Oman’s friendly cartel

The end is nigh for bargain hotels in Oman after hotel owners decide to adopt a minimum room rate.

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By  John Irish Published  March 18, 2004

The Sultanate of Oman is set to introduce a minimum room rate for hotels in Muscat beginning early April. The decision followed two years of research looking into the hospitality sector carried out on behalf of Oman’s hotel owners and the Omani government. “We were having a huge problem here in that the five star hotels were killing the three, two and one star hotels by radically cutting their rates,” explained Mohammed Ali Said, director general Oman Tourism. “The five star hotels were selling rooms at two star prices, so they were losing money and the country was losing money." According to statistics recently released by Deloitte & Touche, average room rates in Muscat stood at $68 in 2002, almost half the regional average. The new regulations mean hotels will enforce a minimum price irrespective of season or the state of the industry. However, room rates will be able to go up during the peak season. Unlike other similar associations elsewhere in the Gulf, the room rate will also differ depending on facilities. Beach hotels will have one price, city hotels another, four star establishments another structure, while three star hotels will be subdivided depending on facilities. In order to ensure hotels keep to the system, a new hotel owner’s association, abiding to various codes and regulations will also come into force in the next few months. According to Abdul Al Nabri, owner of Muscat’s Radisson SAS the move was inevitable. He claims the reasoning was just a simple question of demand against supply. “The demand on rooms was less than what was available, so to minimise the losses on hotels and to enable us to provide a high standard of service to guests whether corporate, leisure groups or individuals, it had to be done.” However, not everybody is convinced this is the best way. Elie Younes, senior associate at hospitality consultants HVS suggests things may not be so rosy as Oman’s expansion forges ahead. “Sure, it will help the hotels,” says Younes. “It may have a short term negative impact on occupancy rates, but in the long term it’s good, as long as you don’t have a lot of hotels opening, which will put the pressure on the cartel or whatever you want to call it.” Oman’s tourism authority set the tone last November. US $30 million was set aside to promote the Sultanate over two years, primarily in Europe and the GCC. Likewise, a better political climate has to a certain degree helped pave the way for a spate of lucrative projects. The Shangri-La Resort in Bar Al Jissah, is scheduled to open in 2005, providing a further 680 rooms. In February the government unveiled the $805 million ‘The Wave’ tourism development project stretching over 7.3 kilometres of beach.

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