Oman Tourism Report Q4 2009

Oman might still lay claim to being one of the 'great undiscovered destinations' but that position is very likely to change in the coming years. There is an ongoing effort to build the profile and attract visitors to this once closed nation.

Standard Chartered Bank released a study in August 2009, in which it shows that the Sultanate's tourism industry has shown resilience in the wake of the global slowdown and the flu scare. According to the study, 'the number of tourist arrivals over the first five months rose 17.5% as compared to last year'. The study also reports a 3.9% rise in revenue. Oman's image has been helped by the recent completion of two new major projects: The Wave and The Muscat Hills Golf & Country Club.

In another vote of confidence in the sector, Swiss-Belhotel International signed a Memorandum of Understanding to build a four-star business hotel in Al Khuwair in Muscat, in August 2009.

Oman has smaller oil and gas reserves than many of its neighbours and consequently has had to face the challenge of diversifying its economy earlier than most. Tourism was identified several years ago as one of the new industries on which the Sultanate will invest. Funds have been allocated both to infrastructure within the country and marketing efforts overseas. The most recent initiative is a regional one. Iran and Oman have entered into an agreement to promote tourism between the two countries and to undertake joint promotions to third countries. Oman plans to attract 12mn visitors annually by 2020, an almost fourfold increase on the current level.

The focal point for decision making is how it can achieve this increase while maintaining the 'authentic' character of the Sultanate. Lore Koening, director of sales and marketing at the Chedi hotel in Muscat put it this way in a recent interview, 'People come to Oman because they are interested in the country, its culture and its history. They don't come because there is a cheap deal going and they will get guaranteed sunshine. That is not our market'.

At this point many tourists to Oman come from other Gulf countries to the coast on the southwest corner of the country. This area catches the Indian Ocean monsoon during the summer months between June and September. While most of the gulf region suffers from extreme, dry heat during that time, the Dhofar Province has a cool and misty summer. Travellers from outside the region may not see the attraction of a cool, damp 25 degrees Celsius (oC) summer holiday.

Political Risk July 23 marked the 39th anniversary of Sultan Qaboos' accession to the throne, the occasion known as Renaissance Day. The Omani media celebrated with a fairly predictable series of tributes and glowing praise about the sultan's achievements in turning Oman into a modern nation. Generally speaking, he does seem fairly popular, and certainly, there is scant evidence of opposition or dissent. At a reasonably youthful 69 years old, this situation should continue over the coming years, although his sudden incapacitation would pose a risk. He has not named a successor publicly, but his preference has reportedly been stated in a sealed letter which is to be opened in the event of his death.

Economic Risk Bolstered by an expansionary spending policy, Oman is looking to mitigate the sharp drop in crude oil revenues experienced in H109 with the addition of an injection of state investment in order to underpin flagging private-sector economic activity. Last year's impressive, if boom-fuelled, 13% real GDP growth will clearly not be matched, but Oman should still manage positive real GDP growth of 0.4% this year (upwardly revised on the back of 2008 data and the recent uptick in oil prices), rising to a respectable 2.5% next year.

Business Environment According to the Oman News Agency (ONA), the Oman Tender Board has allocated tenders for contracts worth US$139.8mn in the areas of transport and energy. The largest single tender includes construction of a power plant worth US$29.4mn, which will serve the Yitti region in the Muscat governorate. Other tenders include the designing and construction of internal roads in Oman's Al Sharqia region at the cost of US$23.3mn. Although Omani government involvement in projects is on the low side by GCC standards - at 33%, compared with a regional figure of over 60% according to Kuwait Finance House - we expect the public sector role to increase as financing remains hard to come by. This could be negative for the business environment going forward.