Executive met with Pierre Ashkar, head of the Hotel Owners Association in Lebanon, to discuss the hotels’ performance this year as well as the main issues and concerns affecting hotel owners.
E According to tourist numbers and hotel occupancy rates, it appears that the year 2015 started off well for hotels in Lebanon, correct?
Usually, 60 to 70 percent of tourists in Lebanon are either individuals or corporate travelers. The individual traveler can get corporate rates if they are loyal customers who come frequently. Individuals get rack rates while corporate rates goes down by 15 to 20 percent. Tours and bulks get a completely different deal with lower prices.
The problem started in Lebanon in 2011 when the hotels began to lose guests, and so automatically hotels started lowering their room rates: the rack rate which was $200 went down to $150, a 25 percent decrease. So when my rack rate goes down 25 percent, I have to decrease the price as well for my corporate customers, so that’s another 15 to 20 percent decrease.
So when you hear that the increase in the number of tourists is 16 percent from last year, you have to ask yourself first how many days they stayed in Lebanon because nobody knows. Also, a bigger [number] than before are coming within tour groups, especially Iraqis, and they are getting group rates. So whereas before you would have said no to that, today you take them at group rates because you are hungry. Hotel owners are giving rooms at $60 and $80 just to have liquid money in their hands and make their payments.
I will show you some numbers related to Christmas and New Year’s in 2010. A 100-room hotel had rates of $200, which makes $20,000 per day, and most guests used to stay for 10 days, so the hotel could make $200,000. That same hotel, today, has lowered prices down 40 percent which makes a room $120, totalling $12,000 per day. Since the average stay is down to three days, the total today is only $36,000. Look at the difference, less than a quarter of revenues. Now you see the reality.
E Were all the areas equally affected by this situation?
No, because some areas rely on local Lebanese as their base clients, and mainly those who are used to spending their summer in the mountains. So these hotels are already seasonal and only work for two months.
E What about the guesthouses and boutique hotels that were popular this summer and appear to be on the rise?
It’s a different segment and market. They work on weekends and in the summer. These represent a maximum of 10 percent of hotels in Lebanon. Some hotels have the financial means to survive this period because they only have 30 rooms and the whole family runs the hotel but the hotel institutions which employ many people, such as the hotels in Beirut, have to comply with international standards and expectations which are different than those required for guesthouses or hotels in rural areas.
E You paint a rather bleak picture. From the Association’s perspective, is there a solution to this crisis?
Let us speak honestly. No one can solve the problem entirely. But what could happen that would help many stay on their feet while waiting for better days is financial engineering.
Financial engineering has allowed the Lebanese government, with all its debts, to remain on its feet. Who is behind this financial engineering? The minister of finance, the central bank governor and experts in this field. Just like they found a way to keep the government on its feet, even though it is still accumulating debt, they need to find a solution for hospitality institutions, because each hotel that closes down is letting its employees go, therefore increasing unemployment and making these youths desperate to make some money and [support] their families.
This is my opinion. The day they elect a president, there is an agreement to stabilize Lebanon on a local, regional and international level. Automatically you will see the country prosper. This is what happened after the 2006 war and the same scenario after the Doha Agreement in 2008.
E So there is still some hope for prosperity in this sector?
The country has not lost its components or the capabilities of its citizens. It did lose the quality of youth who have left the country already but I assure you those will return as soon as they feel the country is stable.
Look at the concepts developed by Lebanese in Africa or the Gulf; why are they so successful? Because those countries offered them stability. This is all we need, stability, and I tell you Lebanon will be full and at a room rate of $200. I repeat, give us stability and take all you want.