Longer and more frequent stays for Oman's tourists drives renenues

A steady increase in arrival numbers is demonstrating growth in Oman’s tourism industry, according to a new report from the country’s National Centre for Statistics and Information (NCSI).

The government has identified tourism as a sector with strong potential for, and a key source of jobs, for Omani nationals.

“We plan to focus on developing tourism capacity with added local value across the sultanate,” Maitha Al Mahrouqi, undersecretary of the Ministry of Tourism (MoT), told OBG. “Armed with our new Oman Tourism Strategy (OTS), we will focus on identifying and supporting strategic investors, creating new jobs in the sector, encouraging and facilitating local small and medium-sized enterprises, developing a comprehensive tourism supply chain and engaging with local communities by building tourism awareness and involving them in our development process.”

Economic Footprint

The tourism sector currently accounts for 2.2% of Oman’s GDP, as per NCSI figures, with inbound tourism generating OR250.9m ($649.6m) in 2014 – nearly double the amount earned in 2005. Meanwhile, domestic travel earnings totalled over OR970m ($2.5bn), up three-fold over the period.

This is a significant increase of 31% compared to 2009 when total expenditure per visitor totalled OR91.10 ($235.86). Around 72.6% of all travellers stayed more than one night, with the remaining 27.6% being same-day tourists. Other GCC nationals accounted for the majority of visitors at 45.8%, followed by travellers from Asian countries with 22.6%, Europe at 19.2%, Arab nations with 6.2% and another 6.2% from other nations, mostly the Americas and Oceania.

According to the latest World Travel & Tourism Council (WTTC) report, the industry’s contribution to GDP is expected to increase by an average of 6.1% per year through to 2025, to reach 3.3% of GDP. Direct employment in the industry is also set to climb, expanding from its present 2.8% of the workforce, representing some 44,500 jobs, to 3.7%, or 72,000 positions, by 2025, for an average increase of 3.8% per annum over the period.

Driving inbound revenues: If recent trends in arrivals and stay durations continue, the growth rates may prove to be on the conservative side. According to the NCSI, arrival numbers have increased by an average of 7.4% per year over the past decade, rising from 1.1m in 2005 to nearly 2.1m in 2014.

While inbound visitor numbers are on the rise, travellers’ motivations for visiting Oman have remained relatively static over the past five years: leisure and recreation accounted for 34.3%, followed by visiting friends and relatives (38.7%) and business (18.7%).

In 2014 more than 70% of visitors stayed for more than one night, with average stays rising from five nights in 2005 to 7.4 in 2014. In 2014 alone, the average visit duration increased by 0.5 nights, contributing to a 10% year-on-year increase in inbound tourist expenditure.

If Oman is to increase tourism’s contribution to GDP, it must actively seek to attract more inbound tourists and those from more diverse markets. Given the current geopolitical climate, Oman must not only market itself as a safe and tranquil destination, but also compete with other GCC states, such as Kuwait and Bahrain, that are looking to boost their own share of tourism revenues.

Domestic Travel On The Rise

While inbound tourism nearly doubled between 2005 and 2014, growth in domestic tourism was even more marked, with most indicators increasing threefold over the past decade. This may be the result of both rising levels of disposable income for Omanis and the success of government and private sector efforts to develop facilities catering to vacationing locals and their families.

In particular, the country has sought to promote domestic tourism in the Dhofar region during the mid-summer khareef season, when cool winds from the east bring rain and lower temperatures to the south-eastern city of Salalah and the surrounding area for about two months. Domestic travel during the khareef season has doubled since 2010, rising by 9.4% in 2014 alone.

Though Oman’s plan seems to be working, with solid industry revenues across the board, NCSI data also shows a widening gap between local sector income and money spent abroad by Omani citizens and residents, with a balance of OR163.5m ($424.6m) in favour of overseas spending posted in 2014. Oman will be looking to narrow this gap, as the MoT’s new OTS deploys and more tourism infrastructure is developed across the country, increasing the appeal of holidays at home.

It is important to note, all receipts from the national carrier, Oman Air, and travel agencies are included as domestic tourism. Hence, the share of Oman Air and travel agencies in domestic tourism exceeded OR480m($1.2bn), 50% of total domestic tourism production, in 2014. As a result, a passenger traveling from Oman to the UK on British Airways would be considered an outbound tourist, while a tourist traveling from Oman to the UK on Oman Air would be considered a domestic tourist.

Room At The Top

Average room occupancy rates reached 49.2% in 2014, marking the fourth consecutive increase. This is particularly significant given the growth in available hotel space over the period, with more than 3100 rooms added to accommodation stocks since 2011.

As the main entry point and the country’s business hub, Muscat was the dominant governorate in terms of occupancy rates, registering an average occupancy of 61.7% in 2014. While most governorates saw occupancy levels remain relatively stable, additions to existing room stocks are likely to have obscured increases in volume terms.

The NCSI report also showed that occupancy rates in Oman’s four- and five-star hotels were far higher than in most other segments, averaging around 60% per night, compared to fewer than 40% for one- and two-star accommodations. A modest slip in occupancy rates for three-star hotels, when taken alongside the rise in occupancy rates for rooms at higher-rated hotels, could also be an indicator of Oman’s rising appeal as a destination for more affluent local and international travellers. This trend in up-market travel is driving project development in Oman’s high-end tourism segment, with several luxury hotels either under construction or in the planning stages in Muscat.