As Oman prepares for next month's grand opening of the Oman Convention and Exhibition Centre, a backer has walked away from an upcoming Crowne Plaza hotel connected to the new space.
In a statement to Muscat Securities Market, the only stock exchange in Oman, Al Batinah Development and Investment Holding said the hotel's developer has "has imposed additional fees of OMR7 million [$18.2 million] on the project as a whole for the rights other than what has been agreed previously".
"Thus, the value of the company's contribution to the project is OMR1 million [$2.6 million], representing 5 percent of the project capital instead of OMR656,000 [$1.7 million], which was defined previously."
In a January statement to the Muscat bourse, Al Batinah announced that it had agreed to invest $1.7 million, or 5 percent of the total value, in the capital of Destination Hotel Management Co, a subsidiary of Omran that owns the Wadi Irfan Crowne Plaza Hotel project.
But with the increased investment cost, Al Batinah's board of directors has opted to withdraw the firm's participation due to "non-feasibility of the investment." The company emphasized that there is "no obligation on the company or impact on the financial statements of the company as a result of this decision."
The hotel, once expected to open this year, is now slated to debut in the first quarter of 2017.
The Al Batinah Development board, which met on Thursday, also approved the unaudited consolidated financial statements for the first half of 2016. The net profit of the group rose to $716,000 from $506,000 a year earlier.
This financial improvement is notable as the Muscat Securities Market has struggled recently due to weakness in financial stocks. Al Batinah Development, in particular, dropped 2.04 percent on Tuesday alone, days after the company abandoned the Crowne Plaza development.
The Convention Center and the Waterfront
Al Batinah's decision is notable given the promising future of Oman's business and leisure tourism scene. The new convention center is slated to open next month with four hotels, including a JW Marriott, also due to open next year.
As noted earlier this year, global hotel companies are looking to expand their footprints in Oman. Emaar The Address, the Mandarin Oriental Hotel Group, Hyatt, Viceroy Hotels and Resorts, Hilton Hotels and Resorts, Taj Hotels Resorts and Palaces, Banyan Tree Luxury Hotels and Resorts, Chedi and Four Seasons are reportedly looking to develop and/or manage one of the seven hotels planned for a new waterfront development in Oman.
“In this era of low interest rates, and low returns on more traditional investments, investors are looking for new markets and avenues to provide healthy and secure sustainable and recurring returns,” Salah Al Ghazali, chief investment officer at Oman’s tourism body Omran, said at the time.
And earlier this week, the Sheraton Hotel in Oman announced that it would reopen in October after closing its doors a decade ago.
But while Oman waits for the convention center, it is facing a downturn in tourism numbers. According to latest government data, hotel income in Oman has slumped by 36 percent and there was an overall 19-percent drop in visitors.