Oman Invests in Tourism Sector to Diversify Oil-Based Economy

In an era of low oil prices, many of the world’s oil-exporters are looking to diversify their economies from reliance on this volatile commodity.

In an era of low oil prices, many of the world’s oil-exporters are looking to diversify their economies from reliance on this volatile commodity.

The Sultanate of Oman is one of several countries in the Gulf Cooperation Council (GCC) that is trying to transform its oil-based economy by investing in various critical non-oil industries, such as manufacturing, logistics, fisheries, and mining.

“Non-oil activities are forecasted [sic] to grow at 4.3% annually during 2016 to 2020, whereas oil-related activities (at constant prices) will witness a slight increase at just 0.2% annually,” according to projections by the Tanfeedh (“Implementation”) handbook published in 2017 by Oman’s National Program for Enhancing Economic Diversification. At the moment, one of the main non-oil industries that Oman is focusing on developing is the tourism industry.

Oman, located in the southeastern part of the Arabian Peninsula, not only has many unique cultural and historic sites, but it also enjoys a wealth of natural scenery and ecological diversity. The sultanate’s strategic location in the continent of Asia, and its proximity to Africa and Europe, also make it an ideal candidate to host and organize international and regional events. However, despite Oman’s many inherent advantages, the country has yet to fully capitalize on its tourist potential.

In the World Economic Forum’s 2013 Travel & Tourism Competitiveness Report, which ranks countries by their travel and tourism attractiveness, Oman was ranked 57 out the 141 countries indexed. Two years later, in 2015, it had dropped to 65 out of 141. In the most recent report published in 2017, the sultanate’s ranking dropped yet again to 66 out of 141.

If Oman is actively trying to improve its tourism industry, why are its efforts not reflected in its international tourist rankings?

While the Omani government is making a concerted effort to develop the country’s tourism sector, there are a number of obstacles that stand in the way. Among the main challenges deterring the growth of the Omani tourism industry are the length and complexity of the bureaucratic processes required to apply for approvals to operate tourism businesses, the lack of services and unique tourist activities in the country, and insufficient investment in marketing to promote Oman as a premiere holiday destination.

Other challenges for the Omani tourism industry include complex visa-issuing procedures, inadequate air transportation, a lack of qualified staff in the tourism sector, an insufficient number and quality of hotel rooms, and a lack of competitive pricing for existing hotels.

In order to address these issues, Oman has had to focus on improving the country’s overall business environment by introducing new legislation and eliminating redundant policies. It has also had to improve the coordination between multiple government authorities to ensure that the policies governing such things as land use, rent, finances, and human resources facilitate the growth of the tourism sector in the future.

In 2016, Oman’s Ministry of Tourism announced the launch of the 2040 Tourism Strategy, which aims to invest close to 20 billion Omani Rials (around $7.7 billion) “to diversify [Oman’s] economy and…create jobs by offering the world enriching tourism experiences with Omani personality.”

Through the 2040 Tourism Strategy, the sultanate aims to generate 535,000 jobs, increase the tourism sector’s contribution to the GDP by 6-10%, reach a Social Responsibility Index of 850/1000, host over 11 million international and local tourists, and add an inventory of around 65,000 hospitality keys over the next 25 years.

Oman also seeks to achieve a host of other socio-economic objectives through the 2040 Tourism Strategy including the diversification of job opportunities in the country, the development of tourist-related entrepreneurship, and the preservation and promotion of Omani culture on a national and international level.

As a part of its long-term tourism strategy, the sultanate aims to focus on nine business models (vacations to relax; touring and culture; nature and adventure; special interest; short breaks and stop overs; festivals; meetings and events; day visitors; and friend and family visits) and five target tourist profiles (millennials; middle class families and couples; high income families and couples; individuals and couples between the age of 30-60; and adventurers) to increase its competitiveness and attractiveness on a global scale. However, the most interesting and critical part of the Oman 2040 Tourism Strategy is the “cluster” concept that it has developed.

Clusters, or groups of facilities or services, will be located in tourist centers all across the country and they will be comprised of “well-serviced groups of attractions [that feature] ample accommodation, a transportation network, infrastructures, tourist facilities and services,” according to the Oman Tourism Strategy executive summary published by Oman’s Ministry of Tourism and THR Innovation Tourism Advisors in 2016.

Ultimately, Oman’s cluster strategy intends to develop 14 natural, cultural, and urban tourist clusters that will be connected by 5-7 high value itineraries for visitors to explore. Oman introduced its first cluster in 2016, and it projects that it will deploy the rest of its planned clusters in 2021, 2026, and 2031.

While revenue from Oman’s oil and gas industry funded the first 50 years of its economic growth, new non-oil activities will play a vital role in transforming the country’s economy. By introducing more comprehensive, sustainable and inclusive development, Oman’s latest tourism strategy promises to bring on a new era of modernization, globalization, and economic prosperity to the country.