Lebanon—no business as usual

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It’s a haemmorage, but we are used to it. It’s not the first time and it won’t be the last.

The situation of the Lebanese restaurant industry is summed up in the slogan on the Lebanese Tourism Ministry website "Lebanon, still as vibrant as ever!" It is at once an acknowledgement of the difficult situation in Lebanon, and a description of the amazing resilience of the Lebanese tourism industry.

The worst economic damage is not from the war, but from the Hezbollah-led opposition sit-in which has all but shut down the Central Business District (BCD). Protesters are camped out in tents in front of businesses and set up roadblocks which make it very difficult to get into the BCD.

According to Paul Ariss, President of the Syndicate of Restaurant and Café owners, of the 103 restaurants in the BCD before the war, around 70 have now closed, while just 15 were still serving lunch. Overall, losses in the restaurant industry are expected to top $30 million. And some feel that the closure of the restaurants in the BCD has the capacity to affect the entire Lebanese economy.

The downturn really began in February 2005, when Lebanon's Prime Minister Rafik Hariri was assassinated. Prior to this, business in the upscale BCD was thriving and new investment was pouring in. But the assassination and the wave of bombings that followed hit the commercial heart of Beirut hard as shoppers and diners started going elsewhere-to quieter areas. Yet while many restaurants stayed open through 2005, the 2006 war with Israel destroyed more than 800 businesses in and around Beirut, and led to a loss of around 109 business days. Then, in December 2006, came the Hezbollah-led sit-in.

The government has announced a series of measures aimed at shoring up failing businesses, including providing loans and waiving property taxes and fees. But implementation depends to ratification by the Lebanese Parliament - which has not met since December due to the political standoff.

BCD business owners have met several times to ask the opposition parties to end their blockade, but have met with little success. In an article in Trends magazine, the sit-in foreign press officer, Marc Sassine, argued that, "Its better to suffer a little now than a lot later," in the fight against what the opposition sees as a corrupt political system. Solidaire, the largest landowner in the BCD is owned by Hariri's family, so the protesters are not motivated to do anything that will help Solidaire recover.

Yet the tourism sector in Lebanon is nothing if not resilient, and while businesses downtown suffer, life goes on in other areas of Lebanon. "I invested $1 million in my downtown restaurant and now it is closed," complains Joe Basili, founder of Salmontini, "but the beaches are full up and the rooftop [restaurants] are doing well because they are safer."

Some downtown businesses have also relocated to the mountains, while others are hunkering down and waiting to reopen in better times. "Many restaurants are closed and waiting for better days," says Ariss, adding, "It's a haemmorage, but we are used to it. It's not the first time and it won't be the last."

There are already small signs that some of the tourism sector is beginning to recover, driven largely by Lebanese expats and tourists from GCC countries. Many of these people visit Lebanon several times a year on holiday. This year they waited longer to take their summer holidays - but they are finally coming. "The hospitality sector has, without a doubt, been affected since July 2006 with behavioural booking patterns for the intra-regional leisure traveller in particular being shorter lead and/or last minute, confirm Jorg Hauri, General Manager and Kurt Vichman, EAM of Food and Beverage at Movenpick Hotel and Resort Beirut.

Rani Ghareeb, General Manager of Howard Johnson Beirut concurs, "Some tourists are now coming from the Gulf, Spain, France, the US...in general everything is going fine." Despite such upbeat talk from hotel managers, the numbers show that everything does not, in fact, look fine.

A recent survey by Deloitte & Touche gave Beirut hotels an average occupancy rate of just 32.9%, with a RevPAR of -53.6% for the first half of 2007 - the lowest in the region.

Despite the dreary numbers, most hotels report that they are positive about the future. "We are confident it is just a matter of time to restore the complete return of tourism," agrees Palm Beach Hotel sales and marketing manager Nadine Zaccour.

Some hotels and restaurants have also found a new client base in the many journalists and other personnel assigned to Lebanon during the war. According to Hauri and Vichman, "...we have discovered a new found international client base of visitors whom were assigned to cover Lebanon during challenging times..... Best of all, these clients have returned on multiple occasions, for holiday with friends and families."

In April, the Tourism Ministry and the restaurant association launched a website - www.restovisa.com - aimed at wooing tourists back to Lebanon's restaurants. The site sells discount tickets to restaurants throughout the country. Participating restaurants donate a percentage of their profits to a fund to assist struggling restaurants. Says Paul Ariss, president of the syndicate of restaurant and café owners, "Loans won't help, just to spend them and then [they will be] in losses again."

Everyone agrees that the biggest challenge to the Lebanese economy and tourist industry is to restore confidence. Unfortunately, this is difficult while the opposition sit-in holds the BCD hostage. Many investors are waiting to see how the political situation resolves itself before going ahead with planned investments. Around 11 new hotels slated to be built in the BCD with foreign investment have been put on hold. Others, such as UAE based Habtoor Group Chairman Khalaf Al Habtoor, are considering more drastic steps. Habtoor has recently threatened to sue the state of Lebanon before the U.N. Commission on International Trade Law and International Center for Settlement of Investment Disputes for failing to protect business investments. Revenue at the Habtoor Grand Hotel and the Boulevard Mall in downtown Beirut has been seriously hit by the sit-in.

Some analysts also worry that the situation in the BCD will have a knock-on effect in investor and consumer confidence. They point to how the inability of the Lebanese government to protect the property rights of restaurant owners in the BCD may seriously affecting investor confidence in the entire country for the long term.

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