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In focus: Muscat.
Thursday, 10th October 2013
Source : Cristina A Zegrea & Hala Matar Choufany ~ HVS Duba
Located on northeastern coast of Oman, in proximity to the strategic Strait of Hormuz, Muscat is the capital and largest city in Oman, with a population estimated at 797,000.

The economy is dominated by trade, with Mina Sultan Qaboos Port being a large hub between the Persian Gulf, the Indian subcontinent and the Far East. The main pillar of the economy is Petroleum Development Oman (PDO), the country's second largest employer, after the government.

Economics

Oman's economy shows promising GDP growth over the next four to five years, with average GDP growth forecast at 4.6% between 2013 and 2017. Aiming to diversify the economy, which is primarily dependent on oil and gas, the government policy is geared towards developing tourism along with the country's infrastucture such as railways and ports.

According to World Travel and Tourism Council, the tourism total contribution to GDP in 2012 was 7% and is estimated to grow by 8% in 2013 and by 5.5% annually through 2023.

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Airport Statistics

As with the majority of international airports in the region, passenger movements declined in 2008 as a result of the global economic recession. Following the regional trend, Muscat rebounded rapidly, with passenger movements growing by 17% in 2012. Year-to-July 2013 data indicates that passenger traffic increased by 13.9% in the first six months when compared to the same period last year.

The number of flights incresed by 8.7% to approximately 17,500 flights in the first half of 2013, comparing to approximately 16,000 flights registered in the same period last year. Muscat International Airport is undergoing extensive renovations and expansion work , which are expected to be completed by 2014 and increse the handling capacity to 12 million passengers annually.

Further expansions are planned in three subsequent phases that will ultimately boost the airport's annual capacity to 24 million, 36 million and 48 million passengers, respectively.

Market Performance

Following the trend set in the past three years, Year-to-July figures for 2013 indicate a growth in marketwide hotel occupancy by three percentage points when compared to same period last year.

While the ADR remained relativly stable, positive growth has been reported in terms of RevPAR, Year-to-July 2013 data indicating 5% increse over the same period last year. It is important to note the rising contribution of domestic tourism, due to the forecast increase in spending by Omanis.

Taking into account the significant growth in hotel supply for the upcoming years, the positive key performance indicators reflect a healthy and sustained hotel sector for Muscat in particular and for Oman in general.

Seasonality

With the hotel market generally benefiting from stronger occupancy during the first, second and fourth quarter, Muscat has a rather typical seasonality, following the structure pervasive throughout the Middle East and determined primarily by weather conditions.

The highest level of occupancy is observed from November to March, with occupancy traditionally troughing between July and September due to the extreme heat and weaker demand during the Holy Month of Ramadan.

Nonetheless, the moving impact of Ramadan will gradually observe trough periods shift into previous peak periods, thereby impacting trough periods in the near- to mid-term.

Source Countries for Muscat

The primary source of visitation to Muscat is the local market, followed by the GCC and Other Arab countries, which are constituting roughly 45% of the total visitation.

Among the international source markets, the European counties continue to deliver the highest number of visitors to Muscat, reflecting an increased relevance of this market, especially to hospitality related projects.

Aside from the aforementioned primary source markets, the Tourism Authority is turning its attention to India, with a strategy in plan to promote the Sultanate as a wedding destination for Indian guests.

Current and Proposed Hotel Supply in Muscat

While until recently there has been a limited increase in supply, approximately 4,600 rooms are expected to enter the market between end of 2013 and 2017, out of which, 3,000 rooms are scheduled to be added by the end of 2014. The new supply is including, but is not limited to: W Muscat, Element Muscat, Kempinski The Wave, Ritz-Carlton Reserve Muscat, Rotana Muscat, Crown Plaza OCEC, Somerset Panorama Muscat, and the recently announced Grand Millenium, the first Sharia-compliant five-star hotel in Oman.

In addition, based on current available data, the US$200 million Jebel Sifah project located 45 kilometres from Muscat is expected to feature a Four Seasons Hotel, a Banyan Tree and a Missoni Hotel.

Outlook

After reaching the milestone of 1 billion US$ generated revenue in 2012, Oman's tourism sector has much to look forward to in the upcoming years, particularly with the development of major projects such as the Omagine, The Wave, Jebel Sifah, Muscat Hills and Oman Convention and Exhibition Centre.

Stable, long-term growth also looks particularly promising for Muscat International Airport, the regional hub for Oman Air, which is expected to expand its capacity to approximately 48 million passengers in the upcoming years.

About Cristina A Zegrea
4Hoteliers Image LibraryCristina Zegrea is a Consultant and Valuation Analyst with HVS Dubai Office. After practicing law for two years, she redirected her focus to hospitality sales & marketing. Performing in various managerial roles for established international hotel chains, Cristina developed a solid foundation and in-depth understanding of hotel demand, rate positioning strategies and hotel operations overall. While at HVS, Cristina has conducted multiple feasibility studies, valuations and rate positioning exercises throughout the Middle East.


About Hala Matar Choufany
4Hoteliers Image LibraryHala Matar Choufany directs HVS Dubai, the company's first presence in the Middle East region and is responsible for the firm's valuation and consulting work in the Middle East and North Africa. Since joining HVS in 2005, Hala has worked on several mid and large scale mixed use developments and conducted numerous valuations, feasibility studies, operational asset assessments, operator searches and negotiations, strategy advice, return on investment and market studies in Europe, MENA and Asia. Hala has in-depth expertise in regional hotel markets and a broad exposure to international markets and maintains excellent contacts with developers, owners, operators, investment institutions and government entities. Before joining HVS International, Hala had several years of operational and managerial hotel industry experience. She lectured at Notre Dame University in Lebanon on International Travel and Tourism. Hala is fluent in English, French and Arabic. She is Member of the Royal Institute of Chartered Surveyors, holds an MPhil from Leeds University,U.K., an MBA in Finance and Strategy from IMHI (Essec- Cornell) University, Paris, France and a BA in Hospitality Management from Notre Dame University, Lebanon. Hala can be contacted at
hchoufany@hvs.com.
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