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Check-up or check-in?

by Samer Elhajjar

Before October 17, 2019, most 4- and 5-star hotels in Beirut reported annual average room occupancy rates of 75 to 80 percent before the first coronavirus case in Lebanon was reported on February 21, 2020. This occupancy rate had been the norm since 2009 and most hotels expected that in 2019, they would exceed that rate and set a record year. According to Ernst & Young Middle East hotel benchmark survey, the occupancy rate in Beirut’s 4- and 5-star hotels slipped to an all-time low of 16 percent by November 2020, down from the previous year’s recorded 69 percent during the same period. In details, we can attribute the low hotel occupancy rate to several reasons. Starting with the global COVID-19 pandemic that has affected the world, followed by the blast that hit Beirut port on August 4, 2020, ending with the worsening financial crisis and political deadlock in Lebanon. As a result, the number of arrivals to Beirut airport recorded a 72.22 percent drop by November 2020, compared to the same period in the previous year, which affected the hospitality sector negatively.

Almost all world economies are at a standstill because of the COVID-19 pandemic, and tourism in particular is one of the hardest-hit sectors. In 2019 alone, travel and tourism accounted for $2.9 trillion in direct contribution to the global domestic product (GDP), which is the highest contribution by sector. Unfortunately, the United Nations asserts that the spread of the virus has cost the global tourism sector $1.3 trillion in lost revenue in 2020. This predicament escalates to the potential jobs lost, which are estimated at 38 million, a figure that represents 70 percent of the industry workforce. A recent Roundtable Discussion organized by Executive Magazine in partnership with the United States Development (USAID) Lebanon Enterprise Development (LED) project shed light on the many issues that hotels and hospitality venues are facing.

Researchers have embarked on studies to ascertain the impact of the COVID-19 pandemic on the Lebanese hospitality industry. A prime study is one that two Lebanese University researchers commenced in June 2020. A survey questionnaire posted on social media platforms, including LinkedIn, Instagram, and Facebook, was used for data collection. 404 filled questionnaires were obtained, with 348 valid responses from both Lebanese citizens and foreigners residing in the country. Findings from the study indicate that people’s purchasing power had declined by about 40 percent compared to 2019. When this is the case, many are unwilling to spend their hard-earned money on the allegedly luxurious items in life, including hospitality bills. One could also cite the long-standing Lebanon economic crisis as a complementary factor. Also, 36 percent were unwilling to pay more than 40,000 Lebanese pounds ($26.47 at the official exchange rate) on related transportation, meals, and associated activities.

First line of defense

Hotels’ administrations never imagined that such a pandemic would occur and cause the industry to perform in such an unprofitable manner. Lebanese hotels often face national calamities that the managements are ready for and set mitigating measures to face, and such activities threaten their operations. Most remedial actions from Lebanese hotels are predicated on cutting operational costs and concentrating their business activities in the capital as the rest of the places are rift with political and geopolitical crises. According to our research, despite managers’ training on various crises strategically, the COVID-19 pandemic presented a different type of challenge that executive teams did not consider when planning.

The results of our research show that Lebanese hotels faced business drop and revenues losses; the pandemic’s effects crippled all operations including bookings, meal preps, occupancies, and conferences causing the industry to function in survival mode. Although the Ministry of Tourism is yet to issue a precise figure on the revenues lost, the International Labour Organization (ILO) asserts that approximately 25,000 of the total estimated 69,000 workers employed in the hospitality industry were dismissed from their jobs. This data correlates to the period between September 2019 and February 2020. Monthly occupancy rates at 4- and 5-star hotels in Beirut had decreased from 79 percent in March 2019 to 10 percent in March 2020, forcing many hotels to cut jobs and/or reduce wages amid the economic slowdown of the COVID-19 outbreak.  Hotels cancelled investments in renovations, and the focus was on pressing costs that facilitate the company’s survival. Since 2019, 150,000 workers in the tourism sector lost their jobs. Foreign staff members returned to their respective countries. Others were laid off as many hotels shut down their operations to minimize expenses as the pandemic caused revenues to drop to negatives. On a relatively positive note, the average room rate increased by 156 percent from November 2019 to November 2020, leading to a RevPAR growth rate of 132.6 percent during the same period.

As mentioned earlier, with the decline in revenues (including booking cancellations), hotels have had to be ruthless in reducing their operational costs. The most evident strategy is the downsizing of staff. On the other hand, many were compelled to take their annual vacation days while the remaining had to adhere to reduced and alternate days of arriving to work. Further, workers’ wages and working times were reduced while the administrations froze their bonuses and incentives.

Nonetheless, the country and other stakeholders, including corporations and the public, have facilitated lockdown measures, allowing for the reopening of various firms in multiple sectors. Today, it is typical of guests and employees entering these establishments to have their body temperature measured. Moreover, specialized hygiene and cleaning audits have been instituted. Suppliers are expected to adhere to the set protocols when delivering supplies. To this end, there have been impressive comebacks of the Lebanese hospitality sector where people have begun showing to these facilities frequently.

Opening for business?

The Lebanese context appears to be more complicated than possibly elsewhere. Firstly because the country faces the ramifications of geopolitical crises from its immediate neighbours such as the Syrian War and Arab Uprising. Therefore, it is likely we will experience optimal economic recovery when the current political challenges are over, as it is difficult for tourism to thrive in such circumstances. However, the second complication is that the failure of reforms has led to a state of internal maintenance, which, compared to international hyper-competitive countries, constitutes a considerable setback in the county’s development. It will take the government a reasonable period to sell itself as a great tourism destination, far from the current imagery state of a country marred by significant levels of political instability. These steps will be paramount in revitalizing the hospitality industry. More importantly, they will be more ruthless when coupled with the world’s complete healing from the current COVID-19 pandemic.

In the meantime, companies in this industry must continue upholding safety measures in their operations. The future remains optimistic, given that companies such as AstraZeneca have already manufactured a credible vaccine. Positive news offers much-needed hope to all stakeholders. Partially open hotels must ensure social distancing to curb the spread of the virus. Besides, they will witness a lower impact than individual and family-owned business units because travellers will prefer chain hotels to commit to sanitation and hygiene standards. Moreover, the government has chosen such organizations to quarantine international visitors. Lastly, let everyone anticipate a new ‘normal’ where masks could be mandatory, and employees expected to maintain stricter safety and hygiene procedures.

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