The Market

Recent trends - April 2018
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 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.

Turning the corner?
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, HVSViability and Colliers to be more attuned to the industry than any other source.

Since February 2015, as shown in the chart above, these forecasts from Colliers have highlighted a significant drop in RevPAR (Revenue Per Available Room), with an overall compounded decline of 33 percent in those three years. 

In the most recent report for March 2018 the 12 month Year on Year (YoY) forecast is for an increase of 4 percent in RevPAR. Following on from similar positive forecasts in January and February, this is now officially a trend.

Note: The positive improvement in the RevPAR was solely due to a significant increase in the forecast for occupancy, while Average Room Rates (ARR) remain at a three year low, and 32 percent below the ARR of February 2015.

How these figures can be read

  • For the past three years the hospitality industry in the MENA region has been in a cycle of declining RevPAR. It appears to have reached the nadir and is now trending upwards.
  • This regional decline in the hospitality industry is a direct result of the lower oil price and the ongoing security concerns for the region as a whole. 
  • A recent increase in oil prices has injected some enthusiasm in the economy as a whole and has seen a pronounced improvement in the outlook for hotels.
  • After experiencing declining RevPAR for the past three years the hospitality industry in Muscat is seeing a glimmer of hope. For the first three months of 2018 the YoY forecast is for RevPAR to increase from current figures by four percent in the next 12 months. 
  • While Muscat has seen and will continue to see a substantial increase in the supply of hotel rooms, there is a growing appreciation of the relevance and potential of the industry. 
  • The increased investment in the hospitality industry, both in properties and infrastructure, particularly the new international airport, will provide new demand to offset this growth in supply. 
  • This projected increase in demand will bolster the occupancy rates of hotels. However, the ARR is unlikely to increase as the new hotels will introduce their properties to the market with lower introductory room rates. 
  • Overall Muscat is entering a period of significant growth that will lead to the establishment of a vibrant and dynamic tourism industry. An industry in which we can all invest and which will provide gainful employment for many.
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