Oman Hotels Add 700 Rooms amid Reduced Tourism Activity

Tim Elliott (0:00)

It's the Morning Drive, this is Mira Business FM. Oman's hospitality sector is adding 700 hotel rooms by the end of the year, even as tourism activity softened in the first half of the year. Hotel guests down at about 13%.

Occupancy 46.3% was the average, with the Harif and winter seasons expected to play a key role in the second half of the year in H2. Khalil Al Zadjali is the head of Oman, property consultancy, Cavendish Maxwell, joins us on the line to break down the latest numbers and what's driving demand. Khalil, it's good to have you on the show. Thanks for joining us.

Khalil Al Zadjali (0:39)

Thank you for having me.

Tim Elliott (0:41)

You're very welcome. Let me start with the number of guests.

992,000 guests in three to five-star hotels in the first half of the year. Down 13% year on year. The drivers for the decline, I understand the obvious, but I'm interested in your thoughts.

Khalil Al Zadjali (1:06)

Yeah.

So the decline is largely driven by the basically weaker of international demand, plus also the decline in the passenger traffic by almost 10 to 11 percent. You know, European guests are considered as the main driven for the Oman tourism sectors. This interruption in the regional air travel is causing the main decline of the guest.

Tim Elliott (1:45)

The first half of the year started strongly. Occupancy was around 70 percent January and February. What changed from March onwards?

Khalil Al Zadjali (1:59)

So basically, January and February was, I would say, the first or the better month for the H1. March was basically is a clear picture, where the regional traffic started in the region, and that caused mainly international travelers and change to the traveling, also cancellation in a lot of traveling path. So that's mainly causing the decline in the March.

April was the worst month for the H1, and it start picking up in May, and again, decline in June.

Tim Elliott (2:58)

April, I'm looking at the report here, hotel revenues falling 64.5%. How much did regional travel disruptions, and I guess air connectivity affect Oman's tourism sector. Can you put that into context for us?

Khalil Al Zadjali (3:14)

So, they had impact, particularly on international tourism. So, international passenger traffic declined by 10.8%, which is basically compared to 0.6% increase in the domestic passenger traffic.

The effect was mostly visible in the Q2, when disruption to air connectivity coincident with a sharp decline in international hotel guest and occupancy. So, basically the data indicates that Oman's tourism performance remains closely linked to the international connectivity and regional travel condition.

Tim Elliott (3:57)

I'm looking at some of the figures in the report, and I think it was out yesterday or just before the weekend, am I right? Overall occupancy averaged 46.3%. Hotel revenues dropped 12% in the first half of the year.

And I'm interested in what you've seen in the market. How have hoteliers leaned into discounting? Has there been aggressive discounting and rate slashing almost to maintain the sort of occupancy baseline?

Khalil Al Zadjali (4:30)

So basically, you know, due to this regional impact in the area, so what normally the hotel operators will do, they try to control their occupancy along with the average daily rate. So they basically reduce the average room rate and thus basically, you know, impacted the revenue overall.

But, you know, in this kind of situation, you really need to understand that this is impacting not only Oman, it's impacting all the GCC and Oman, as I said, it's mainly driven by the European tourism, or I will say Western tourists. And those basically being advised, or, you know, being given advisory from their governments to not to travel abroad unless there is an important, or, you know, is really important for the guests to travel.

Tim Elliott (5:39)

I mean, clearly, it's been an exceptional, unusual set of circumstances this time. I just wonder if this erodes the long-term luxury position around the region, not just Oman, in terms of hospitality brands. I wonder when the tipping point is.

Khalil Al Zadjali (6:04)

Yeah, so, I mean, when we're talking about the luxury brand, so we know that European will be the number one for visiting those kind of hotels, and usually they spend more compared to other, you know, tourists. And so, in consideration of the, you know, comparing this time to COVID, we believe that COVID was even worse, which has a similar situation. So I think, you know, we are around, you know, 12% at the moment, where in the COVID, we've seen around 11%.

So I believe that this is acceptable for taking consideration of what's happening in the region over here.