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 (2017-2022) 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 USD 144 till 2022, whereas the RevPAR is expected to grow at a 5-year CAGR of 0.6 per cent to USD 93 by 2022.

Oman is a suitable destination for cultural and heritage attractions along with a potential to capitalize 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.

In addition to events, the leisure attractions continue to be a major demand driver for the GCC hospitality industry with over 2,000 projects worth $200 bn in the pipeline. GCC MICE market is expected to also play its role in attracting visitors for its conferences and events.

The religious tourism in Saudi Arabia is expected to see a significant increase on the back of expansion projects in Makkah and Medina, supported by Haramain High-Speed rail and the $7.2 bn expansion project of King Abdulaziz International Airport (KAIA).

In another significant development, GCC regions are easing visa regulations to promote tourism. Transit passengers are exempt from paying a transit visa fee for the first 48 hours in the UAE. Qatar has allowed visa free entry for citizens of 80 countries. This is expected to give a boost to the tourism and hospitality sector.