B2B | Hotels in Oman must address these 10 points

Colliers | MENA Hotel Forecasts 1703 (Mar-17 Page 1)

The Sultanate of Oman consistently receives positive international media coverage. This year Newsweek published a positive article about Oman under the heading “How Much Longer Can Oman Be An Oasis of Peace in the Middle East?” that emphasised the relative safety and stability of Oman. This article went out to a global audience of more than 15 million people.  Click here for details and analysis of the article.

Earlier two other news reports promoted the tourism offerings from the Sultanate to a potential market of more than 90 million people.

Oman was listed as #8 in the Lonely Planet Best in Travel 2017 - Top Countries, and then The New York Times published a very positive article about Oman under the heading “A Carefree Getaway Just Off the Persian Gulf”.

As the tourism industry in the Sultanate of Oman matures and expands, such positive and high profile articles are exposing Oman to a potential new market of millions. These articles clearly support the international marketing efforts of His Majesty’s Government, particularly the Ministry of Tourism.

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Recent trends

Colliers | MENA Hotel Forecasts 1703 (Mar-17 Table)

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 in Oman. 

The hospitality industry in particular is experiencing one of the worst periods in the past decade. With more than 1,000 extra room keys in the past 12 months and a drop in corporate and leisure tourists in the same period, hotels have experienced declining occupancy levels. To compete in such a market hotels have been offering significant discounts which has led to a major drop in RevPAR (Revenue Per Available Room), a common industry indicator.

According to a recent presentation from STR Global RevPAR in Muscat has dropped 20 percent in the past year and is at a level not seen since 2007. Please click here if you wish to receive a copy of the presentation from STR Global.

Looking forward

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, Cluttons and Colliers to be more attuned to the industry than any other source.

The reports from Colliers show that RevPAR has been declining in Muscat since 2015 and is forecast to continue that decline for the next 12 months, albeit at a slower rate. Often the forecast decline has been in double digits, and this year Muscat has regularly been one of the worst performers within the region. In the most recent issue the forecast is that RevPAR in Muscat will decline by 6 percent over the next 12 months.

How these figures can be read

  • The hospitality industry in the MENA region is clearly in a cycle of declining occupancy. To compensate for the loss of business the industry is reducing room rates, which simply compounds the drop in RevPAR.
  • 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.
  • Muscat is negatively impacted by the same issues. Further complicating matters in Muscat has been a substantial increase in the number of hotel rooms. So an increase in rooms at a time of less tourists (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.

To succeed hotels in Oman must address these 10 points

  1. Declining RevPAR
    Muscat will continue to experience declining RevPAR until the end of 2017.
  2. Distressed hotel properties
    For the next year a large number of uncompetitive hotels will fail. This has already started with many hotels facing financial pressure. By 2018 the industry will be far more stabilised, profitable and competitive.
  3. Diversification of the economy
    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 a dependence on the petroleum industry.
  4. Promote - Natural and cultural attractions
    Oman is better able to develop a robust tourism industry than many other countries because of its natural and cultural attractions. In this area we are blessed - but we need to promote ourselves a lot more.
  5. Promote - Safety and stability
    As highlighted in the recent Newsweek article Oman is one of the most stable and safest countries in the world.  This is reinforced by the World Economic Forum which ranks Oman as #9 in the world in terms of Safety and Security.  Click here to see the full report and analysis.
  6. Lower room rates
    For the tourism industry in Oman to compete internationally, Muscat has to embrace the lower room rates and accept them as the norm. There will be no returning to the higher rates once enjoyed.
  7. Rooms too large
    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.
  8. Competitive pricing
    Market forces will demand more mid-range hotels with a greater number of rooms and more competitive prices.
  9. Quality will be rewarded
    These same forces will ensure that quality properties will survive better in the market. A “quality property” is not an expensive five star property, rather it is a mid-range property that has been purpose built to international standards.
  10. Professional management
    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.

Mac Thomson
CEO, MMIS LLC
Mac@MMIS.co

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