and egg situation," says Mr Wright.

"Certainly if they are all built then there will be more competition, which should lead to more consumer choice and that should mean room rates come down and so, perhaps, more people will want to come to Muscat."

Rather than increasing from about 3 million a year since 2009 as was predicted, the number of tourists coming to Oman has actually fallen, hitting barely more than 1.1 million in 2011 as the global economic downturn continued to bite. Since then the number has risen slightly, according to official statistics, but there is scant evidence yet of the sort of increases talked about by the government. According to government figures the number of Omani tourists has risen by 70 per cent between 2009 and last year while the number of GCC and European guests remains below the level for 2009.

Mr Wright points out that even the relatively small stock of existing hotels currently stand half empty.

Hard hit by the downturn, government figures show occupancy for five-star hotels across the Sultanate increased from 47.9 per cent in 2011 to 54.5 per cent last year, while four-star hotels showed an increase from 52.4 per cent to 54.2 per cent - significantly below their 2008 highs.

Data released recently by the hospitality consultancy STR Global paints a slightly rosier picture: average annual occupancy for higher rated Muscat hotels stood at 59.6 per cent last year.

"An increase in the number of hotel rooms from 3,750 to 7,750 sounds like a lot when you think of it as a doubling but when you compare it with Dubai's plans to add more than 4,000 rooms over the next two years to increase it's stock to more than 62,000 it's actually not that many rooms," said Craig Plumb, the head of research at Jones Lang LaSalle's Dubai office.

"We believe the market can accommodate that sort of growth.

"Oman is becoming more established as a tourist destination especially for eco tourism and historic tourism and it definitely has potential for more. The office market, however, is not large so we don't see potential for much growth in commercial traffic, but for more tourism there is definitely a market."



Updated: May 22, 2013 04:00 AM



Editors Picks
Most Read