Market Update: Oman
Oman Vision 2040 is readying the Sultanate for a more diverse and balanced hospitality sector. However, as hotels rush in to seize the opportunity, market prices are being affected
Oman, like many Arab countries around it, is gradually pulling its economy away from oil and diversifying. Its hospitality industry is a huge part of this mission, with hotels spread across each segment of the market in the pipeline.
TRI Consulting senior consultant, Philippe Vercruysse told Hotelier Middle East: “Based on the data provided by STR, in total, an estimated 7,188 hotel keys spread across 36 establishments are set to enter Muscat’s market by 2024. An estimated 63.9% of the upcoming supply will fall into the upscale-to-luxury bracket, while the remaining 36.1% will be classiﬁed as economy-to-upper midscale. The highest growth in room inventory will be witnessed across the upscale segment (2,720 keys), followed by upper-midscale (1,232 keys) and upper-upscale (1,108 keys).”
Invariably then, Oman is primed to welcome more properties into the country, however the experts Hotelier Middle East spoke to were sceptical whether the market was ready for the inﬂux hurtling towards it, and if existing hotels had enough time to adjust. The industry saw a decline in RevPAR in 2019, attributed by consultants to lowering room prices.
Hilton is among a handful of the international operators to have unveiled plans in Oman. A Muscat hotel is slated for a 2021 opening, comprising 205 keys. It is followed by the Hampton by Hilton Muscat Ghala Heights opening the same year (with 207 keys) and the Hilton Garden Inn Salalah Al Hafa opening in 2023 (with 174 keys).
Hilton SVP Arabian Peninsula and Turkey William Costley highlighted in particular Oman’s business travel sector as a growing industry for Oman. He told Hotelier Middle East: “Hilton operates two hotels in Oman and has a long-term commitment to the country. We ﬁ rmly believe in, and are committed, to the long term development of travel and tourism in the country, as well as the growing area of business travel.”
Marriott International CDO, MEA, Jerome Briet echoed a similar insight, explaining: “Oman’s well-developed conference and meeting facilities make the country a sought-after destination in the Middle East particularly within the MICE segment. Hotels are looking to craft innovative and engaging experiences for MICE travellers in Oman, from water sports activities to cultural and heritage site visits, as well as off-the-beaten-path excursions.”
The pipeline for Marriott in Oman includes the St. Regis with 340 keys, the Aloft Muscat with 170 keys and the Courtyard by Marriot with 230 keys all opening in 2024.
Rotana also will increase its presence in Oman. Its area VP, Christian Baudat told Hotelier Middle East: “The company will open 10 properties under three of its ﬁve distinctive brands in various cities in the Sultanate by 2022, adding a signiﬁcant inventory of 1,907 keys to the country’s branded accommodation stock.
Although the continued expansion by these established operators will feed into Oman’s Vision, with it comes short to medium term issues for the industry. Baudat for example believes the “new stock” may “put short-term pressure on prices and the performance of existing players before the market corrects itself.”
TRI’s HotStats survey for 2019 (Dec 2018-Nov 2019) shows occupancy increased in the whole industry increased by 0.6% to 60.2%, while RevPAR decreased 6.4% from US$84.45 to US$78.05.
ADR saw a 7.3% decline reaching US$129.7 in 2019. As a result of the decline in revenue, GOP PAR also dropped 14.8% in 2019.
Those ﬁgures though are from across all segments of the industry, according to Colliers International head of hotels for MENA, Christopher Lund, the luxury hotel segment in Muscat took an especially heavy blow in 2019.
Lund told Hotelier Middle East: “Muscat is an increasingly price sensitive market with luxury hotels achieving a RevPAR decline of 18% (largely due to a signiﬁcant drop in occupancy) compared to an almost no change in RevPAR for mid-market hotels as of YTD November 2019.”
Prices are being lowered by operators in Oman as a means to boost occupancy in these luxury hotels, though the knock-on effect is lower revenues. Briet explained: “Although the tourism sector is Oman’s fastest growing industry, global economic decline has put pressure on the Sultanate’s hotel sector. As such, luxury operators are countering the situation with more competitive rates and offers in order improve occupancy as well as RevPAR.”
Given the luxury sector’s underperformance, the entry of more affordable properties in 2019 and in the future could help Omani hospitality deal with underperforming sectors. Briet said: “Supply in Muscat is predominately dominated by the upper-scale and luxury sector, however lower-scale properties entered the market 2019, and we expect the country to introduce more affordable accommodation in order to cater for the wider market.”
Oman’s 2019 however saw hotel revenues for YTD November 2019 grow to OMR 202 million from OMR 189 the previous year revealed Lund. Moreover hotel guests in the same periods went from 1.4 million to 1.6 million.
Still, to meet the aspirations of the Oman Vision 2040, which stand at 11 million targeted international and local tourists, the industry must diversify. Lund explains Oman is over-reliant on the GCC for inbound tourism.
He revealed: “Currently more than 30% of inbound arrivals are from the GCC which is a higher share than the other four major source markets put together.”
The Sultanate’s hospitality industry is also too dependent on its corporate travellers, which Vercruysse revealed makes up 33.40% of hotel demand from December 2018 – November 2019. He continued: “Corporate demand remained the prominent segment in 2019, however, strong leisure and group demand helped offset the dilution in corporate and conference demand. The B.A.R. segment, which is primarily comprised of online bookings, remained stable at 14%.”
Oman also has dependency on its capital city, though Lund sees this issue as a fleeting one. He said: Muscat is the primary hospitality market in the country; however, going forward by 2040, it is planned to have 31% of the total supply in the country as the country seeks to have a more balanced overall hospitality market.”
What can be learnt from Oman’s hospitality industry in 2019 is that it can’t depend heavily on individual sectors. Certainly more properties are emerging in the country, though they must ensure they appeal to more than one source market, or represent a sector of the industry in demand.
On the issue of GCC source market dependence, Vercruysse touched on the improvements to Oman’s infrastructure and their role in increasing its global connectivity and potential for new source markets. He said: “Complementing its hotel pipeline, Muscat has made significant investment in its airports, namely the new terminal at Muscat International Airport, which opened in March 2018.”
Six Senses Zighy Bay general manager, Aaron McGrath added: “The most important factor for the hotel industry in general in the region is geopolitical stability. With Oman’s visionary leadership and its peacekeeping policies, it’s a country that is perfectly positioned to continue to thrive.”