Tourism is already an important part of Oman’s economic mix due to its contribution to national productivity and job creation. But the government has plans to considerably grow the role of the sector as it looks to accelerate economic diversification, increasing tourism’s contribution to 12 per cent of GDP compared with 3 per cent at present.

The number of hotels rose from 224 to 282 in the five years to 2013, increasing the number of rooms by 37 per cent

Despite the effects of the financial crisis on the global economy from 2008 and political instability in the Middle East since 2011, Oman’s tourism sector has proved resilient. Since a slight dip in 2010, value added to the economy by the sector increased by 45 per cent to RO709m ($1.8bn) in 2013. Over the same period, the number of tourists also grew by 45 per cent, from 1.5 million to 2.2 million. The government aims to increase this to 4 million by 2015.

Oman Air is looking to increase its fleet size from 40 to 70 in its current 10-year plan, Abdulrahman al-Busaidy, the airline’s chief operating officer, told the MEED Oman Tourism Day on 28 October. The carrier will take delivery of 13 new aircraft in 2015 alone. Al-Busaidy expects the number of passengers using the airline to increase to 4.8 million in 2014 from 4.7 million in 2013. Oman Air is targeting new routes to China, Western and Eastern Europe, Vietnam, the US and India.

More hotels

Hotel development has also been on the rise. The number of hotels rose from 224 to 282 in the five years to 2013, increasing the number of rooms by 37 per cent, from 10,491 to 14,369, and the number of beds by 35 per cent, from 16,681 to 22,521. There are currently plans to build 6,000 new hotel rooms in the sultanate, Philip Woolmer, executive director of STR Global Middle East & Africa, told the MEED Oman Tourism Day.

The reduced appetite for major construction projects, however, has meant the government’s ambitious plans for a series of major mixed-use tourism developments known as integrated tourism complexes (ITCs) have had to be downscaled or put on hold. 

“Some started in 2005-07, but with the financial crisis, very few ITCs have gone ahead,” says Chihed ben Mahmoud, head of US-based JLL’s hotels and hospitality group. “I think the government is thinking about how to finance them internally.

“Among the few ITC schemes that proved successful was The Wave [a luxury mixed-use development] near Muscat airport. Many other projects remain on hold. Hotel investment is becoming more of a local play rather a regional or international one. The main question in Oman is how to reactivate these projects, maybe on a smaller scale or with revised phasing.”

Infrastructure challenge

Other plans are under way to cope with Oman’s infrastructure challenge, one that is becoming increasingly important given the increasing number of arrivals. The first stage of a four-phase project to expand Muscat International airport is due to be completed in 2016, with capacity of 12 million passengers a year. This will rise to 24 million in phase two, 36 million in phase three and 48 million in phase four. There are also plans for an airport city, featuring a car and rental hub, an office complex, shops, hotels, malls and an aviation school, alongside the airport.

“Tourism is a key driver for growth and the catalyst for increased infrastructure development”

Trevor McCartney, OCEC

Beyond the capital, there are plans to expand Salalah airport, and to build regional airports at Sohar and Duqm – which are already under way – and in Ras al-Hadd and Adam – which are at the tendering and design stage. The multi-phase Salalah airport project will deliver capacity of 1 million passengers a year in phase one, 2 million in the second phase and 4-6 million in phase three.

The government has plans to improve infrastructure throughout the sultanate. “It has forecast its spend on infrastructure will reach $56bn by 2017,” says Trevor McCartney, general manager of the Oman Convention & Exhibition Centre (OCEC). “A large part of this investment is on transport infrastructure, including a railroad contract of RO1bn towards a network to link six Omani cities to six Gulf countries.”

Business tourism

OCEC itself is at the centre of the government’s plans to improve tourism and commercial facilities for business travellers. “OCEC aims to create a state-of-the-art facility that will become the leading venue of choice in the region, positioning Oman as a global hub for the convention and exhibition industry, and the business tourism market overall,” says McCartney.

The project is being built over two phases. Exhibition halls are due for completion in late 2015, and auditorium, banquet halls and meeting rooms by mid-2017. In September, Omran – the government company set up to deliver major projects and manage assets and investments in the tourism sector – awarded contracts to the US’ JW Marriott and Crowne Plaza Hotels for the construction of the first two hotels on the site, each with 300 bedrooms.

OCEC is expected to attract 600,000 additional visitors to Oman in its first year. It is estimated that by 2030 it will contribute between RO200m and RO240m a year to the economy, or about a third of the sultanate’s forecast tourism-related revenue.

 “Tourism is a key driver for growth and the catalyst for increased infrastructure development, as well as advances in the industrial, communications and social sectors, says McCartney. “Oman is increasing the accessibility of its natural attractions, considerably extending its range of hotel accommodation and improving tourist facilities and the national supply chain to support the increase of tourists the sultanate has seen in recent years.”

Luxury focus

Despite this focus on infrastructure development, Oman’s tourism sector retains an unusually strong spotlight on luxury tourism. In 2013, four- and five-star hotels alone received 613,555 guests, 28 per cent of the total, and generated RO149m in revenue. The average occupancy rate of five-star hotels increased from 55.3 per cent in 2012 to 60.6 per cent in 2013, and that of four-star hotels from 54 per cent to 56.7 per cent over the same period.

The sultanate has carved a niche for itself in which difficult terrain and a lack of infrastructure are made to work to its advantage. “Oman is a unique destination in the sense that it offers a remote resort – a concept that doesn’t exist anywhere else in the region,” says Ben Mahmoud.

“The infrastructure needs of the sultanate are tremendous given the configuration of the territory. But it is turning a weakness into a strength. Given the limited resources, the deployment of infrastructure has been limited and selective, which preserves the remoteness.

“Oman is positioning itself as a luxury destination for sophisticated travellers. It is developing very remote luxury accommodation that at the same time is only two hours from Muscat airport. The [financial] crisis perhaps even helped in that it allowed the destination to preserve its exclusivity.”

The government has also decided to open up remote military areas to tourism development. “A new project opened a few months ago called Jabal Akhdar, and another one is due to be opened in the next couple of years,” says Ben Mahmoud. “These areas were completely military areas, so there was no access at all. They were considered strategic, and are very remote. There are virtually no roads.”

Chedi Muscat

The recent success of the Chedi Muscat, the epitome of Oman’s luxury hotel sector, exemplifies the success of this niche market. “The destination has become more and more popular, and demand for luxury tourism remains strong,” says Marcus Iseli, the hotel’s general manager. “During 2011- 2013, we broke records every year. In 2014, we are trying to do even better, and next year we expect a new record.”

The Chedi Muscat is enjoying occupancy rates of more than 90 per cent, but this is not always the case in the luxury hotel market. “I hear some five-star hotels have occupancy of 15 per cent and yet charge RO90 a night,” says Al-Busaidy. “If we had decent rates, we could attract people from the GCC, who would come for a couple of days and go to Salalah.” Oman Air has launched a hotel stopover programme whereby passengers are able to stay at affordable rates, and is encouraging more hotels to join the scheme.

Several new projects are under way across the sultanate that promise to diversify Oman’s tourism offering. “All the towns are developing a little bit,” says Ben Mahmoud. “There are a few projects here and there. There are mid-scale schemes, even in Muscat.”

A major redevelopment of the Sultan Qaboos port in the Muttrah area of Muscat has also been announced. Oman’s Transport & Communications Ministry has been given responsibility for the project, which could cost RO1.2bn-RO1.4bn and take up to 12 years to complete. The site totals 1.2 million square metres and the aim is to turn it into a major tourist destination. In addition to a cruise terminal, it will include a leisure park and hotel zone.

Plans call for the creation of a waterfront development company to deliver the scheme. Consultants are being invited to bid for the contract to advise on the structuring of the firm. It is estimated that the redevelopment will create about 27,000 direct and indirect jobs in construction and operations.

But there is little likelihood of Oman’s character as a luxury destination changing in the near future, and numerous new five-star projects are under development. “There is no danger to Oman’s exclusivity,” says Ben Mahmoud. “It’s extremely expensive to develop resorts in Oman because of the geography and the investment costs and infrastructure costs needed. It’s likely that pockets of the territory will be preserved.”