The massive explosion that ripped through former Lebanese Prime Minister Rafiq Hariri’s motorcade also damaged the nearby Phoenicia Intercontinental, arguably the jewel in Lebanon’s post-war tourist sector. On the day of the bomb, was running at 80% occupancy. Since then, the hotel has been losing tens of thousands of dollars a day and when EXECUTIVE visited the site he only occupants were the orange-jacketed “Crisis Response Team.” General Manager Pascal Gauvin – also clad in an orange Crisis Response jacket – gave an exclusive interview and spoke about the impact of the assassination on his hotel and the sector.
How did you, as manager of the Phoenicia hotel, respond to the bombing?
My immediate reaction was concern for the customers and staff, a sudden realization that all the emergency drills now had to be put into practice, and an effort to recall every aspect of the crisis management plan. It all went very well. That is my consolation in all of this. No one from the hotel was injured. No one lost so much as a mobile phone or a dollar. They all returned home safely. We wrote them letters and have been receiving positive comments. Of course very quickly you also start thinking: Wow, what will the impact on business be? In the 12 or 14 hours following the explosion, we had to close down the hotel and secure the assets. We bought plywood directly from Tripoli to protect the building against looters. Then it was back to business. An insurance representative, who happened to be in Beirut, came in on the day itself. We met at six in the evening and started planning the next step in the recovery process – it’s all about money, about who is going to pay for everything, about the planning and scheduling. And decisions had to be taken very quickly.
How much damage did the explosion do to the hotel?
It’s too early to say exactly, and I’m not a technician. But we suppose the damage will turn out to be around $10 million. It could be $15 million.
What loss in revenue will the business interruption translate into?
This hotel finished last year at 80% occupancy. Last year, our revenue was $63 million. So if we have an average of five to six million dollars in revenue a month, you can imagine what our losses will be.
When do you plan to reopen?
We plan to partially reopen on 1 April with restaurants and 250 rooms – out of a total of 460. The renovation should be completely finished by June 1.
What has happened to your staff?
We have released around 260 seasonal, extra or casual or task force staff. It’s a temporary move. As soon as business has returned to normal they will have first priority in terms of return to the hotel. After all, they have been trained and have developed skills. In an agreement with the insurance, a task force composed of hotel staff is securing the building and supervising the contractors. The involvement of staff in the task force allows me to secure the 876 contract staff jobs we had on the day of the explosion for the next two to three months, until the hotel is fully open again.
What medium- to long-term effect on business do you expect?
We don’t know how long the recovery process will be. Right now, Lebanon is not trading at the same rate as before 14 February. As things stand now, we do however have good indications. Reservations are still coming in. Conferences scheduled for March and April are being rescheduled for a few months later. We’ve had many examples of customers saying: no way am I going to move my conference to another country. I don’t mind if I do it six weeks or two months later. I want to come back to Lebanon. The only cancellations we’ve had are those during the period where we are unable to receive people – and we were expecting 80% to 90% occupancy. But we are moving business forward from March for e.g. to June. Of course, some of the meetings can’t wait. But most congresses, like in the fields of banking, education, pharmaceuticals and product launches, have simply been postponed. We are planning to reopen the ballroom on 2 April. And it’s already almost fully booked from then on. We already had a good number of reservations and we are filling up the remaining space with postponed congresses.
What is your role as hotel operator during this period?
I have to administrate the problem from the Intercontinental point of view, the owners’ point of view, the customers’ point of view, and from the insurance point of view. This requires a change of structure, a reorganization of staff, and a checking of legal issues – all in fast decisions. We have set up a Crisis Management Team and have started cleaning the building. We had to prepare the hotel for the contractor so they could come in and start working. I had to meet with the owners, contractors and loss adjusters. After four days, the contractors came in. We have one – sometimes two – daily progress meetings. Our role as operator is to keep the business alive, to prepare a sales and marketing campaign, to keep customers informed and staff trained and skilled. I want to use the time until reopening to become stronger than before. We are developing three training programs over the next two months. We are also moving forward some projects in the hotel. For example, the whole club floor will be reopened with new LCD screens and Hi Fi technology systems. We will have a new interactive TV system for the whole hotel and IP telephony in all rooms – something that was supposed to be done only in June, July or perhaps August. We are also changing operating systems – a process much easier implemented in a closed hotel. We are trying to ensure that when we reopen we have added value.
What has the reaction from owners and insurers been?
They have been very businesslike. They haven’t panicked. They have experience with Lebanon. Remember, this hotel opened in 1961. It closed when the war started in 1975 and then reopened in 2000. I wouldn’t say what is happening now is routine, but the reaction has been very calm. The insurers have also been very professional. What could they do? They couldn’t minimize the incident.
How will the attack affect the tourism sector in Lebanon as a whole?
We have a very positive outlook on the future. We don’t think this attack will put an end to Lebanon as a tourism destination. And that’s an outlook I share with the owners. Of course, we are experiencing a difficult time but we have to be ready for business as soon as possible.
Is there no concern at all – on your part and on that of the owners, insurers and contractors – that the massive chunk taken out of revenues by the post-attack closure, as well as the danger of continued political instability and violence and their effect on hotel business, could result in serious financial trouble for the Phoenicia and the hotel sector in general?
Of course. That’s not something that can be discounted. And we have a plan that takes that possibility into account. But right now we are focusing on the damage to the hotel. That’s the main, urgent concern. We are upgrading systems, replacing windows, redoing false ceilings, changing carpets. The business interruption, the future situation are not as much a concern. We can’t predict. And insurance works on fact and not predictions. Now we are closed; that’s a fact. If we reopen after two or three months and it’s business as usual, great, that will be a fact too. Insurance will take care of the interruption. If we reopen and for a few months business is below normal, insurance will have to take care of that as well. But this is not a concern of ours, of the owners, or of the adjusters right now. And why should business not come back at 80% of what it was – which would already be very very good.
What is the plan?
There are actually two scenarios: In the first, we open after two to three months and it’s business as usual. In the second, come June the business is not there. Of course, we will have a sales and marketing campaign but if there is instability there is instability. In that case, we would have to reduce the capacity of the hotel like we did during the Iraq war. For a month and a half, we reduced staff to a minimum level, asked them to take unpaid leave, reduced the capacity of the hotel from 460 to 200 rooms. We have no problem running a smaller operation and reducing costs to try to generate profit.
Right now we think it will be business as usual as of the first of June. I think people will come back for the summer. We have received faxes over the last three or four days asking for sizeable summer reservations – suites plus rooms, and not just for a few days, but for 20, 30, 40 days. So, despite the attack, people are planning to come back to Lebanon for the summer. If anything like what happened on 14 February happens in the meantime, of course the plan will have to be revised. But if nothing else happens I expect a very strong summer, given that last summer we were refusing 250 rooms – 50% of our capacity – a day. So even if I lose 20% to 25% of interest I can still fill up this hotel.
What are your realistic predictions for summer occupancy?
Things will probably go back to what they were. I think what happened was an isolated albeit unfortunate incident. As things stand, the summer figures in my 12 month 2005 forecast remain unchanged. In January, we did really well – above 85% occupancy. February was great – about 85% occupancy. There will be no revenue for the second half of February and the month of March. April and May will be a recovery process. As of 1 June I predict 80% occupancy, 95% during the summer and 85% for the end of the year, with the same average room rate.
What will be the parameters of your marketing campaign?
It’s important to recapture sustained business pretty quickly. We have to target local, regional and international business. The strength of our company is the global network over which it presides. On a local level, we are developing a plan around the reopening of our outlets. The message is: we are coming back; there are new things for you, new menus, an attractive look. On a regional level, we are advising all airlines and all the countries in which we work that we will be back. And we are preparing an ad for magazines – in airplanes as well. We will also be participating, as every year, in the Arab Travel Market in May. Perhaps this year our participation will be even more significant. This will show us coming back full blast into the market. We will be doing a road show in Europe and also in the GCC countries. Our staff and cooperating agencies will be advising people of dates and helping them reschedule conferences. And we will be using all our loyalty and rewards programs, along with brochures, posters and our network of hotels, to put not only the Phoenicia but Beirut and Lebanon back on the tourist map as a destination.
Although Lebanon still relies primarily on Gulf Arab tourists, we were seeing an increase in European tourists, especially in low periods of Gulf Arab activity – like in May. It took a lot of effort to get the Europeans to start coming. They are very sensitive to violence in any Arab country, especially Lebanon. What effect will news of a lethal attack on one of Lebanon’s most famed tourist stretches, have on European tourists?
We have worked on diversifying our clientele for the past three years. That was our main targeted marketing goal. We wanted, during low periods of Gulf traveling, to expand into the European market. It was becoming successful. That kind of campaign needs two to three years to really have an effect. In fact on the day of the attack I had people from France in the hotel on a site inspection for a group expecting to come in June. Of course what happened has had an impact. We will have to go back and start working really hard again almost from where we were two to three years ago.