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On a growth trajectory.

Summary: A double-digit rise in guests at top-end hotels and a parallel rise in revenues indicate that the Sultanate's efforts to develop the tourism sector are beginning to bear fruit

The author is Regional Editor, Oxford Business Group

Tourism is an increasingly important economic contributor, and the sector has a central role in Oman's diversification programme. As the government looks to unveil a refreshed tourism strategy, the country is focussing on what it does best: placing itself as a high- value destination with strengths in segments including adventure, cultural, MICE and cruise tourism.

The number of guests (as opposed to guest nights) at Oman's four and five-star hotels rose 10.8 per cent in 2013 to 614,000 from 554,000 in 2012, according to the National Center for Statistics and Information (NSCI). Revenues at Oman's 31 four and five star establishments rose 11 per cent from RO134.5m from RO149.3m. These figures are significant as Oman aims to attract more of the sort of well-heeled, freer-spending tourists who stay in top- end hotels -- visitors who bring higher margins and whose expenditure has a bigger impact on the broader economy.

Nearly a third of the guests at top hotels last year -- 202,000 -- were from Europe, up 16.7 per cent on 2012. This underlines Oman's continuing popularity with Europeans, for whom Oman is an attractive medium-haul destination, particularly in winter.

Omani guests constituted the next biggest group of hotel guests, with 186,000 staying, a figure up 17.7 per cent on the previous year. Domestic tourism constitutes an important part of the market (by some measures, generating more than half of all revenues) and can sometimes be overlooked. In third place were guests from Oman's GCC neighbours, with some 90,000 guests, up 14.6 per cent on 2012. Oman's accessibility and familiar culture and language make it an appealing destination for this group, but they also enjoy some contrasts, such as the more relaxed way of life, and vibrant traditional Arabian culture that is not always so well preserved elsewhere in the region.

All the figures point toward the welcome fact that tourism is on the rise. Initial figures announced by Minster of Tourism Ahmed bin Nasser bin Hamad al Mehrzi suggest that visitor arrivals overall grew 10 per cent in 2013 on 2012, when 2.06 million inbound tourists came to Oman.

Broader economic impact

The sector is already a major economic contributor, and looks set to grow strongly over the coming years. Tourism and travel directly contributed RO893.4m to GDP in 2012, or 3.1 per cent of the total, according to the World Tourism and Travel Council (WTTC), a global industry body. But the WTTC emphasises the industry's broader economic impact -- direct, indirect and induced -- to the economy, meaning not just spending by tourists and government expenditure on tourist facilities, but also investment related to the sector (such as on new hotels and aircraft), government spending to support tourism (for example promotion, and infrastructure around resorts) and the development of related supply chains. By this measure, tourism and travel are worth upwards of RO2bn, or 7.0 per cent of GDP.

Clearly, tourism's contribution to the non-oil economy is proportionately larger; once one strips out hydrocarbons, the industry probably generates around 14 per cent of GDP, making it one of the major drivers of diversification.

It is also a significant employer, importantly in a country in which the population is growing rapidly and the youth bulge brings large numbers of young people onto the labour market every year. The WTTC estimates that 77,500 jobs are supported by tourism directly and indirectly, equivalent to seven per cent of the total workforce.

robust growth

Good news, then, that growth is expected to be robust. The WTTC expects the sector's direct contribution to grow by an average 5.1 per cent per year between 2013 and 2023, while its total economic impact will rise by 5.5 per cent annually. A 2013 report from the World Economic Forum (WEF) comes to a similar conclusion, forecasting annual growth of 5.2 per cent to 2022.

Oman has a strong natural appeal as a destination.

A thriving and well-preserved Arabian culture complements beautiful and varied scenery including mountains, deserts, beaches and sub-tropical Dhofar, as well as historical towns and the country's famous forts. Other Gulf countries do not quite have this combination

However, the government might hope to exceed these forecasts, having set the goal of attracting 12m tourists a year by 2020. This is an ambitious target indeed. For purposes of comparison, Egypt, one of the world's oldest tourist destinations, attracted a record 14m tourists in 2010, the year before its revolution, while Morocco, another major regional destination, welcomed 9.5m in 2013. Some might also question whether visitor arrivals is necessarily the most important target, revenues being more significant in terms of economic impact, and that the Sultanate should focus on bringing fewer, higher-spending tourists. But, given the size of the global tourism market, bringing in several million more visitors while focusing on middle- and upper-income demographics is not incompatible. With the right strategy, Oman should be able to attract many more tourists without succumbing to low-value mass-market tourism that could prove to be environmentally and culturally detrimental. And currently, the country seems to be developing a tourism product mix that can position it to build both arrival numbers and value.

Gift of nature

Oman has a strong natural appeal as a destination. A thriving and well-preserved Arabian culture complements beautiful and varied scenery including mountains, deserts, beaches and sub-tropical Dhofar, as well as historical towns and the country's famous forts. Other Gulf countries do not quite have this combination.

Added to this are year-round sun -- and particularly good weather during the European winter -- and accessibility both from Europe and the growing tourism markets of the Middle East and Asia. Oman is a safe, stable, family-friendly destination.

Private sector investment is accelerating as demand grows.

Oman has one of the fastest-growing hotel sectors in the Middle East and North Africa (MENA) region. Hotels expected to open between 2014 and 2017 include the Holiday Inn Muscat Airport, with 187 rooms, and the Muscat Grand Millennium Hotel. The Coral Plaza Qurum, EWA Mandha Hotel, and Swiss-Belinn Ghubrah Muscat will add 363 rooms between them. Major luxury brands will include the Kempinski Hotel: The Wave, with 309 rooms, InterContinental Blue City Beach Resort, (248 rooms) and the W Hotel Muscat (250 rooms).

As well as capitalising on growth, these investments could help catalyse further tourism expansion. The increasing number of high-end resorts, and the highly-successful integrated tourism complexes (ITCs) strengthen Oman's appeal by enhancing accommodation options, with international brands increasing the Sultanate's visibility to the global tourism market through their international booking systems.

The number of guests (as opposed to guest nights) at Oman's four and five- star hotels rose 10.8 per cent in 2013 to 614,000 from 554,000 in 2012, according to the National Center for Statistics and Information (NSCI)

Business tourism

If demand is set to continue growing, in which segments is it likely to be particularly strong? With investment and trade inflows to Oman strong and rising, business tourism will continue to be a major contributor to revenues. The WTTC estimates that business travel accounted for more than 35 per cent of spending in 2012, and that revenues from the segment grew by a striking 12.5 per cent in 2013. The wave of infrastructure investments being made, from the Oman Railway to the Duqm Special Economic Zone, is likely to bring in increasing numbers of business visitors.

Oman is also looking to strengthen its position as a centre for MICE (meetings, incentives, conferences and exhibitions) tourism, which capitalises on its location, relatively low costs, and the facilities available at the Oman International Exhibition Centre (OIEC). The OIEC has achieved steady growth over the past three decades and now hosts around 2m visitors and 35 to 40 events annually. While many events are focused on Oman, international conferences also take place -- this year, for example, the centre is hosting events on oil and gas in West Asia, and global higher education.

The MICE segment should receive a significant fillip from the Oman Convention and Exhibition Centre (OCEC), a $1bn project due to open in 2016. The complex's 22,000 sq m of exhibition space, 3200-seat auditorium and four hotels with a total of 1000 rooms is a major boost to capacity. While Muscat is, realistically, unlikely to be able to compete with the likes of Dubai, Abu Dhabi and Doha for the biggest global conferences and exhibitions, it should be able to leverage its advantages to enhance its standing on a regional level, while the adventure tourism segment could perhaps tap the "incentives" part of MICE more effectively.

Adventure and outdoor tourism is already a strong selling point and trails, transportation and hotels are all improving. The number of visitors to Jebel Akdhar rose by more than 17 per cent in 2012, to almost 120,000, and the development of ecotourism centres including Maison Cheval Blanc, a high-end, luxury ecotourism hotel in the As Sodah ITC, and the Alila Jabal Akdhar eco-resort in Dakhliyah will strengthen the appeal of Oman's "great outdoors".

Another high-end segment that has grown rapidly over recent years and promises to expand further is cruise tourism. According to the Ministry of Tourism, 256,700 cruise passengers visited Oman in 2012, up from just 3500 in 2003. Investments in a number of cruise terminals, including existing facilities at Mina Sultan Qaboos, Salalah and Khasab, and a planned harbour at Duqm, should support the upward trend. The government's decision to grant 48-hour visas to cruise passengers shows the sort of flexibility that stands the sector in good stead, the possible easing of visa restrictions on visitors from Asian emerging markets being an ongoing topic of discussion.

Finally, an excellent example of Oman's successful cultivation of its unique attractions as a cultural destination is the Salalah Tourism Festival during the khareef -- a season during which Salalah attracts nearly half a million visitors in a good year. The festival helps offset the strong seasonality of Oman's tourism sector, which can see hotel occupancy plunge to 30 per cent in summer, dragging down annual averages even though high-season rates at many hotels are 100 per cent.

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Publication:Oman Economic Review (OER)
Date:Jul 10, 2014
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