Real success story?

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Gada Sardouk is trotting out the government line. “Beirut’s downtown is the success story of the entire region. People are visiting in huge numbers,” said the director general of the tourism ministry. “Yes, it is sometimes crowded but the area has no problems. If there were anything to harm the tourist, it would be empty.”

Warped logic aside, if the growth of the area’s restaurants and cafés is a measure of its vitality (numbers rose from around 40 in late 2001 to over 70 in the summer 2002, 99 in autumn of 2003, and more than 110 this spring), the same activity offers equally negative indicators, such as the district’s high rate of restaurant closures and re-openings, affecting one in every five establishments over the last two years and with some properties on Maarad street housing more than three outlets during the same period. But the real problem is highlighted by the teams of municipal officers that swarmed through the area in February and March, instructing tenants to remove outdoor plant decorations, abide by sidewalk seating limits and meet hygiene standards. Those, though not all who were in breach were fined. A token gesture, say many; the problem has not gone away.

The two largest stakeholders in the area, the municipality of Beirut and Solidere, the company tasked with its redevelopment, say they are engaged in a major clean-up campaign to improve the area’s image by purging the downtown hospitality sector from various style aberrations and regulatory infractions. Both have been compelled to act. City hall does want to see the downtown become ‘sin city’ and Solidere does not want its shareholders repulsed by a deteriorating ambience. “Merchants and operators approached us to discuss how to organize the management of the area,” explained Georges Nour, property administration division manager at Solidere. “Nobody was respecting the rules.”

“Presently, the Beirut Central District (BCD) works in a very narrow and ill-directed way,” said one of Lebanon’s highest ranking public figures who refused to be identified. “It is an attraction for the bad side of tourism,“ he fumed. “Ours is a country that is 7,000 years old. We should have much more important poles of attraction for tourists. The downtown is over saturated with nightclubs and pubs that are so expensive that only a few rich people can enjoy it. This is not the vision of a downtown where people meet to exchange views on topics of culture, politics, or religion. When you sit in one of these cafes today, you hear anything but.”

Prime hospitality stakeholders in the area also raised grave concerns. “Investments are risky if regulations are not enforced. Can the authorities not see what is going on?” asked an angry Michel Fernein, owner of La Posta.

“For the time being, the situation is not as we expected,” said Dory Daccache, head of the Crepaway restaurant group and who holds stakes in four budget and mid-level eateries in the district. “That the area has been going down is not really a sufficient term to describe it.” According to Ferneine, both the luxury and mid-market restaurant niches have seen revenue shrink in the last year. “The average spend per ticket in 2003 was lower than in 2002, especially in the evenings,” he said. “Patrons who would order an upscale dinner and an important bottle of wine now stay away. They are no doubt put off by the congestion, noise, and harassment.”

The downtown appears to have a problem of clashing restaurant cultures. Restaurateurs are at odds over loud music and ‘un-neighborly’ practices and fight over precious outdoor seating areas. The situation has seen three distinct sub-groups emerge: those that actively disregard rules and live by fly-by-night mentality; those that want to see rules enforced and espouse a long-term strategy of doing business; and a buffer group, probably the largest of the three, comprising entrepreneurs that fundamentally accept the need for regulations and positive conduct, but do not actively seek to improve things and instead go with the flow. Plaintiffs from the second group insist that it is neither a matter of price competition nor a complaint against the riff raff. It is, they claim, all about Lebanon’s image. “Any downturn in revenue is our problem,” said Fernein, “but the reputation of the country is at stake here. The downtown is the most important project in Lebanon. How can something this important have so many things that obviously don’t work?”

Surprisingly, many of these complaints have been echoed by operators whose establishments in the past year have been less than scrupulous in maintaining their own standards in terms of rampant outdoor seating, lack of customer bathrooms and harassment of pedestrians.

“If it is not regulated, the city center is going to be a jungle,” said the owner of an eatery serving what he called “affordable food in big portions,” out of a kitchen installed in what was clearly designated to be a retail store. On condition of anonymity, the entrepreneur admitted that he had hired a hostess for the specific purpose of approaching potential customers. “We are a new place,” he said. “People wouldn’t notice us if we didn’t send the hostesses to explain our menu.” When asked about restroom facilities for the 40 or so seats in front of his establishment, he said a new portable toilet would be installed that night. He had a simple explanation for the area’s hospitality problems. “They didn’t expect the boom,” he said. “More restaurants than they ever expected opened in this area.” There is some truth to this. According to Nour, the success of Maarad began as an “urban management accident.” The Solidere master plan had earmarked the street for vehicular traffic and not as pedestrian zone. The plan had expected retail businesses to populate the street, and most buildings were not equipped for restaurant use, creating challenges in the adaptation of facilities, setting up generators, storing supplies (including cooking gas), and the collection of waste, that only a few investors rose to.

“You cannot believe how dirty it is behind the doors of some kitchens and service areas,” lamented one manager. “Some neighbors here have had an abominable lack of hygiene.” This situation is improving now, he added, since a system for collection of food waste and used cooking oil begun in February, as part of the initiative to better the area.

Many stakeholders agreed that implementation of hygiene standards should be more strongly enforced. “Lebanese regulations on restaurant hygiene are excellent,” said Daccache, “but some restaurants do not apply the regulations, and enforcement is weak.” The inspectors from the health department at the Beirut municipality, the supervisory authority for restaurant cleanliness, are reportedly meticulous in checking that employees working in restaurant kitchens wear hair covers and gloves and have clean fingernails. As a result of the unsanitary practices of some operators prior to the implementation of a new garbage collection scheme earlier this year, pest problems reportedly got so alarming that competitors in the same building had to hermetically seal off doors in order to ward off a despicable daily invasion of cockroaches from the garbage next door. Yet some restaurant owners wonder if all establishments are inspected with equal vigor. “The health inspectors are very tough on me,” said one manager who lambasted his neighbors for having no toilets and dirty kitchens. “If they are also being checked, how come they are still in business?”

Central to the whole issue is the legal status of restaurants, cafes, snack bars and nightclubs. Stakeholders and legal experts estimate that only a minuscule portion of downtown establishments operate with a full license, a legacy of Lebanon’s restaurant law, which was adopted by parliament in 1950 and has remained virtually unchanged since 1970. “In general, obtaining a restaurant permit from the ministry of tourism is extremely difficult,” said Paul Awad, a lawyer specialized in issues relating to the hospitality industry. “Not more than 5% to 7% of restaurants hold a permit.”

Getting a permit is a two-step process. Firstly, operators have to prove their basic compliance with regulations on kitchen facilities, bathrooms and exits, etc. If these are met, the restaurant, cafe or pub can launch its business but it still needs to complete the second step of the licensing in which the applicant must prove the existence of one parking space per 4m2 of restaurant floor space, on the same grounds as the restaurant location itself. Alternatively, the establishment can pay the municipality between $5,000 and $7,000 per non-realized parking space. “Nobody has these spaces, and nobody is willing to pay these amounts,” Awad said. “Therefore nobody gets a permit.”

Realistically, restaurants that have completed the first stage of licensing requirements face little trouble and can be reasonably certain that they will not be shut down. However, the second license is the basis for the classification of restaurants, the lawyer said, and one important consequence of the lack of full licenses is that eateries and pubs are not classified by the ministry, which in turn diminishes the ministry’s ability to monitor their compliance with price levels and service charges. On a day-to-day basis it works. The ministry does what it feels it has to, to maintain standards. “To be realistic, Lebanon is a tourism country. We deal with the private sector in form of a partnership,” said Sardouk. “We are very strict in responding to complaints but very flexible in communicating with the private sector. We are not a police state.” Sardouk added that in the whole of 2003, the ministry of tourism had received 10 serious complaints from tourists and acted upon them, only one of which involved a downtown restaurant. Hospitality establishments in the area display stickers with tourist police telephone numbers, should they have a complaint. When Executive tried to contact the tourist police, it was connected to an Ogero recording that said the number was “not yet in service.”

However, weaknesses in the legal framework clearly contribute to the current malaise. Operators who disregard rules tend to use what they see as absence of a clear legal environment as an all-purpose excuse for ignoring standards and regulations, but for those who wish to instigate improvements or challenge infringements, the legal ambiguity can be a major impediment because an “unlicensed” restaurateur with a complaint does not enjoy full legal status and is immediately at risk of becoming a target. In their plan for improving downtown, the municipality intends to enforce compliance with all standards before this summer. This will involve making operators abide by the areas of public space they rent from the municipality for outdoor seating and respect those regulations that insist that emergency pathways be kept clear and enforce all other municipal codes. For its part, Solidere has retained a consultant to style the area with a range of official materials, colors and designs for awnings, tables and chairs. “We are proposing to the municipality all ideas that we want to implement,” said Nour. “The organization of the public open space is the mandate of the public sector administration. We are offering only value-added. Urban management needs dialogue between the city and the people.” Reassuringly, in this context at least, both the municipality and Solidere claim that relations between them have never been better.

Restaurant owners who want to see standards improve say they are prepared to contribute to enticing back a better class of customer. In the long run, they also expect that the overall growth of the city center towards the seafront and the hotel district will alleviate some of the problems the area has experienced in the last two years. Finally, on the legal front, a revised restaurant licensing law with more practical regulations is under review in parliamentary committees, with hopes that it will be pushed through soon. But in a country where the law is frequently overlooked when it becomes a hindrance, it remains to be seen whether this will be enough.

Overcrowded mess

With seating boundaries constantly in violation, Maarad is becoming an accident waiting to happen

The restaurants and cafés on Maarad and Al Omari Streets are demarcated by round, metal studs embedded into the pavement, which represent the limit that a restaurant can place an umbrella, awning or gas heater. If they exceed the boundary, restaurant owners are, in theory, in violation of municipal seating regulations, designed to ensure there is enough space for pedestrians and emergency vehicles to pass. Most of the restaurants regularly violate these laws and Maarad Street, with its gas heaters and plastic awnings, is an accident waiting to happen.

An example of this blatant violation could be found at Al Sa’a, located across from the clock tower. On the last Sunday of March, the café increased its sales area from its usual 100 to some 168 chairs. The restaurant not only set up extra rows of tables in front of an empty storefront adjacent to their location, it also added two tables per row to an area that passersby should freely walk through according to the law.

The manager of Petit Café, one of the places on Maarad with the highest number of outdoor seats, admitted to Executive that in the high season (when the lion’s share comes from outdoor guests), he makes an average of “including cover charge, $25 per customer.” This is too much to resist for landlords who say they are struggling with the BCD’s exorbitant rents. For Layali al Balad, for instance, the owners pay a reported $260,000 a year to sublet the tiny premises. By bending the rules during one day in the busy summer season, 24 “extra” outdoor chairs can add another $1,440 to the day’s takings; that’s in excess of $44,000 each month. When some landlords are paying up to four times the market rate, this extra revenue can make all the difference.

On March 30, Executive, posing as a potential customer, spoke to restaurant owners and managers in the area to see how many outdoor diners they could accommodate at full capacity. Al Sa’a said it could accommodate a staggering 500 diners. La Cita offered to seat 120 diners, Kiub’z 150, while Petit Café and Layali Al Balad said they could seat 450 between them. Even with the most generous calculations these seating arrangements would easily put them in violation of municipal laws. Only Hani Osman, manager of TGI Friday’s, said that if he wished to exceed his legal quota, he would have to check with the municipality.

That the rules are being broken at will is obvious, but what is inexplicable is that the municipality is unable to exert its influence. In the property management offices of Solidere, a large map, dated December 2002, is pinned on the wall. It delineates in perfect detail areas where hospitality enterprises are allowed to set up tables and where they are not. The map is equally well known in the halls of the Beirut municipality, where officials admit that the regulations are not enforceable and that patience is required in the almost daily fights with some BCD tenants. According to the municipality, rent per square meter of its territory is 3% of the annual rent per square meter of a restaurant’s indoor area. The municipality would like to increase this to 15% or 20%, but for the time being income from the downtown business, either in rent (of public space) or fines is not a money-spinner. (Some outlets have been “fined” – in some cases as much as $30,000. This constituted rental dues and fines for operating outdoor seating for two years without a license.) It may simply be that many of the owners are politically backed and, therefore, immune to the rules and regulations that mere mortals have to abide by. The Bendakji brothers –who own Kiub’z, Petit Café and Layali al Balad as well as Al Sa’a, Grand Café, and VIP (the latter two are in the area of Abdel Malak Street) – are allegedly stoutly backed by top political individuals and appear to flout regulations with impunity. In the short term, a new walkway over the downtown ruins could offer visitors and restaurateurs on that side of Maarad a solution. The walkway will be inaugurated in the summer, but the municipal board has not yet reached a decision on allowing outdoor tables. Permanent barriers are also planned but fears remain that there will always be those whose connections will encourage them to ignore the law.

Thomas Schellen

Thomas Schellen is Executive's editor-at-large. He has been reporting on Middle Eastern business and economy for over 20 years.