RevPAR loss forecast to hit hotel industry in Oman
July 20: Although the hospitality industry in Oman is expected to get significant boost this year from the planned opening of new properties, revenue per available room (RevPAR) is forecast to witness a declining trend.
The revenue loss is not restricted to Oman alone, the entire MENA region is seen to suffer double digit fall.
“For the next year a large number of uncompetitive hotels will fail. This has already started with many hotels facing financial pressure. In a bit of crystal ball gazing the industry will be far more stabilised and profitable in 2018”, says Mac Thomson, CEO of Midan Muscat International Services.
According to reports from Colliers, the RevPAR will decline in Oman for all of 2016 and is forecast to continue for the next 12 months.
The comparative performance of hotels in Muscat has not been as bad as their peers in other MENA areas, but this is a result mostly of the other centres performing worse than Muscat, the Colliers report pointed out.
All countries in MENA need a vibrant and growing tourism industry, both as a source of future employment for the youth of the country and as a logical attempt to diversify away from dependence on the petroleum industry.
This regional decline in business is a direct result of the lower oil price and the ongoing security concerns for the region as a whole.
“Further complicating matters in Oman has been a substantial increase in the number of hotel rooms. So an increase in rooms at a time of lean tourist season (business or leisure) clearly leads to a drop in RevPAR. On top of this, it is standard business practice for new hotels to enter the market with lower room rates. This is designed to promote their property and to generate immediate interest. All this puts strong downward pressure on RevPAR, the global agency opined in its first quarter report.
“Oman is better able to develop a robust tourism industry than many other countries because of its natural and cultural advantages. In this area we are blessed”, says Mac.
It is estimated that by 2020 the number of hotel rooms in the country will be more than 20,000, giving a major boost to the country’s ambitious tourism growth strategy that hopes to attract 5 million visitors a year by 2040.
According to ‘Business Monitor International’, visitors to Oman are increasingly steadily, with total tourism arrivals expected to increase from 1.1 million in 2015 to over 1.4 million in 2019, providing a healthy boost to international tourism related expenditure.
The ongoing shakeup in the industry will mean that all hotels need to be professionally managed and marketed. Essentially, the industry will need to become more competitive and professional.
“For the tourism industry in Oman to compete internationally, the country needs to embrace the lower room rates and accept them as the norm. There will be no returning to the higher rates once enjoyed”, he said.
The current focus of developing large hotel apartments (and the resultant fewer rooms) will need to stop. Operating hotel apartments will face increased financial pressure to compete in this new commercial reality.
Market forces will demand more midrange hotels with a greater number of rooms and more competitive prices.
These same forces will ensure that quality properties will survive better in the market. A “quality property” is not an expensive five-star facility, rather it is a mid-range property that has been purpose built to international standards, Mac adds. Among hotel operators entering the country for the first time are the Anantara Group which will open two 5-star resorts in the mountains of Jabal Akhdhar and the south of the country at Salalah.
The Kempinski and Fairmont hotels will open near the Almouj golf course and Wave development on the waterfront in Muscat, while a refurbished Sheraton Hotel in the capital’s central business district will also be launched.