The Sultanate of Oman possesses a number of the key characteristics of a premier tourist destination – a diverse environment, unspoiled beaches, breath-taking mountains and a wealth of historical sites (including a number with UNESCO World Heritage status) – all of which help to make the country a truly unique location in the Middle East.
The National Program for Enhancing Economic Diversification (Tanfeedh) is implementing steps aimed at further enhancing Oman's status as a go-to tourism destination. The Tanfeedh programme was established in early 2016 with the primary aim of increasing economic diversification and reducing the Sultanate's reliance on the volatile oil and gas industry. It identified five sectors as being key in achieving this aim – manufacturing, transportation and logistics, fisheries, mining and last, but not least, the tourism sector. Oman's Ministry of Tourism, through the Tanfeedh programme and other initiatives, has set an ambitious target of attracting more than 5 million international visitors to Oman annually, up from just over 3 million in 2016, while also seeking to raise the tourism sector's contribution to the Sultanate's gross domestic product from 2.8% to 6%.
A vast number of key projects aimed at achieving the country's ambitious goals are in various stages of development across Oman. Oman Tourism Development Company SAOC (Omran) is targeting delivery of a number of new hotels in 2018, including the five-star W Hotel currently being constructed in Muscat, which will provide more than 1,000 additional rooms. Omran is also overseeing Oman's latest flagship master-development - the Madinat al Irfan Urban Centre – which, with the new Oman Convention and Exhibition Centre at its heart, is being billed as the "gateway to Oman". Other developments to note are the ongoing expansion of the Royal Opera House Muscat and the proposed redevelopment of Port Sultan Qaboos, which is likely to benefit the tourist trade in Muttrah, the historical heart of Muscat, hugely.
On the regulatory side, the government has taken the step of adding twenty-five countries to the list of those whose citizens are eligible for non-sponsored tourist e-visas. This means that nationals from the United States, the United Kingdom, Canada, Australia or Schengen Area can now obtain e-visas in advance of arriving in Oman, thereby helping to address waiting times at immigration. To put this into perspective, previously only Chinese, Indian and Russian nationals were eligible for non-sponsored e-visas.
These steps and others certainly seem to be making a positive impact. The Lonely Planet travel publication ranked Oman among the Top Ten Destinations in the world to visit in 2017 and, in its economic impact report for 2017, the World Travel and Tourism Council placed the Sultanate ninth in the world in terms of overall growth in the tourism industry.
Nevertheless, there are still hurdles that must be overcome if Oman is to stake and maintain a claim as a leading tourist destination. Aside from a need to enhance its infrastructure, the Sultanate also suffers from a local skills shortage in the tourism and hospitality industry. According to data from the National Centre for Statistics and Information, by 2040 there will be 500,000 jobs in tourism and hospitality in Oman, demonstrating the significant role the industry is projected to play in employing residents, both local and expatriate, in the future. However, there is still a perception that work in this sector, with its long and often unsociable hours and low pay, is unappealing, making it difficult to attract Omanis to seek employment in this field. It is therefore critical that the government does all it can to promote the tourism industry, not just abroad, but also locally in order to raise awareness amongst the Omani workforce as to the opportunities the sector presents.
Regardless of the current infrastructure challenges and labour shortages, recent developments in the Sultanate's real estate market are likely to serve to boost the tourism sector. At present, expatriates in Oman are permitted to buy property only in specially designated developments known as integrated tourism complexes (ITC). The development of new ITC projects is one of the elements of the Tanfeedh initiative and the Times of Oman newspaper recently reported that the Sultanate plans to invest US$10.39 billion in developing five new ITCs including 5,000 homes which will be available for purchase by expatriates. This should, indirectly, boost the tourist sector if more non-Omanis enter the market and purchase properties as holiday homes.
Recently, the government has taken its lead from the UAE and Saudi Arabia in passing legislation permitting the establishment of Real Estate Investment Funds (REIFs), a move which appears to be aimed at stimulating growth in the tourism sector as well as the real estate market in general. The Capital Market Authority's Decision No. 2 of 2018 (also known as the REIF Regulations) sets out a comprehensive regulatory framework whereby REIFs are permitted to invest in properties (of which at least 50% must be income-generating) provided they offer at least 40% of their capital to the public and trade on the Muscat Securities Market, thereby providing investors with the opportunity to invest in 'liquid' real estate interests.
REIFs typically own, operate and trade in several types of commercial real estate assets such as office buildings, apartment complexes, hospitals, warehouses, shopping malls and, most importantly for the tourism sector, hotels. An interesting aspect of REIFs is that while they are generally prohibited from investing in undeveloped lands, REIFs are permitted to invest in real estate under construction, subject to certain conditions. This will provide an important additional source of financing for hoteliers looking to develop projects in the Sultanate.
We also foresee further potential for the tourism sector in Oman should the concept of "Management Rights Schemes" be embraced by the government and other relevant stakeholders in the sector. Management Rights Schemes were first established in the late 1970's on Queensland's Gold Coast in Australia and are now broadly utilised across Australia and New Zealand. At the time, the Queensland government and hotel and resort developers realised, on one hand, that there was a financial advantage to titling separate hotel rooms or apartments and selling them to third party investors, providing a higher return on investment than a sale of an entire hotel or resort and, on the other, allowing third party investors – individuals, pension funds and other investors - a return on income generated by a hotel or resort as a part owner of a complex.
Management Rights Schemes are distinct to fractional ownership schemes, timeshare schemes and REIFs, which do not provide sole ownership or title to a distinct room or apartment. Resorts or hotels are run by an on-site manager or operator, who look after the day-to-day operations, as well as providing a "letting management service" to investor owners. They provide owners with a means of marketing their properties for short term leasing - mainly to tourists - creating additional accommodation and addressing under-occupancy issues in residential complexes.
Dentons is a global law firm with strong cross-border capabilities, and has operated in the Sultanate of Oman for 36 years (and in the Middle East for over 50 years). During this time we have played an active and integral role in assisting clients operating in Oman's tourism sector, from prominent international hotel groups to mixed use, hotel and ITC developers. Our associate firm, S&A Law Firm, provides dispute resolution and advocacy services throughout Oman, possessing a deep knowledge in all the main areas of dispute resolution, including litigation, arbitration and mediation.
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