Tapping tourism potential

The Sultanate’s tourism industry is poised to play an important role in Oman’s near-term move away from hydrocarbons reliance, and in its long-term economic growth plan

The oil price drop between June 2014 and January 2016 – when oil fell below $30 a barrel – threw the economic dangers of an over-reliance on hydrocarbons into full focus. The drop led to a steep decline in state revenues for all Gulf countries in 2015, resulting in cutbacks to the region’s 2016 budgets as authorities sought to shore up government finances. Despite the economic impact, however, a silver lining has emerged: the drop has given governments across the region good grounds to finally start implementing the types of thorny subsidy reform long called for by international organisations such as the World Bank and the IMF. Moreover, the fall in oil prices has sharpened decision-making, with a renewed sense of urgency now surrounding diversification drives.  

Launched earlier this year, Oman’s 2040 Tourism Strategy provides a comprehensive blueprint for tourism development in Oman and outlines a series of targets for the country’s tourism sector. Chief among these are plans to boost the sector’s direct GDP contribution to between six per cent and 10 per cent by 2040, up from an estimated 2.6 per cent in 2015, in the process raising the number of people working in the tourism industry to 500,000 and doubling the number of yearly inbound visitors to 5m. The strategy will be based around the development of 14 clusters, with the concept for each drawing inspiration from the local heritage and culture of its location. These locations are set to include the coastal areas of Mussandam, the Hajar Mountains, the frankincense trail in Salalah, the Muscat region and the country’s deserts. Indeed the diversity of offerings that a place like Oman can boast is its strength. While its nightlife and shopping may not be able to compete with Dubai’s, its strengths – the pristine beaches and rugged mountains – are what need to be exploited.

 On the up

The targets outlined in Oman’s strategy are no doubt ambitious, especially when the global economic climate is taken into account. Although oil prices have rallied in recent months, volatility concerns remain. When taken together with the ongoing conflicts in Syria, Iraq and neighbouring Yemen, the impact of the Chinese slowdown on energy exports, an increasingly ominous election cycle in the US and the continued fallout from Brexit, the picture that emerges for the regional investor is far from clear. And yet despite these external factors, the outlook for Oman’s tourism sector has remained upbeat and investment has continued to grow, albeit not at the steady clip witnessed before the decline in oil prices.

Travel and tourism investment into the country in 2014 was RO267.0mn, according to figures from the World Travel and Tourism Council (WTTC), or 3.6 per cent of total investment. WTTC forecasts suggest this will rise by 10.3 per cent in 2015, and then rise by 6.3 per cent per annum over the next 10 years to reach RO541.0m in 2025 (3.9 per cent of total investment). Inbound visitors to the sultanate doubled over the decade 2005-2014 while domestic tourists more than tripled. In 2014, the direct contribution of travel and tourism to the country’s GDP was RO765.1mn, representing 2.6 per cent of total GDP, a figure the WTTC has forecast will rise by 5.2 per cent in 2015, and then by 6.1 per cent per annum from 2015 to 2025.

The rising number of internationally accredited hotels and beachside resorts are also testament to the sector’s growing success, while a series of effective tourism marketing campaigns have helped raise the sultanate’s global profile, with a unique climatic attraction in the form of the seasonal Khareef underlining Oman’s value proposition to investors and visitors alike. Meanwhile, according to Oman’s Ministry of Housing, recent months have seen a rush by Gulf nationals to buy real estate in the Salalah region, attracted by its high economic and tourist potential and good returns. In 2015 the volume of real estate transactions stood at more than RO6bn, a 10 per cent increase on 2014 figures. Hotel development is also continuing at a healthy clip with 2000 new hotel rooms set to open at destinations across the country in 2016, with the Sultanate aiming to have 20,000 rooms by 2020. Taken together, these various trends clearly indicate a sector on the move. Moreover, the authorities understand that with regional events such as the Dubai Expo 2020 and the 2022 FIFA World Cup set to attract a surge of visitors to the region in the coming years, now is clearly the time for the Sultanate to “set out its stall”.

Private sector role

Speaking shortly after the launch of the 2040 Tourism Strategy, HE HE Maitha Saif Al Mahrouqi, Undersecretary of the Ministry of Tourism, singled out the tourism sector’s important role in the global economy, estimating that by 2025 the sector will account for 11 per cent of total global employment. The undersecretary went on to underline the targets laid out in the 2040 Tourism Strategy and called on the private sector to play its part in ensuring the plan’s success, namely by contributing approximately 88 per cent of the almost $20bn of required investment. While rigorous private sector involvement is clearly the best way to ensure long-term success and sustainability for the industry, widespread private sector participation largely depends on local financial institutions’ willingness to provide the credit needed to fund private sector initiatives. As such the onus falls on local lenders, extending credit to private players, and particularly to SMEs operating in the sector. Indeed, SMEs in particular stand to benefit from the investment climate the government is aiming to foster around the sector. Moreover, the increasing numbers of locals being drawn towards the sector via tourism-focused university courses and training programmes will ensure a workforce eager to capitalise on these opportunities.

 Although rising numbers of Omanis are now being attracted to the tourism sector, they have traditionally not sought work in the industry. This has had to do with the negative perceptions held towards the sector, including low job security and little prospect for career development. Efforts to change these negative perceptions are now underway. The Ministry of Tourism is promoting the sector as a viable career option to young Omanis. Universities and colleges are being encouraged to support the sector, with targets now in place to deliver qualified graduates for the sultanate’s tourism industry. Dedicated university courses are helping formalise the sector as a career choice. In another bid to formalise the sector, mandatory licences for guides have also recently been introduced, with requirements that each guide passes a test and a spoken interview before being issued with a license.

Leveraging MICE potential

Oman’s meetings, incentives, conferences and exhibitons segment (MICE) is another area that has been identified as a key pillar for future growth, with the opening of the Oman Convention Centre in Muscat later this year expected to provide a major boost to the segment. In addition to exhibition halls and conference facilities the centre will have four new hotels providing 1100 new rooms in the capital. Although the MICE segment has started to grow in recent years, the close proximity of regional MICE powerhouses such as the UAE presents a challenge to expansion. To compete Oman needs to play to its strengths, using the location card to effectively link its natural attractions to MICE events. If the Sultanate can successfully leverage these advantages as it develops its MICE segment it should stand a good chance of competing regionally. In terms of connectivity, Oman lies within 7.5 hours flying distance from approximately half the world’s population, with 39 international airlines currently operating in the sultanate. Additionally the national flag carrier, Oman Air, announced in early 2016 that it would be adding several new flight routes this year and expanding its fleet to 45 aircraft as part of its ongoing network expansion programme originally launched in 2014.

As volatility in global energy markets continues to pose uncertainty, the need to achieve greater economic diversity has become more pressing than ever for the Gulf’s oil producing countries. Oman has long been home to one of the Gulf region’s most promising tourism sectors and with the launch of the 2040 Tourism Strategy it is now seeking to further build on this potential by consolidating its status as a leading regional destination, in the process positioning the tourism industry as one of its core drivers of economic growth. With the hope that the majority of this growth will be driven by the private sector, and with a rising number of young Omanis choosing to work in the sector, the Sultanate’s tourism industry is poised to play an important role in Oman’s near-term move away from hydrocarbons reliance, and in its long-term economic growth plan.

The author is Regional Director, Oxford Business Group 

Leave a Reply