Fabio Scacciavillani is chief economist for the Oman Investment Fund. He started his career working for the International Monetary Fund

In the middle of the Arabian Peninsula, the summers can be brutal: hot and arid, with temperatures reaching well into the high 30s and beyond.

But Dhofar, an area in the far south of Oman, is different. This is one of the few places in the peninsula to experience the ‘khareef’, a tropical monsoon lasting from July to September. Here, in summer time, the desert blooms.

“The region has a microclimate thanks to the monsoon, so the summer is cool and rainy,” explains Dr Fabio Scacciavillani, chief economist for the Oman Investment Fund, which recently announced its investment in one of the first luxury hotels in the region: the Alila Salalah, a 125-key beachfront destination resort due to open in the second half of 2017.

“It’s a bit like Scotland: breezy, green and misty,” says Scacciavillani. “When the rest of Arabia is torrid, [Dhofar] maintains this very pleasant temperature of 25?C. And in the winter, it’s also very pleasant because it’s a tropical spot. The region could have tourism 12 months a year.”

Better exploiting such unique natural assets is just one of the ways in which the Sultanate of Oman is seeking to develop its fledgling leisure and tourism industry, as part of a wider government-led drive to diversify the country’s economy away from oil and gas.

The Oman Investment Fund (OIF) is one of a number of institutions within the country supporting these efforts. A sovereign wealth fund founded by royal decree in 2006, the OIF invests in the public equity, private equity and real estate markets. According to Scacciavillani, it was born as a companion to another sovereign wealth fund: the State General Reserve Fund (SGRF), “a sort of rainy day fund” for the Sultanate’s surplus oil and gas revenues. But whereas the aim of the SGRF was and is to support the government’s budget, the OIF is better described as “a future generations fund [with] the aim of transferring to future generations the money from oil and gas exports. In that sense, it has a distinctive focus on long-term growth.”

As such, the OIF invests in a wide variety of industries, from engineering and transportation to financial services and healthcare, as well as high-value manufacturing and high-value services – among which leisure and tourism is currently a priority.

TOURISM GEM
A native Italian with a PhD in economics from the University of Chicago, Scacciavillani started his career with the International Monetary Fund. He later held senior positions with the European Central Bank and Goldman Sachs, before moving to the Middle East in 2006 as head of economic research at the Gulf Organization for Industrial Consulting. From there, he served as director of macroeconomics and statistics at the Dubai International Financial Centre until taking up his current position four years ago.

As chief economist of the OIF and a member of its investment committee, Scacciavillani has a dual role. The first is to analyse global economic trends, to evaluate their potential impact on countries where the fund has interests and to advise on its asset management strategy. The second is to identify domestic investments that have the potential to not only deliver good returns, but also to help strengthen and diversify Oman’s economy.

It is with this second goal in mind that the OIF has sharpened its focus on leisure and tourism. “Tourism is a focus because it’s a high-value sector, but also because it’s labour intensive: it provides great opportunities for job creation,” says Scacciavillani. “And Oman is, from a tourism point of view, a gem.”

At 300,000sq km, Oman is about the size of Italy, but with a population of just four million. Such a light human footprint combined with great geographic diversity – the country boasts 3,000m-high mountains, large swathes of unspoiled desert and almost 1,700km of coastline – makes the country particularly attractive to certain type of visitor: wealthy, sophisticated and environmentally conscious. “Oman now has a reputation for high-end tourists,” says Scacciavillani. “It’s a sort of ‘happy few’ destination.”

There are already a number of luxury hotels and resorts in the country catering for this market, especially in and around the capital of Muscat; Scacciavillani names the Chedi Muscat and the Shangri-La Barr Al Jissah Resort & Spa, 20km outside the city, as particularly noteworthy. In the north of the country, the Six Senses Zighy Bay on the Mussandam peninsula is another jewel.

But in the drive to bring Oman’s tourism industry up to the highest standards, these developments are only the tip of the iceberg, says Scacciavillani – and in certain regions, such as Dhofar in the south-west, the Hajar Mountains in the north-east and a host of pristine islands along the coast, there is huge scope for development.

For the OIF, the journey towards realising this potential is just beginning, with investments not only in the Alila Salalah – owned by Alil Salalah SAOC, a joint venture with an Omani investor – but also in an InterContinental Hotel within a new convention centre in Muscat, slated to open next year. A third development, a luxury resort in the mountains, is also in the pipeline.

PAST INVESTMENTS
The OIF is by no means new to leisure and tourism investing, however. In 2008, a few years before Scacciavillani came on board, the fund bought a 50 per cent stake in Jurys Inn, one of the largest hotel chains in the UK and Ireland. The financial crisis saw Irish property valuations collapse, leading Jurys Inn’s banks to take control of the company. But a debt write-off by the Royal Bank of Scotland (RBS) combined with a large injection of equity from the investors significantly reduced the debt pile, and in 2012 a debt-for-equity swap by RBS – combined with business management measures – successfully revived the group’s fortunes.

“We had to endure very tough times, but we made an enormous effort to put Jurys Inn back on its feet,” says Scacciavillani. “We made a monumental turnaround of the company and then we successfully exited the investment [in January this year].”

While Jurys Inn was a very different kind of investment to the hotel projects the fund is currently investing in, it proved an invaluable learning curve. “We have experience of greenfield projects and restructuring [and] we bring this kind of expertise to Oman now.”

ATTENTION TO DETAIL
The OIF’s decision to invest early in the Dhofar region – specifically around Salalah, the region’s capital and Oman’s second city – was an easy one. With its unique microclimate and access to the beautiful beaches of nearby Mirbat, the area has huge appeal. And while there are already a number of hotels in the area (including Marriott and Hilton sites), there is still enormous development potential, says Scacciavillani, particularly at the top end of the market.

The Alila Salalah will be the second Alila hotel in the country. The first – which the OIF has not invested in – was the Alila Jabal Akhdar, which opened last spring in the Hajar Mountains (Jabal Akhdar means ‘Green Mountain’ in Arabic).

An Indonesian-born company with a portfolio of eight luxury properties (plus three in development) across the Asia-Pacific, Alila Hotels and Resorts is known for its innovative design, unique destination experiences and clear commitment to sustainability. For the OIF, it was an obvious choice of partner. “[The brand] is luxurious but it also has an environmental consciousness, a blending with nature, and an attention to detail which is almost manic,” he says.

“When you enter the rooms, every little detail has been painstakingly thought of, from the bed to the artwork to the towels in the bathroom to the furniture. It’s an experience in itself. Beyond the beauty of the nature around it, [there is] a feeling you have when you enter [an Alila] resort that you are somewhere special. It’s designed to please all five senses.”

As well as 100 suites and 25 villas, the Salalah resort will include fine dining restaurants and a Spa Alila wellness centre. While KGD+MT Architects and Engineers have designed the resort in a “contemporary Dhofari” style, BLINK Design Group (left) has been selected to bring out the Dhofari influence in the interior design.

Scacciavillani has no doubt that getting the design right is absolutely essential to a project’s success, and it is consequently something the fund pays close attention to, from the blueprint right through to “the materials they use for doors.”

In pristine locations such as the Hajar mountains and coastal Dhofar, sustainable development is also crucial, he adds – not only because of valid environmental concerns, but also because of its increasing importance to the high-end tourist market.

In addition to its design credentials and track record on sustainability, Alila also offers the advantage of an Asia-wide reservation network. And although the OIF is not an investor in Alila Jabal Akhdar, the presence of two Alila resorts in the country can only be an advantage. As Mark Edleson, president of the group, says: “We can now offer our guests the Hajar Mountains and Mirbat beaches in one Oman holiday.”

The OIF is now planning to invest in its own resort in the Hajar Mountains, which like Dhofar, has the advantage of pleasant year-round temperatures in addition to breathtaking scenery.

As Alila already has a property in the area, the fund is now looking for another hotel management partner for the project. Although the two resorts will in theory be competitors, Scacciavillani is confident not just that there will be plenty of business to go round, but that a greater choice of resorts in the area can only have a synergistic effect on the number of tourists visiting it.

CRITICAL MASS
Scacciavillani is keen to stress that the OIF is only one of several organisations focused on building tourism in Oman. Leading the charge is Omran, a government agency established in 2005 with the express purpose of growing the capacity, scope and potential of the sector through development, asset management and investment.

According to Scacciavillani, the two organisations are in close contact, regularly sharing ideas and opportunities. Among other things, Omran owns Alila Jabal Akhdar – which it also developed – and it’s the master developer for the Oman Convention and Exhibition Centre in Muscat, where the OIF is investing in one of four hotels on the site.

Until now, it has been difficult to truly realise Oman’s tourism potential due to what Scacciavillani describes as a “bottleneck” at Muscat International Airport. However, with a second terminal with a capacity of 12 million passengers a year due to open in 2016, this problem will soon be solved. Together with the opening this year of a new airport in Salalah with a capacity of 2 million passengers a year (compared to 200,000 in the city’s existing airport), the flow of visitors into the country is assured.

The next step, says Scacciavillani, is to increase the supply of hotel rooms until the industry has “the critical mass to attract a larger cohort of the tourist market. Then we expect there will be an organic growth with an exponential dynamic,” he says.

Hand in hand with this is a need to expand the range of leisure activities on offer in order to truly leverage Oman’s unique microclimates and, from there, to create a brand for the country. “We have to characterise Oman, to give Oman a certain flavour. I don’t mean that we need to create a slogan like ‘Malaysia, Truly Asia’ or ‘Incredible India’, but we definitely need [to plant] in the minds of tourists an association between Oman and a certain lifestyle or concept: active or eco-friendly,” says Scacciavillani. “At present, tourists come for a quiet vacation in a luxurious but touristic environment. That’s the main brand association. But we can do better than that. For example, we can cater for rock-climbing enthusiasts, windsurfers, kitesurfers... Sailing is another activity that can be pursued in Oman. But to put all these plans in place needs time, it needs balance and you need to involve the tour operators as well.”

Although domestic investment is a priority for the OIF, the fund is also looking for new leisure and tourism opportunities outside of the country: while it’s too early to name names, Scacciavillani confirms that he and his colleagues are speaking to top hotel operators throughout Europe and the Middle East. Such investments are important not only for their potential to deliver strong returns, he says, but also for the indirect benefits they offer – not least, access to global reservation networks and hotel management talent pools.

This much is clear: the OIF’s efforts to put Oman on the international tourist map are only just getting underway.