Dancing to a different beat

The Lebanese food and beverage sector embraces the changing market

Among the first things you hear about the Lebanese people is how much they love to party and go out. This reputation still prevails, and although those in the food and beverage (F&B) industry are facing more challenging circumstances by the year, they still say their business is performing a lot better than other sectors of the Lebanese economy.

Lebanese market and expats

The food and beverage (F&B) industry has become reliant on those residing in Lebanon and on the Lebanese expats who visit during the summer or winter holidays, says Toni Rizk, chief executive officer of TRI Concepts, which operates a collection of bar-restaurants across Lebanon, explaining that the tourists Lebanon has been attracting these past few years are not “big spenders”.

As such, continues Rizk, the industry has been able to sustain itself to a greater extent than other, more tourist dependent industries, such as hotels.

Seasons to Party

This decrease in tourists with a high purchasing power, coupled with a market catering heavily to expats on seasonal visits to their homeland, has made summer the coveted season for the nightlife industry. Many operators take advantage of the good weather to open outdoor clubs or bars which cater to the increased demand.

“The summer is generally more happening than winter. Also, there are returning expats [in the summer] so they nourish the activity. We have seen from our existing venues that we achieve higher revenues in summer and that’s why we focused on having an outdoor venue,” says Rabih Fakhreddine, CEO of ‘7 Management’, which launched the successful outdoor lounge bar and restaurant Seven Sisters in summer 2015.

However, without a similar concept for the winter, explains Fakhreddine, they would risk losing the employees they had trained and invested in as well as the client base they had developed over the summer. This is why he says his company is developing a similar concept to Seven Sisters called Black, but for winter and indoors, to be launched by the end of 2015.

Tony Habre, CEO of Addmind, which operates White in the summer and Indie in the winter, both on Dora’s seaside road, also believes in the importance of a winter venue in retaining staff. “We always keep our winter season outlets, even if they are not that profitable, to be able to keep our staff who are our secret and our strength.”

Lower purchasing power

When Lebanese expats return to their adopted countries, the main market for the F&B industry becomes the local Lebanese. With the local economic crisis causing these Lebanese to economize in their spending habits, F&B operators are witnessing a change in trends.

“The affordable concepts are the ones which are working most today while the fine dining segment is suffering because the purchasing power in the country is low,” says Tony Ramy, president of the Syndicate of Owners of Restaurants, Cafés, Nightclubs and Pastry Shops.

Marwan Ayoub, managing partner at Venture Group, says Lebanon’s F&B industry is moving more toward quick service restaurants (QSR) and low entry concepts like snack shops because of the current economic crisis, but adds that it should balance out again into the more expansive concepts (big clubs and restaurants) when the market is back to normal.

Speaking for the nightlife segment, Rizk, who operates The Bohemian in Mar Mikhael, sees that the trend in 2015 was generally geared toward smaller bars, where people can enjoy cocktails and bites, as opposed to big clubs where people usually spend more and go all out.

Indeed, main areas full of 60 to 70 capacity bar-restaurants such as Mar Mikhael, Badaro or Hamra enjoyed more sustainable footfall than many of the city’s nightclubs and large venues which were busy mainly on weekends.

“Even in the Lebanese cuisine industry, you have both restaurants and cafés but you see people gravitating toward cafés more because the average bill there is $20 while in a restaurant it can go up to $60,” analyzes Ramy in light of the public’s decreasing purchasing power in recent years.

Operators Adapting

Faced with this reality, operators in the F&B industry have had to adapt their business models and strategies to accommodate their clients’ needs for affordability.

As such, investors are shying away from the big projects and playing it safe by investing in smaller outlets, explains 7 Management’s Fakhreddine.

The trend in 2015 was generally geared towards smaller bars

“This is why we are not seeing big nightlife concepts like White or Skybar anymore because this costs real money and it’s not the right time in Lebanon. We no longer have the crowd that can fill a place with a capacity of 1,500 for five days a week,” says Ayoub, explaining that operators in the industry have adapted their business models to go in different directions such as cluster projects or expanding into the region.

Cluster Power

While areas which have grown organically such as Mar Mikhael or Badaro remain Beirut’s nighttime destinations of choice for 2015, many operators are choosing to seek strength in numbers by becoming tenants in a hospitality cluster project.

Hospitality clusters have grown in fame in the F&B industry, with The Courtyard in Hamra opening late 2014, The Village Dbayeh opening in November 2015 and a few other such projects in the final phases of completion.

Rizk, who has recently opened Trumpet, a vintage themed bar-restaurant in The Village Dbayeh and who is finalizing his other outlet, Lily’s Lounge Bar, in another cluster called Blueberry Square, says the cluster model has positive elements. “One benefits from having a variety of pubs next to each other in an organized manner because the project becomes a destination with the potential to attract more footfall than a standalone venue,” he explains, adding that his experience with Trumpet has been favorable in relation to the cluster model and its services such as landscaping, common marketing and a well-structured management body.

Rabih Saba, managing partner of Venture Group, which has developed The Village and is in the final phases of development for Backyard Hazmieh, says that for a cluster model to be successful, it needs to create outlets with similar concepts and average check and a strong marketing campaign concentrating on its target clientele. “Clusters are successful if they reach the target clientele they want to reach; it’s all about positioning.” Saba further explains that clusters don’t need to be aimed at the “trendsetters” to be successful but can be directed towards families or lower income clients as well.

Expanding into the Region

More and more F&B operators are branching out to the neighboring regions, mainly the Gulf, as a means to cope with an unstable security situation in Lebanon.

Interest in regional expansion has gotten to the point where, according to Ramy, many F&B operators are opening their creative concepts in Lebanon solely to register them locally and prove themselves, while developing their franchise manual according to international standards and finally selling their concept to a franchiser.

“When Lebanese are designing new F&B concepts, they are thinking of concepts that would work well outside; hence you see more QSRs opening in Lebanon with the aim of moving abroad,” says Saba, adding that Lebanese operators are speaking of expansion to Europe and the United States, following the successes of Semsom and Classic Burger there, when before they had never dreamed of expanding beyond the Gulf.

Fakhreddine says plans for taking February 30, the company’s first bar in Hamra, and Seven Sisters to the region are in the pipeline. “We are going abroad for two main reasons: first of all, because of the international exposure you get when you move to a city like Dubai and second of all, stability. No one has the vibe Beirut has in terms of nightlife but the political and security situations force you to take a step out of the country to maintain a certain level of stability and to grow our talents,” laments Fakhreddine.

Addmind’s Habre, who has four successful outlets in the United Arab Emirates, supports such expansions but tells his colleagues in the industry to be well prepared. “Dubai looks easy for them [in comparison to the difficulties of operating in Lebanon] but what I say from the bottom of my heart is just be careful; it’s not at all an easy country to operate in and we have a lot of examples of bad luck in this industry.”

Downtown sorrows

Summer 2015 was not a good one for the hospitality outlets in Downtown with Habre reporting a 50 percent loss of business in Iris, their bar on the rooftop of the Annahar building, during the periods of closure and protests in the area.

Rizk says that Uruguay Street, downtown Beirut, had not been performing well from mid-2015 due to chaotic growth of the street and also because other nightlife areas were increasing in popularity and competing with it. While many years have passed since Downtown was really a hub of activity, he continues that the events of the summer – from governmental closures to street protests – hurt the area further.

When the landlord of the Fenicia Bank building which housed Gatsby bar wouldn’t give the tenants payment facilities in light of the difficult situation in the area, Rizk was forced to relocate due to no longer being able to afford the double-digit monthly rent with no footfall in Downtown.

Escaping the city

Their negative experiences in relation to security issues in Beirut coupled with the increasingly high rental fees in the city have encouraged F&B operators to invest in areas outside of Beirut.

“We are expanding regionally, which is economically much healthier than having even the F&B offerings clustered in Beirut and Downtown. You have many benefits when that happens, including creating job opportunities in the area, increasing the value of land and incurring further developments around such projects. Today people have the choice; if they want they can come to Beirut and if not they can go somewhere in their regional neighborhood,” says Sami Hochar, CEO of The Village Dbayeh, speaking of their project’s location in Dbayeh.

Rizk sees that Dbayeh will be the new “Downtown” for the Metn area, attracting people from the immediate vicinities and from Keserwan as well. “Dbayeh is a new market and does not have the security problems of downtown Beirut. It’s a big area with a big demographic and even when new places open there, which they will, it will be a healthy competition and those with the best concepts will prevail,” he says.

Whether expanding locally or abroad, and whether developing snack concepts or little bars, Lebanese F&B operators have learned to dance to a different tune and continue to waltz through it all.

Nabila Rahhal

Nabila is Executive's hospitality, tourism and retail editor. She also covers other topics she's interested in such as education and mental health. Prior to joining Executive, she worked as a teacher for eight years in Beirut. Nabila holds a Masters in Educational Psychology from the American University of Beirut.

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