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.

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 to an estimated USD 68, a decline of 70 percent on the high of 2008.

“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.

The number of Chinese tourists travelling to the GCC is expected to increase 81% from 1.6 million in 2018 to 2.9 million in 2022.

“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.”

The Details | MENA Hotel Forecasts

Each month Colliers International EMEA sends out the MENA Hotel Forecasts. The key performance indicator in these forecasts is RevPAR. In general, the hospitality industry finds the forecasts and analysis from private and industry organisations such as STR Global, HVS, Viability and Colliers to be more attuned to the industry than any other source.

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