The Market

February 2019
Everyone who has visited Oman is aware of the many and varied attractions that clearly establish Oman as a premier tourist destination. At the same time the commercial realities of life in a region so dependent on a high oil price are being felt by everyone living and working in Oman. 

The hospitality industry in particular is experiencing one of the worst periods in the past decade. With more than 1,200 new hotel keys in the past 12 months (Cluttons | Muscat Property Market Outlook) and a drop in corporate and leisure tourists in the same period, hotels have had to sell their properties agressively.  To do so they are offering significant discounts.  As mentioned in a recent press release, RevPAR in Muscat is currently lower than it was in 1996.

Reduced revenue a pointer to change 

The financial health of Oman’s hospitality industry has taken a downturn but it should not be a cause of pessimism for the longer-term outlook, according to Mac Thomson, Chief Executive Officer of hotel and asset management group, MMIS LLC.

Muscat Hotels

Limited corporate and MICE activity followed by subdued leisure demand continues to impact both occupancy and ADR, having a negative impact on RevPAR. 

Colliers MENA Hotel Forecasts
December 2018

Mr Thomson said the latest data from property consultants, Colliers International, in its MENA Hotel Forecasts, revealed that Revenue Per Available Room (RevPAR) retreated into negative territory in the last three months of 2018.

RevPAR is widely regarded as the financial barometer for the hotel sector.  The metric, which is a function of both hotel occupancy and average room rate, is one of the most important gauges of health among hotel operators.

Colliers latest forecast for December 2018 continues the downward trend and suggests that Muscat’s RevPAR for October, November and December 2019 will be 5% lower than 2018.  The dip follows eight months of positive RevPAR forecasts at the start of 2018 which gave local operators some confidence that the hotel sector had turned a corner following three years of reduced revenue.

According to HVS the historical RevPAR in 2017 was USD 71, a far cry from the revenues received in 2008 when RevPAR peaked at USD 227.  Adjusting for inflation, RevPAR is now well below the 1996 level of USD 72.  RevPAR continued its decline in 2018.

“The latest data from Colliers is a concern to the hotel and hospitality sector but we should not overlook its message,” Mr Thomson said today.

“The data has been impacted by the large number of hotel rooms that have entered the market in recent years.  To address the drop in RevPAR hotel operators need to look at the growing tourism markets such as China and India, and understand what will encourage them to visit Oman,” he said.

“His Majesty’s Government and the Ministry of Tourism have made an admirable commitment to the sector with the 25-year National Tourism Strategy with major investments in airline and airport infrastructure, and an easing of visa requirements.

“Its now time for the private sector to play its part in promoting Oman more as a very attractive leisure destination and providing the accommodation and experiences that local and international visitors are seeking.

“With nearly half of the current hotel keys being in the four and five star category, it is time the hospitality sector moved its focus away from the top end hotels to affordable accommodation favoured by more budget-conscious visitors.

“Oman offers an extraordinary mix of cultural and natural environment experiences to which we should be adding the health and wellness and adventure tourism experiences that have proved so attractive elsewhere in the world.

“So despite the RevPAR declines late last year, I believe there is a lot of potential for a stronger hotel and hospitality sector in the longer term which should be a cause for optimism.”

© 2019 MMIS