Oman bets on tourism to protect itself against global shocks

Al-Monitor Pro Members

Tamara Juburi

Researcher and analyst focusing on the Middle East 

April 7, 2023

As part of an effort to revamp its tourism industry, Oman announced last week that it was launching visa free travel for nationals from 103 countries. This move is part of Oman’s wider effort to increase its global standing as a hub for international tourism, which is a central component of its plan to diversify its economy. In doing so, the sultanate aims to create more than 500,000 jobs and earn the country $22.5 billion in tourism revenue by 2040. However, effectively distinguishing itself from its neighbors, such as the United Arab Emirates (UAE) and Saudi Arabia, and successfully showcasing what it has to offer on the international stage will be key if the nation is to meet its goals.

Scenario 1: Oman’s vulnerability to global events will hinder its ability to meet 2040 goals

Oman’s heavy reliance on oil exports, coupled with its relatively small economy, make it more vulnerable to external shocks than many of the larger economies surrounding it, such as the UAE and Saudi Arabia. Based on this, changes in global prices that occur as a result of unforeseen circumstances — such as the war on Ukraine — can severely impact Oman’s financial strength and therefore its ability to meet the targets set out in the strategic plan. The 2020 fall in global oil prices, for example, strained Oman’s GDP, as well as its fiscal and current account balances. During this period, more than 26% of the nation’s GDP came from gas and oil sectors, contributing 75% of government revenues.

Another testament to this vulnerability was the COVID-19 pandemic, in which Oman was one of the hardest hit nations with tourist numbers dropping by more than 80% between 2019 and 2021. Despite current forecasts supporting a promising recovery — including a 348% increase in arrivals in 2022 compared to the previous year — the effects of the tourism slump that occurred throughout 2020 and much of 2021 can still delay Oman’s ability to meet its tourism targets in two ways. First, the slump in numbers throughout this period can slow progress toward reaching the goal of having 11.7 million visitors by 2040. Second, such economic shocks impact the Omani government’s liquidity, which is needed to fund the 20% of the tourism budget that is expected to come from public funds. Given the turbulence of the world economy today, Oman must act quickly to diversify its economy and make it more sustainable in the face of external global events.

Scenario 2: Oman will be unable to compete with its GCC neighbors for a higher proportion of foreign arrivals

Even if global events do not threaten the nation’s ability to meet its goals over the next decades, Oman will still face the challenge of competing with its GCC neighbors. Qatar’s 2022 World Cup is expected to continue having a significant impact in terms of making international travelers more willing to visit the region. However, with other GCC countries also seeking to boost their tourism industries, Oman will have to compete with its neighbors to convince foreigners that it is the best option. The UAE — which currently leads the region in terms of international visitors — will likely continue dominating in this space for the foreseeable future.

Furthermore, if it is to strengthen regional tourism, Oman will have to overtake Bahrain, which currently absorbs more than 40% of tourists coming from other GCC countries. Given that the World Tourism Organization found that GCC travelers spend 6.5 times more than tourists from other parts of the world, Oman should prioritize domestic and regional travel in order to increase the revenue generated from the tourism industry in the short- to mid-term. Doing so can go some way in funding its plans to increase the infrastructure needed to attract larger numbers of international travelers in the long-term. 

Tamara Juburi is a researcher and analyst focusing on the Middle East. Her particular areas of interest include entrepreneurship in the GCC, the evolving nature of the relationship between the EU and the region, and how global diplomacy translates into local business and trade opportunities.