Lebanon’s hospitality industry suffering from economic and tourist crisis

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Until Lebanon was hit by a wave of nationwide protests, the country’s dynamic and well-known hospitality sector, characterized by an exceptional food and beverage (F&B) scene and popular five-star hotels, was generally thriving.

As recently as October 17, 2019 – when the anti-establishment revolts first broke out – downtown Beirut’s five-star hotels were reporting average room occupancy rates of 75 to 80 percent. Two of the most high-profile hotels – Four Seasons Beirut and Le Gray – said that this rate was very good for Lebanon – and that they had been expecting 2019 to be a record year for their properties since opening in 2010 and 2009 respectively.

While F&B outlets were already complaining of a sluggish economy on October 16, a lot of them had also benefitted from increased business in the summer and were expecting a solid end to the year.

But then came the protests.

How did the protests impact the hospitality sector?

All expectations and hopes for the last three months of 2019 were dashed with the onset of the protests and the consequent uncertainty and instability which has plagued the country since.

Hotels across Beirut spoke of a severe drop in occupancy the day after the protests began.

“The problem with our sector is when negative things happen, the reaction is fast. We dropped from a 100 percent occupancy the day before the events to 4 percent within days. So yeah it was drastic,” said Rami Sayess, regional vice president and general manager of Four Seasons Beirut.

All five-star hotels in downtown Beirut said occupancy in November was in the single digits and that they do not expect it to increase by much in December. According to hotel managers at Le Gray and Four Seasons, political tension alone has not put tourists off visiting Lebanon historically – but now that it is has manifested in disruptive road closures or limited street violence, they are understandably staying away.

Meanwhile, F&B outlets are also suffering from a severe drop in customers due to a lack of solvency among most locals, who are now only spending their money on necessities and keeping their outings to a bare minimum. The majority of F&B outlets closed down for at least ten days during the worst days of the protests, with a negative impact on their business.

President of the Syndicate of Owners of Restaurants in Lebanon Tony Ramy said that 130 restaurants had closed down in September alone because of increased taxes on imports and a dwindling purchasing power among locals. The protests and the subsequent turmoil have only exacerbated the problem, with 265 more F&B establishments shutting down in October and November.

Ramy warned that if the situation continues as it is, the figure could reach 465 by the end of the year. Within the remaining venues, Ramy said sales have dropped by an average of 90 percent.

How is the sector surviving – and for how long?

The first nine months of 2019 were so good for hotels that they have been able to sustain operations from those revenues. “We are managing with our cash flow now – since it was a very good year, we have acceptable cash flow and acceptable reserves,” said Georges Ojeil, Area Manager of Le Gray.

Ojeil added that they, like other hotels in Beirut, have taken cost cutting measures such as limiting their purchases by more efficiently managing their stock and minimizing the cost of energy by shutting down some floors and elevators and decreasing the usage of diesel and fuel.

These measures will allow them to survive until the beginning of 2020, but it is unclear how they will cope in the long-term. “These measures should help us sustain until the end of the year; if this continues beyond January, we will have to think of other measures. We are taking things one step at a time and will do what we think is right,” said Sayess.

Meanwhile, operators of F&B outlets are also putting cost cutting measures in place including reducing their number of employees or giving them salary reductions. After Paul, the French-style café chain, gave a 30 percent pay cut to its employees at the onset of the protests, some staff angrily took to social media to advocate a boycott. Alongside store closures, these measures could have a dramatic effect on a sector that employs 150,000 people across different socio-economic levels, according to Ramy.

F&B operators have largely accepted that they will not be making any profits during these difficult times and are aiming to survive the crisis without shutting down. Rabih Saba, co-founder of hospitality development company Venture Group, said the whole hospitality chain – from the international supplier, to the local distributor, to the landlord or cluster developer and their own employees – needs to be more tolerant of the situation and accept deferred payments or payment in installments and checks, instead of cash.

Although the hospitality sector in Lebanon has been quite resilient historically, those in the industry believe it will not be able to bounce back quickly this time. Ojeil estimated it would take at least two months for the hotels to recover following the formation of a government.

“Leisure tourists need time to forget and rebuild their trust in Lebanon while local and regional corporate bookings are influenced by the economic situation in the country and will not hold conferences or invite delegations to Lebanon,” explained Ojeil.

Ramy said that even if a government is formed today, the economic situation will take time to improve - until then, consumers will continue to suffer from low purchasing power and guard their money.

While others are more hopeful, the outlook remains bleak. “If a government is formed today, it will give back trust and help us to restructure our companies and pull ourselves back up in a few months. But if the situation continues like this, I really don’t know where we are going,” said Jean Claude Ghosn, CEO of Ghia Holding which owns Lebanese cuisine restaurant Abdel Wahab and Duo among others.

Contrary to previous years, it seems that 2019 holiday celebrations in Lebanon will be subdued, as people hope for the country to get back on its feet and tourists to return.

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