Market update: MICE business in Oman booms

The Sultanate of Oman is focusing on increasing its tourism potential, with the launch of a 25-year tourism vision worth US $35 billion. A report from Arabian Travel Market showed that inbound tourism to the Sultanate rose by an average of 7.4% per annum in the decade beginning 2005, with the country targeting 1.4 million international arrivals by 2019, up from 1.1 million in 2015.

Taking this seriously, the Oman Ministry of Tourism has forecasted hotel room capacity will expand at an annual growth rate of 5.3% over the next three to four years, and contribute 10% of GDP by 2020. Last year, the ministry revealed that the top 10 development projects have a total investment value of just over US $3.3 billion. Among those that will be opening their doors will be hotels from Westin, St. Regis and W, as well as Ritz Carlton — the Muscat Reserve, valued at $200 million. High-end mixed-use developments such as the Saraya Bandar Jissah Resort valued at $840 million are also underway as well as the Kempinski Hotel, Louis Vuitton Hotel and Fairmont Hotel which will be completed in the next few years.

With all these in the pipeline, the country has also ranked seventh out of the 100 places most favoured by Muslim tourists, according to the Global Muslim Travel Index. Showing a positive frame of development, figures from the Oman Airports Management Company for both Muscat and Salalah airports recorded an 18% rise in passenger numbers through the capital’s gateway in 2015, surpassing the 10 million passenger mark for the first time in its operational history, while Salalah Airport also saw a rise in traffic by 22% to reach more than one million passengers.

Orascom Hotels Management (OHM) managing partner Abdelhamid Abouyuoussef tells Hotelier Middle East: “Oman is a much needed refreshment to the world’s touristic map. The country has a special identity. It is blessed with amazing dive sites, thrilling sand-dunes, virgin beach expanses, tropical weather at Salalah and a unique cultural heritage. It also has a high standard of infrastructure, be it airports or medical facilities. This makes the country not only attractive to the tour operators and end users, but also to foreign investors who can see the country’s potential.”

STR Global has reported that projects in the pipeline that are ‘Under Contract’ are 34 hotels equivalent to 6,474 rooms in Oman over the next few years. Out of this, seven hotels and 967 rooms are currently ‘In construction’ and due to open in 2016.

Last 12 months

STR Global analysts reveal that while Oman experienced relatively flat occupancy growth for year-end 2015 (+0.1%), ADR was down from the previous year (-10.2%), resulting in negative year-over-year RevPAR growth (-10.1%). Interestingly, hotels in the Oman Regional submarket experienced a +31.1% growth in occupancy for year-end 2015, which, despite a -14.9% decrease in ADR for that market, led to a RevPAR growth of +11.6%.

Colliers International director and head of hotels MENA Filippo Sona focuses on the capital and says that in 2015, Muscat’s high-end hotels saw a slight drop in occupancy and average daily rate (ADR) in 2015. “Occupancy dropped by 3.4 percentage points and ADR by 5.2%. This decline in KPIs is due to lower demand materialising from the corporate segment, as declining oil prices resulted in reduced spending for oil & gas companies. The European market visiting for leisure purposes has also seen a decline due to the weaker Euro, and the Russian / CIS crisis.”

Sona asserts that the upscale/midscale market was very stable in 2015, with a 0.3 percentage point drop in occupancy and 0.4% drop in ADR. “Demand for more affordable accommodation options is growing, both for corporate and leisure travellers, and this is one of the gaps in the market, also in line with the Sultanate’s plans to launch a low-cost carrier,” explains Sona.

Six Senses Zighy Bay director of sales and marketing Jad Frem says 2015 was a good year and there was some increment during the peak seasons due to the big effort from Oman Tourism Board to boost the country’s image through a series of roadshow and campaign to its key markets. Certainly, a growth in interest from EU and the Americas led to winter hotel bookings reaching 98% in the Sultanate of Oman last year.

Al Bustan Palace, a Ritz-Carlton Hotel general manager Katrin Herz says tourism in Oman is one of the government’s main focus and there is a great potential to attract new generations of travellers.

Herz says Oman is as a destination is growing, “with newcomers in the luxury industry including some of the top luxury hotel brands”. She adds: “This is undoubtedly a sign that we are evolving in a healthy market.”

Abouyuoussef agrees and says: “For 2016 and even the years after, if we would consider our own project in Salalah as a base for the analysis, you can easily note that the country is going in the right direction. When we started in 2012, we had one hotel of 64 rooms and an average occupancy of 31%. Now we have 700 rooms and an average occupancy of 81% in January 2016.”

Infrastructure and government support

MICE is not in high demand in Oman, but hoteliers are confident that with the opening of the Oman Convention and Exhibition Centre, business will thrive. Sona also says that in 2016, the Sultanate’s infrastructure will be in focus. With the opening of the new Muscat International Airport in 2016, he reveals that inbound tourism is expected to increase, and the guest arrival experience will be enhanced, thereby contributing to the “branding” of Oman as a destination. City Seasons Muscat general manager Christian Palacin also refers to the imminent opening of the new Muscat Airport, as helping to lift hotel performance with inbound travel.

“New destinations within the country are growing such as Salalah, and infrastructures are following. We are expecting the extension of our new International Airport in Muscat, an additional feeder for market growth,” Herz adds.

Another development that will facilitate the flow of tourists from the UAE is the main road to Northern Oman, which is currently being expanded into a four-lane highway, reports Sona. This, he says, is important, considering that 85% of summer visitors to Oman arrive by car.

“Southern Oman, on the other hand, has seen the opening of the revamped Salalah Airport terminal. Salalah processed 850,000 passengers in 2014, and an estimated 930,000 passengers in 2015 according to the Oman Airports Management Company,” adds Sona.

Palacin also asserts that Oman’s Ministry of Tourism has heavily pushed Oman as a country with history, culture and Arabian heritage. “Add to this the combination of wonderful climate throughout the year as well as the safety factor that is now lacking in other similar destinations. As for the GCC travellers, they are not influenced by any similar external factor therefore Oman has a nice pull towards Arab families in terms of tradition, safety, Arabic language, good food, and so on.” This will be further helped by the Ministry of Tourism in Oman together with its hospitality partners coming up with a summer campaign to promote the destination in Saudi Arabia, UAE as well as Turkey.

Herz concurs: “The ministry of tourism of Oman is doing fantastic work in reaching out to our main source markets. A greater international visibility for our destination means that we are reaching a larger audience and potentially attracting new segments of travellers. We continue to adapt our services and products to these new travellers.”

What's coming next

Palacin admits there has been a slow start to the New Year due to the decrease of oil prices and other factors that have affected the Arab world as a whole. “Eventually, a few weeks in the New Year and the clouds are dissipating; we are seeing an emergence of business on the books.”

Sona says that in 2016 and 2017, the Omani hospitality market will see a real diversification outside the traditional hotspots of Muscat and Salalah.

New concepts are appearing in Dhofar Governorate and in Dakhiliyah Governorate, such as the Anantara Al Jabal Al Akhdar (expected to open this year), the Avani Jabal Al Akhdar (slated for 2017), and the Junoot Eco-Resort to be managed by Amanresorts (2017).

“Nature tourism has always been Oman’s strong point, and developers are currently taking advantage of this opportunity, alongside wellness tourism and mountain tourism,” explains Sona, and also says there is an opportunity for heritage hotels in villages such as Nizwa.

In more tourism-generating opportunities, Oman is planning a 500 million rial (nearly US $1,300 million) waterfront development around Port Sultan Qaboos in Muscat. The project is due to be completed over four phases up to 2027. The waterfront development will span 451,000m2, and will include hotels, as well as residential apartments and houses around the marina.

“The project will try to emulate Cape Town’s V&A Waterfront. The mixed-use waterfront of Sultan Qaboos Port is expected to become a major tourist destination for Oman, offering one of the region’s most authentic and historic waterfront promenades, while promoting the historic centuries-old Muttrah harbour,” says Sona.

“Although 2016 is anticipated to be a difficult year for European travellers, the market is expected to bounce back in 2017-2018 as the market cycle re-emerges, and new demand drivers are created to diversify the segments.”

Sona reveals that a challenge over the next two years will be containing the slowdown of corporate demand to Muscat. “Hoteliers must find alternate strategies, especially given than 2017-2018 will see a large increase in supply in the city hotel segment, with the entry of the Mercure Azaiba, the W Muscat, and Aloft Muscat, amongst others. These hotels will eventually benefit from the diversification into shopping tourism as well as meetings and conferences.”

Frem says the biggest challenge is the competition with countries that also offer similar experiences in terms of nature and culture. He adds: “However, the hospitality of the people and the stability of the country play an important role in the traveller’s decision-making. Oman is a stable and peaceful country so it definitely plays major part [in their choice].”

Palacin reiterates that the drop in oil prices has been a challenge. “It has heavily affected our internal business i.e. the conference and banqueting at City Seasons Muscat; we have seen a serious drop in all annual contracts related to trainings and events from the government sector.

“The general situation in the Middle East is another challenge that somehow is turning into an opportunity as the safety in other countries in the area as well as in Europe seems to be on the brink of getting affected by similar events.”

Palacin also says a major detractor for tourists from Europe is expensive air fares. “If the rates can be looked at and aligned with a deficient Euro, it will greatly boost the arrivals from Germany, France, Italy and definitely the Nordic countries,” Palacin says.

Nature and culture is what the country should, and is, capitalising on. “In terms of opportunities, travellers are increasingly looking for authentic, off-the-beaten-path experiences, they want to meet the bedouins in the desert, or hear the stories from the merchant at the souk, they want to be immersed in the Omani lifestyle. There are not so many destinations who can offer this type of experiences anymore, but Oman is a gem destination,” concludes Herz.

Colliers Trend Report

Burgeoning of Quality Serviced Apartments

Up until Q4 2015, Muscat had relatively poor quality serviced apartment supply. The market gap for quality serviced apartments is finally being addressed, as last year the Millennium Executive Apartments opened its doors, making it the first internationally branded serviced apartment in Muscat. The reception for this product has been very positive, as GCC families and extended-stay business individuals — both inbound and domestic travellers — finally found the level of service they were looking for in Muscat. Additional serviced apartment supply is expected to enter the market in 2016, including the 277-key Somerset Panorama, the 88-key Coral Muscat Hotel Apartments, and the 77-Key Kempinski Residences the Wave.

Development of Mall Hotels in full swing

Another hospitality market gap which is currently being addressed is that of hotels and serviced apartments with direct connectivity to malls — and which typically prove to be very popular with the corporate clientele and the GCC leisure market. One example is the 296-key Grand Millennium Muscat, which will be directly attached to the Muscat Grand Mall in Khuwair South, and which is expected to open in 2016. Another example of is the 250-key Dusit D2 hotel & apartments in South Batinah, which will be attached to Palm Mall and is expected to open in 2017.

Source markets

Colliers International director and head of hotels MENA Filippo Sona says Oman hotels’ traditional top source markets are domestic, GCC, and European tourists. “The largest increases are from India and Pakistan due to the strong marketing activities by the Ministry of Tourism, and the ease of access from the subcontinent. The increase is also due to the fact that neighbouring countries have a large Asian population which stay for 2-3 nights.”

He adds: “Europeans are expected to represent the majority of demand to the cultural resorts in Nizwa and mountain resorts in Jebel Akhdar, and hoteliers will heavily rely on their longer length of stays to sustain healthy KPIs throughout the year.”

City Seasons Muscat GM Christian Palacin says a rising trend in Oman is the influx of tourists from Central Europe as well as the GCC: “European tourists are now discovering Oman, and their choice is highly influenced by the instability in the other Arab countries where they used to vacation, namely Egypt, North Africa, Jordan, Syria et cetera.”

Palacin has also seen an increase in the India and South Asia inbound as well as the Iranian leisure market. “This pull is mainly due to the proximity of the source countries and also for the increase in airlines routes to Muscat as well as the competitive prices offered by the different airlines serving the area,” he explains.

Al Bustan Palace, a Ritz-Carlton Hotel GM Katrin Herz says her property, which turned 30 years old in 2015, is seeing great interest from German markets and European countries.

Six Senses Zighy Bay DOSM Jad Frem predicts that the new source market will emerge. “China, for example, so this is something that Omani hoteliers are making extra efforts towards.”

Orascom Hotel Group managing partner Abdelhamid Abouyuoussef says OHM started relying on regional business, then diversified to Germany, Italy, Poland and Sweden. “In the coming years, we will be setting base for Oman in Russia, France, Slovakia, the Czech Republic, and also Japan and China,” he adds.