Oman’s hospitality market to reach $1bn by 2022

Muscat: Oman’s hospitality market is expected to grow at a compound annual growth rate (CAGR) of 7.5 per cent to US$1 billion between 2017 and 2022, according to the GCC Hospitality Industry report published by investment banking advisory firm Alpen Capital.
International tourist visits are expected to grow at a 5-year CAGR of 1.3 per cent to 3.4 million, while hotel supply is expected to grow at a 5-year CAGR of 5.6 per cent to approximately 29,635 hotel rooms in 2022. The average daily rate (ADR) is expected to decline at a 5-year CAGR of negative 0.9 per cent to $144 until 2022, whereas the RevPAR is expected to grow at a 5-year CAGR of 0.6 per cent to $93 by 2022.
Oman is a suitable destination for cultural and heritage attractions and exhibits a strong potential to capitalise on transit itineraries for stopover visitors. Gulf Cooperation Council (GCC) visitors comprise a majority of international tourist arrivals at 48 per cent, followed by tourists from India at 10 per cent, Germany at 6 per cent, the United Kingdom at 5 per cent, and the Philippines at 3 per cent. Both the Oman Convention and Exhibition Centre and Royal Opera House Muscat are expected to see an increase in tourist visits and occupancy by 4 to 5 per cent in 2018.
The GCC Hospitality Industry report presents a synopsis of the demand-supply dynamics and key performance indicators of the hospitality industry across GCC countries. The report also covers recent trends, growth drivers, and challenges in the industry. It profiles some of the renowned hospitality companies in the GCC and evaluates their financial and market valuation metrics.
“The GCC hospitality industry, which has been under pressure in recent years, is expected to gain positive momentum on account of the recovery in oil prices, upcoming mega events, increased tourist inflow, positive regulatory initiatives, and increased government spending and investments towards the hospitality and tourism sector," said Sameena Ahmad, Managing Director at Alpen Capital (ME) Limited.
"GCC countries have well-defined strategies to develop themselves as preferred travel destinations,” she added. “They are making significant investments into the development of tourism and hospitality infrastructure including airport expansions to increase the handling capacity of the anticipated visitor inflow.”
“The GCC hospitality sector is going through a phase of transition,” said Sanjay Bhatia, also a Managing Director at Alpen Capital (ME) Limited. “The industry is gearing up for the huge influx of tourists for mega events. Given the positive growth expectations for the GCC economies and for the hospitality sector, we expect revenue, as well as operating metrics of the sector to show a steady improvement."
“The hospitality industry continues to present interesting opportunities to investors. We expect activities across M&A and private equity funding to accelerate in the coming years,” added Bhatia.
Industry outlook
According to Alpen Capital, the GCC hospitality market is expected to grow at a CAGR of 7.2 per cent from an estimated $22.9 billion in 2017 to $32.5 billion in 2022. Upcoming mega events and government initiatives to boost tourism are the primary drivers behind this growth.
Growth in the hospitality sector revenue of individual GCC countries is expected to range from 6.0 per cent to 12.0 per cent. Both UAE and Qatar are expected to witness high revenue growth on account of significant investment activities in the tourism and hospitality sector for the upcoming Expo 2020 and FIFA World Cup 2022. Bahrain and Oman are also expected to grow at a rate higher than the GCC average.
The key operating metrics of the sector, which have been under pressure in the recent past, are expected to show a slow but steady recovery supported by the boost in demand. Economic growth and government initiatives leading to an increase in tourist arrivals are expected to support growth in occupancy and room rates. The average GCC occupancy is expected to increase by 6 percentage points from 62 per cent in 2017 to 68 per cent in 2022.
Growth drivers
GCC countries are expected to witness an improvement in economic performance on account of the recovery in oil prices, leading to improved sentiment and increased government spending.
GCC countries have well-defined strategies to develop themselves as preferred travel destinations. They are making significant investments into the development of tourism and hospitality infrastructure, including airport expansions, to increase the handling capacity of the anticipated visitor inflow. This is supported by regional air carriers offering attractive packages and discounts, along with exclusive memberships, which boost tourism activity in the region.
Dubai's World Expo 2020 and Qatar’s FIFA World Cup 2022 are expected to attract a significant inflow of visitors into the countries, thereby boosting the hospitality and tourism industry. These events command a significant supply of hotel rooms to meet anticipated demand. The GCC has a number of infrastructure and hotel projects scheduled to open through 2022 to accommodate the future tourist inflow.
In addition to events, leisure attractions continue to be a major demand driver for the GCC hospitality industry, with over 2,000 projects worth $200 billion in the pipeline. The GCC MICE market is expected to also play its role in attracting visitors through its conferences and events.
Religious tourism in Saudi Arabia is expected to see a significant increase on the back of expansion projects in Mecca and Madina, supported by the Haramain High-Speed rail and the $7.2 billion expansion project at the King Abdulaziz International Airport (KAIA).
In another significant development, GCC regions are easing visa regulations to promote tourism. Transit passengers are exempt from paying transit visa fees for the first 48 hours in the UAE. Qatar has also allowed visa-free entry for citizens of 80 countries. These are expected to give a boost to the tourism and hospitality sector.
Trends
The GCC hospitality industry is expected to witness increased market penetration by the mid-market hotel segment through 2022 and the increased adoption of Airbnb-type renting models.
The GCC tourism industry has seen a rise in millennial travellers in the last few years, and this trend is expected to continue. Millennial travelers, who opt for experience, authenticity, and value-for-money propositions, are more likely to stay at budget hotels as opposed to high-end luxury hotels.
Another significant trend in the GCC has been the growth of home-grown brands. Regional players such as Emaar Hospitality, Rotana, CityMax Hotels, and Habtoor Hotels are building room inventories and increasing their construction pipelines at a substantial rate.
Mobile applications, smart technology, and IoT have likewise caused a disruption in the hospitality market. With every piece of information, such as hotel amenities and hotel reviews being available at the customer’s fingertips, each competitor is trying to differentiate him/herself in the market to grab the customer’s mindshare and market share.
The GCC hospitality industry is going through a phase of transition. With the expected economic recovery of the region, upcoming mega events, and the range of initiatives taken by regional governments to boost tourism, the outlook for the sector remains promising.