(MENAFN- Muscat Daily) There is a huge scope for international economy hotels to set up properties in Oman as not one economy class hotel in that category is slated for launch in next five years, a leading advisory services provider in MENA region has said in its report on supply gap in economy hotels in Oman.
Colliers International, which has been providing advisory services in MENA since 1996, reported that the situation in Oman represents a clear supply gap as 6,616 hotel rooms and service apartments are currently in the pipeline for Muscat in the next five years, all in the four and five stars segments, but no internationally branded economy hotels have been announced to open in the coming years.
Based on the Colliers Econometric Model for the period 2013-17, the Muscat market could potentially absorb an additional 985 economy hotel rooms over and above forthcoming supply.
Of the 35 new hotels scheduled to open in the next five years throughout Oman, not one of them will be an economy hotel. This represents a clear market gap for a quality internationally branded economy hotel offering, said the report.
Oman has a combined total of 50 economy hotels which does not include guesthouses and serviced apartments.
The Colliers research indicates that 25 economy hotels currently operate in Muscat, of which only three are international brands.
This segment of two and three-star hotels have an average of 66 keys, limiting the potential economies of scale achieved in larger properties.
The Dhofar governorate, in which Salalah captures most of the tourist market, is dominated by one-star hotels and hotel apartments which do not offer the same services or products as internationally branded economy hotels.
Although six economy hotels exist in the local market, they are all ‘unbranded' (independent) properties, it says.
Filippo Sona, director and head of hotels in MENA for Colliers International, said,
''The majority of economy hotels in Oman are either locally branded or ‘unbranded', many of which are not purpose-built and of a limited size.
CURRENT HOTEL SUPPLY 2013
Owing to the fragmented nature of the market, hotel apartments and guest houses tend to compete with the economy hotel market, as there is a lack of differentiation between the two products from a consumer standpoint,'' Sona said.
Muscat has 25 economy hotels, which are composed of 13 three-star and 12 two-star hotels, with a combined count of 1,653 rooms.
Twenty per cent of all economy hotels in Muscat are branded, eight per cent are locally branded and 72 per cent are ‘unbranded'.
Only 80 per cent of two-star, and 31 per cent of three-star properties in Muscat are internationally branded, representing a supply gap in the market for international brand economy hotels.
Muscat is the strongest performing hotel market in Oman, with occupancy rates exceeding 60 per cent in H1 2013, closely followed by Musandam and Dhofar.
‘Unbranded' four-star hotels in Muscat attain lower average rates than international brand three-star hotels, due to service inconsistency and perceived low quality.
In 2012, branded three-star hotels were able to achieve a 15 per cent premium in average rate on ‘unbranded' four-star hotels. Pointing to the economic viability of prospective investment in the branded economy hotel segment, the report said that current market landscape both in Muscat and Oman being dominated by locally branded supply, it can easily be outperformed by international operators due to operational efficiencies, efficient design and strong global distribution system (GDS) capabilities
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