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

Oman’s hospitality market is expected to grow at a compound annual growth rate (CAGR) of 7.5 per cent (20172022) to $1 billion by 2022, according to the GCC Hospitality Industry report published by Alpen Capital, an investment banking advisory firm.

International tourist visits are expected to grow at a 5-year CAGR of 1.3 per cent to 3.4 million whereas the hotel supply is expected to grow at a 5-year CAGR of 5.6 per cent to approximately 29,635 hotel rooms in 2022. Average daily rate (ADR) is expected to decline at a 5-year CAGR of -0.9 per cent to $ 144 till 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 along with a potential to capitalise on transit itineraries for stopover visitors. GCC visitors (48 per cent) comprise majority of international tourist arrivals, followed by India (10 per cent), Germany (6 per cent), UK (5 per cent) and Philippines (3 per cent). Oman Convention and Exhibition Centre and Royal Opera House Muscat are expected to increase tourist visits and increase the occupancy by 4-5 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 the 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 recovery in oil prices, upcoming mega events, increased tourist inflow, positive regulatory initiatives and increased government spending/ investments towards the hospitality and tourism sector. 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 anticipated visitor inflow,” says Sameena Ahmad, Managing Director, Alpen Capital (ME) Limited.

“The GCC hospitality sector is going through a phase of transition. The industry is gearing up for the huge influx of tourists for mega events. Given positive growth expectations for the GCC economies and for the hospitality sector, we expect the 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,” says Sanjay Bhatia, Managing Director, Alpen Capital (ME) Limited.

Industry Outlook According to Alpen Capital, the GCC hospitality market is expected to grow at a 7.2 per cent CAGR 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 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.

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 increase in tourist arrivals is expected to support growth in occupancy and room rates. Average GCC occupancy is expected to increase by 6 ppt from 62 per cent in 2017 to 68 per cent in 2022. ADR is expected to increase at a CAGR of 1.1 per cent to $161 in 2022 whereas the REVPAR is expected to increase at a CAGR of 2.9 per cent to $109 in 2022.

Growth Drivers GCC countries are expected to witness an improvement in economic performance on account of recovery in oil prices leading to improved sentiment and increase in 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 anticipated visitor inflow.

This is supported by regional air carriers offering attractive offers and discounts along with exclusive memberships in order to 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 hospitality and tourism industry. These events command a significant supply of hotel rooms to meet the anticipated demand. GCC has a number of infrastructure and hotel projects scheduled to open through 2022 to accommodate the future tourist inflow.