With the Sultanate aiming to host seven million tourists by 2040, including 2.7 million in Muscat alone, Oman is investing heavily in its tourism and hospitality sector, according to the latest Oman Market View by global real estate consultancy firm CBRE.

The newly-open Oman Convention & Exhibition Center, Oman seeks to target a diversified visitor base with the MICE market (Meetings, Incentives, Conferencing, Exhibitions) becoming an important revenue generator. Additional infrastructure and real estate developments including the long-delayed Muscat International Airport, as well as the Mall of Oman and The Wave, are designed to craft the ‘Oman brand’.

At a glance:

• Oman aims to host 7 million tourists by 2040
• The Sultanate is investing in the tourism and hospitality sectors
• Hotel room supply has tripled to 9,600 keys with 12,400 more to open by 2021
• The supply has affected ADR’s with an 8.9% decrease
• The residential rental market rate declined by 1%.
• H1 2017 saw a decline of 70% in total value of real estate transactions
• Residential sales prices fell by around 2%

Mat Green, Head of Research and Consulting, CBRE Middle East said, “The ongoing construction of various internationally branded hotels, including the Westin, W, JW Marriott and Kempinski, will better cater to corporate demand and help to attract a rising proportion of leisure orientated demand from the GCC and transit leisure business for tourist groups visiting the Sultanate.” 

Number of hotel rooms increasing as room rates dip

H1 2017 indicated steady growth of average occupancy rate, with a 2.2% increase from 59.6% in H1 2016 to 60.9% in H1 2017, as per data from STR Global. 

During the period 2005 to 2016, hotel supply in Muscat more than tripled from approximately 2,900 to 9,600 keys. More rooms are coming with almost 3,400 keys currently under construction, and a further 9,000 new rooms to open by 2021. These have put pressure on ADR’s with an 8.9% decrease for the period June year-to-date, as rates dipped to OMR65.39/room/night from OMR71.81/room/night in the same period last year. RevPAR has saw some notable decline, falling from OMR42.79/room/night in H1 2016 to OMR39.82/room/night in H1 2017, equating to a 6.9% drop, as per data from STR Global

Residential supply level rises affect sales and rental rates

In H1 2017, residential rental market rates declined by 1%. Landlords are becoming more willing to negotiate on rentals to combat rising vacancy rates as supply levels and competition have risen.

“The first half of the year witnessed a decline of around 70% in the total value of real estate transactions, as compared to the same period last year, based on figures from the National Centre for Statistics and Information (NCSI). The number of mortgage transactions declined, and values and volume terms dropped, as volumes from GCC nationals dipped by more than 50% on a year-on-year basis,” said Green. 

Residential sales prices fell modestly by around 2% during H1 2017 and approximately 5% year-on-year. Overall sales market sentiment remains weak, due to the prolonged period of low oil prices and overall economic mood, at a country and regional level. Despite soft fundamentals, future supply levels continue to grow quite quickly, with close to 18,000 residential units expected to be delivered in the next two years.

For more information, view the full CBRE Oman Market View report.

See also:

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