Few people would dispute the idea that Oman has plenty of potential when it comes to tourism. The country has dramatic mountain scenery, unspoilt coastlines and many historic monuments.
Unfortunately, the reality of the tourism sector does not always match up to its potential, and every year Omani nationals spend more on foreign trips than the income the sultanate receives from international visitors.
The size of the tourism trade gap can vary widely, but it is persistent. In 2007, Omani nationals spent $952m on overseas travel, while visitors to the sultanate spent $905m, leaving a deficit of $47m, according to the Washington-based World Bank. In other years, the gap can be far larger; in 2010 it was $522m.
Economic contribution of tourism to Oman
By regional standards, Omans tourism sector is relatively small. According to the World Travel & Tourism Council, the industry directly contributed $2.3bn to gross domestic product (GDP) in 2012. A broader definition including factors such as the impact of spending by suppliers and their employees takes the contribution to $5.3bn. But, in both cases, it is lower than the figures for all the other GCC countries except Bahrain.
As a proportion of GDP, the picture is healthier, with the travel and tourism sector accounting for 3.1 per cent directly and 7 per cent indirectly. At those levels, it is ahead of Saudi Arabia, Kuwait and Qatar, but behind the UAE and Bahrain.
One reason the country fails to attract more tourists is the lack of infrastructure and investment. Their tourism ecosystem is currently weaker [than other GCC states] in terms of planning, transport, hotels and the governance of the sector, says Antoine Nasr, principal at US consultancy Booz & Co and co-author of a recent report on the regional tourism sector, Reinventing Tourism in the GCC.
[Omans tourism] strategy should be to focus on two or three products; you cant focus on everything
Antoine Nasr, Booz & Co
This shortage is now being addressed by the Omani government, in particular through a series of projects by Oman Company for Tourism Development (Omran). Among the major schemes under way is the Oman Convention & Exhibition Centre in Muscat, which is due to be completed by late 2016 and which Omran describes as the most important tourism development in the sultanate. In early October, Omran awarded the latest construction contract on the exhibition centre to the local Carillion Alawi. The 20-month, RO78m ($203m) package includes exhibition halls with 22,000 square metres of leasable space, along with car parking, hospitality suites and ancillary buildings. Further awards are expected between now and the end of 2014. Once complete, the centre could attract up to 600,000 visitors a year.
This is a competitive area of the travel market, however. Dubai is the clear regional leader when it comes to what is known in the travel industry as MICE (meetings, incentives, conferences and exhibitions). Other cities such as Abu Dhabi and Doha are also investing heavily to build up their capabilities. If the new convention centre is to be a success, it will require more than just state-of-the-art meeting rooms and exhibition space; it will need a healthy economy in Oman and the wider region, and strong levels of international trade to attract companies and delegates.
Hotel development in Oman
Most of Omrans projects are directed at other elements of the tourism sector. The firm is developing several hotels across the sultanate, for example, including the Fort Hotel and W Hotel in and around Muscat, the Alila Jabal Akhdar resort in the Hajar mountains, and a three-star resort at Khasab on the Musandam peninsula.
The Alila Jabal resort is currently ahead of schedule and has already passed the 90 per cent construction mark, says Abdul Wahid al-Farsi, vice-president for external affairs at Omran. The Musandam resort is on track for completion during the first quarter of 2014, and has passed the 80 per cent construction mark. Both properties are set to be fully operational during the second quarter of 2014.
Omran is also investing in facilities in the southwest of the sultanate, where the frankincense trees of Wadi Dawkah, the remains of the caravan oasis of Shisr and the ports of Khor Rori and Al-Baleed are included on the World Heritage List by Unesco, the UNs cultural arm, under the collective title of the Land of Frankincense. Among the developments in the area is the Al-Baleed Resort, which is being developed in joint venture with Musstir, a subsidiary of the local MB Holding.
Separately from Omran, the government is turning Sultan Qaboos Port in Muscat into a dedicated tourism complex. That scheme was announced in July 2011, with a plan to move all the existing cargo trade to Sohar Industrial Port by the end of 2014. A lot of work is left to be done at the port, which will happen at a slow pace, says one local businessman in the Omani capital. It will not be as fast as Dubai, but I think the port will attract tourists to Oman, [as is the case in] Dubai.
While many of the developments are being led by the government, the private sector has also been getting involved. Alongside its deal with Musstir for the Al-Baleed resort, Omran has signed up several other joint venture partners to develop various projects, particularly some of the integrated tourism complexes (ITCs) that have been springing up around the country.
Under a 2006 law, non-GCC nationals can buy property in these complexes and obtain residency permits. As such, they represent a way for Oman to entice more tourists in and get them to stay longer and spend more. Among the completed ITCs are The Wave, Muscat and Muscat Hills Golf & Country Club. According to local real estate agents, demand has been outstripping supply in recent years.
A number of other ITCs are now being developed by Omran. They include Jebel Sifah, located 45 kilometres from Muscat, Salalah Beach in the southwest of the sultanate and Ras al-Hadd to the southeast of Sur. These developments typically include a range of villas and apartments, as well as four- and five-star hotels, golf courses and marinas. The international partners on these projects include state-owned property investor Qatari Diar, which is working on the Ras al-Hadd site.
Omran has also formed a joint venture called Muriya with Switzerland-headquartered Orascom Development to develop the Jebel Sifah and Salalah Beach resorts, as well as a boutique hotel on Al-Sodah island, off the southwest coast. Orascom holds a 70 per cent stake in the venture, with Omran owning the remaining 30 per cent.
Oman probably needs more hotels. In the first half of this year, hotel occupancy in Muscat averaged 73 per cent, up slightly from 71 per cent in the same period last year, according to UK consultancy EY. This is ahead of most other major GCC cities, including Doha, Riyadh, Kuwait City and Manama. Only Dubai, Jeddah, Mecca and Abu Dhabi have busier hotels.
But developing the sultanates tourism industry is not just a matter of building more hotels and villas. Oman needs to improve many other aspects of its infrastructure. For example, flag carrier Oman Air has a limited route network compared with its rivals in the UAE and Qatar and the sultanate has just two international airports, at Muscat and Salalah. The development of a national railway, which would provide a huge boost to the tourism economy, is still in the very early stages.
As it strives to improve its tourism infrastructure, Oman also needs to ensure it is spending its money wisely, taking advantage of existing attractions. As well as the Land of Frankincense, it has three other Unesco World Heritage sites, all located close to Muscat. That gives the sultanate a strong position in the region when it comes to cultural tourism; there are only six other sites across the rest of the GCC.
The strategy should be to focus on two or three products; you cant focus on everything, says Nasr. If you look at successful destinations, they have focused on two or three anchor products. Typically, those should include culture or sun and beach because they are the largest components. Then you can have a differentiator such as nature or sports. Oman has a good cultural positioning and strong sun-and-beach elements. It has four Unesco heritage sites.
Alongside the potential for cultural and beach holidays, there are opportunities around ecotourism. But in the recent past, such potential has at times been sacrificed in pursuit of other goals. The sultanate was stripped of a Unesco World Heritage listing for the Arabian Oryx Sanctuary in 2007 because of its failure to protect the area and a reduction in the size of the sanctuary to allow for oil exploration. If the tourism industry is to grow as much as some hope, it will have to find ways to do so alongside other, stronger industries.
The tourism industry directly contributed $2.3bn to Omans gross domestic product in 2012
Source: World Travel & Tourism Council