Some of the world’s best-known hospitality operators are vying to open hotels in a new multi-million mixed-use waterfront destination in Oman, which will regenerate one of the oldest ports and market districts in the Arab world.

Brands including Hyatt, Hilton, Four Seasons, Mandarin Oriental, Banyan Tree and Viceroy have declared their interest in opening hotels in the Mina Sultan Qaboos Waterfront Project, which will enter the first phase of construction in June 2016.

The state-owned Oman Tourism Development Company (Omran) will establish a new company to develop the OMR500m (US$1.3bn, £917.7m, €1.19bn) waterfront scheme – which it says will “set new standards for authentic waterfront destinations in the region” – on a 101 hectare site in the centuries-old Sultan Qaboos Port in the province of Muscat.

It has formed an investor relations task force to identify funding and project partners from the private and public sectors, who will hold 49 per cent ownership in the project to Omran’s 51 per cent.

The development has been green lit by the government of Oman to stimulate the country's tourism sector. The site will feature a wide range of leisure facilities, including seven waterfront hotels, an aquarium, a yacht club and marina, an extensive children’s entertainment village, a retail and boutique shop district, restaurants, cafes and a marine heritage visitor centre. The project will also include an arts, crafts and organic farmers market called Emporium.

Highlighting the vision for the new development, Zoltan Kali, chief strategy officer at Omran, said: “While it is primarily designed to become a hub for the community by adding new recreational and leisure activities for locals that reflect the authentic heritage of the old port, it will also be a big draw for international visitors. Comparable international examples prove that tourists are attracted to urban destinations that are popular amongst the local community.”

Omran’s chief investment officer Salah Al Ghazali said: “This really is a project of national significance, and will be considered as one of the prime visitor destinations in the region when Phase One opens by 2020 ahead of World Expo in Dubai.”

Al Ghazali said the expo will bring an additional 25 million visitors to Dubai, located in the neighbouring United Arab Emirates, and pledged Omran will be ready to take advantage of the influx of international tourism to the region.

“By taking a position in the waterfront development, investors clearly understand the attractive and enduring returns on offer with this state backed project,” he said. “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.

“International hotel operators have clearly taken notice of this potential, and we’re pleased to be talking with some of the leading names in the industry to operate our iconic waterfront hotels.”

Omran said project funding will be secured in July 2016 to coincide with the start of construction.