Market Update: Oman's market gap

Jebel Sifah is one of two developments from Muriya Tourism Development totalling 13 hotels and 2900 rooms.

Budget Deficit
However, Wooller and Chiheb’s praise for the market is countered slightly by a recent report published by Colliers International, entitled ‘Oman, Muscat: Economy Hotel – Market Gap’, which highlights the continuing disparity between the development of luxury/five-star hotels and Oman’s economy and budget hotel market.

Speaking about the report, Filippo Sona, Colliers International head of hotels for MENA, explains how the announced forthcoming supply of hotels across Oman mainly consists of four-star and five-star properties, serving only to further widen an existing gap in the market for branded economy hotels.

“Of the Omani pipeline, the majority of upcoming supply is in the four- and five-star segment. This has caused some rate compression, partly in the five-star market, but mostly within four-star hotels,” says Sona.

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“As the hotel market develops, the top and bottom tend to do very well, but it is the middle that gets squeezed the most,” he adds.

Colliers’ latest industry figures show 6616 hotel rooms and serviced apartments are currently in the pipeline for Muscat in the next five years. Most of the forthcoming hotel supply, however, is in the four- and five-star segments.

Based on the Colliers Econometric Model for the period 2013-2017, the Muscat market could potentially absorb an additional 985 economy hotel rooms over and above forthcoming supply.

“The majority of economy hotels in Oman are either locally branded or unbranded, and many are not purpose built and of a limited size. Due to the fragmented nature of the market, hotel apartments and guest houses tend to compete with the economy hotel market, as there is a lack of differentiation between the two products from a consumer standpoint,” Sona explains further.

This disparity is reflected in the news that Muscat had one of the highest average hotel prices in the world last year, with the Omani capital beating other notoriously glamorous and expensive hotspots such as New York, Tokyo and London, according to a Hotel Price Index report compiled by booking website Hotels.com for H1 2013.

According to Hotels.com’s findings, the average price paid by its customers for a stay in a Muscat hotel room in the first half of last year was US $310 (OMR 119), a rise of 16% compared to Hotels.com findings in the same period last year.

It’s no surprise then that the trend for luxury hotel developments carries through to 2014, with a raft of new luxury hotels on the horizon and some international operators taking their first steps into the Omani hospitality market.

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