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Strength in numbers

Hospitality clusters are on the rise

by Nabila Rahhal

By the end of 2016, Lebanon will have eight new hospitality venue clusters. These are large spaces with many outlets rented out to different tenants by the projects’ developers, who own and manage the entire space.

This seemingly sudden surge in such projects raises some questions concerning the reasons behind their boom, how they work, the merits and disadvantages of being tenants in hospitality clusters and — since four of the projects under development are in Dbayeh, north of Beirut — how much can one area hold?

Restaurant Clusters: The past, the present and the future 

Beirut’s first model of such a cluster was the string of bars on Uruguay Street, all in a single building project developed by Venture Hospitality, a hospitality concepts development and consulting company, and rented out to various figures in the nightlife business back in 2011.

Recalling this experience, Marwan Ayoub, one of the two partners at Venture Hospitality, says, “The idea for the Uruguay Street development was born out of our 10 year experience in the field, especially when we saw the problems that developed when many bars were found in residential areas and without the right infrastructure or master plan, such as in Gemmayze, Monot or Hamra. Eventually, if it is not well organized, everyone on the street is suffering.”

Venture Hospitality did not end up developing the whole street though, as the series of pubs which opened within the last year were in other buildings that had separate owners who were not part of the company’s initial project with Solidere, which is in charge of the overall development of Beirut’s downtown. This factor somewhat decreased the control they had over the street’s growth.

Other hospitality clusters

Yet Ayoub sees the experience they got from Uruguay Street — bringing together different profiles from the hospitality sector, each with their PR, all in one place and with the right infrastructure — as very successful on both the market and financial levels.

Therefore, as business developers and investors, Ayoub and his business partner Rabih Saba decided to duplicate this experience but have the whole operation under their management and ownership in order to maintain full influence over their projects, thereby preserving and maintaining value. The duo is developing hospitality clusters in Dbayeh, Hazmieh and Ashrafieh.

Other developers were also eyeing the potential in Venture Hospitality’s experience on Uruguay Street. 

Soon after, toward the end of 2012, two restaurant clusters, Blueberry Square and Junction 5, opened adjacent to each other on the Dbayeh highway facing ABC and Le Mall. Though the two clusters had strong restaurants in their mix, including Couqley, Goûtons Voir and Shakespeare and Co., their design and layout — which resembled a shopping mall and had mainly indoor seating — discouraged consumers from visiting them frequently.

Sud Square, which opened in 2013 in Mar Mikhael, was a more successful example of a mini cluster of restaurants as it focused on outdoor seating and a piazza feel to attract a steady stream of diners. This emphasis on greenery and a pleasant landscape is something that the new developments will be bringing in. “We Lebanese lack heavily in green open spaces which is why we integrated this aspect into Mar Mikhael’s Enab and will be doing so on a larger scale in our Dbayeh project,” says Ramzi Moghabghab, operations manager at Enab and Dunya restaurants.

Aside from Venture Hospitality’s projects, which are set to open by mid-2015 for Dbayeh and Hazmieh and by early 2016 for Ashrafieh, other projects are set to open in the coming years. Enab’s Zahi Rizkallah is planning a 3,000 square meter restaurant cluster centered around a large Enab outlet in Dbayeh in early 2015. Clé’s Ussama Makarem is planning a beach resort cluster with a pool, bungalows and a street for pubs with a seaside view in Dbayeh. The Courtyard, a pub cluster which is situated next to Hamra Street’s Alleyway, looks almost complete. And Alain Hadife, best known for his wedding planning company, Caractère, is planning a hospitality project in Naccache.

How it works

[pullquote]“In nightlife you need multiple bars in the same area to create a destination which people enjoy, and so we all benefit from each other”[/pullquote]

Developers of hospitality clusters take on the design and construction of their space, incorporating such elements as accommodation for parking, electromechanical infrastructure and security, before studying the local market and deciding on the appropriate tenant mix for it, much in the same way a retail mall is developed. As such, in Hazmieh, a residential area, Ayoub decided to focus on diners and family restaurants with few pubs, while in Dbayeh, which he calls a more mature market, the focus is on pubs and nightlife venues not typical to the area.

Aside from the monthly rental fee, some developers charge their tenants a percentage on sales with a monthly minimum guarantee. Others, such as Moghabghab, prefer to take a monthly rental fee instead of a percentage on sales which he says might come with other conditions and dilute their profit. According to Ayoub, Venture Hospitality typically takes 10 to 14 percent on sales, depending on the concept, and an annual fee of up to $800 per square meter.

“In this way the tenant is benefiting from economy of scale [a proportionate saving in cost gained by an increased level of production] to pay partial rent for this prime land and location,” explains Ayoub. 

Finding the right Tenants

Tenants are usually approached to be part of a project either because of their proven track record in the hospitality market through the brands they created or because they have a solid background in the field and a strong new concept the developers believe will bring added value to the project.

Some, like the developers of the Enab hospitality cluster in Dbayeh, make sure that the other venues in the project compliment theirs and don’t compete with it by offering the same cuisine or concept. Enab’s cluster already has Sud as a confirmed tenant and is considering adding a sushi restaurant to the project.

From the tenants’ point of view, there are many advantages to being part of a hospitality cluster. “In nightlife you need multiple bars in the same area to create a destination which people enjoy, and so we all benefit from each other,” says Toni Rizk, an owner of several pubs on Uruguay Street who also plans to rent a venue in Venture Hospitality’s Dbayeh project. He added that this economics of proximity is an essential factor in nightlife, especially in bars and pubs. 

To Makarem, who is looking to open Clé in Venture Hospitality’s Dbayeh project and is also a recent tenant on Uruguay Street, being part of a cluster ensures that his mind is relatively at peace. “We in the [Lebanese] food and beverage sector look for specifications in our venues which are different than other sectors and from other countries such as proper infrastructure in terms of water and electricity. This is an advantage of being a tenant in a cluster because you don’t have to think of such issues; you are just renting a space in this cluster and the developers provide you with all services, including security and valet,” says Makarem. 

Although Rizk believes that the expenses in such a project can be high compared to independent venues, both he and Makarem agree that being in a place managed by one entity allows for a more organized experience than being on a street that grows organically. “Independent tenants tend to think individualistically … which leads to problems for all of us and might even push consumers away. In a project, there is someone making sure there won’t be chaos,” says Rizk. 

Other advantages of being in a freshly developed project include benefitting from new and modern infrastructure as opposed to being on an old street where tenants would encounter problems, explains Rizk. 

Independent bars

Though it might seem that the hospitality clusters would be eating into the market share of standalone venues and other independent bar streets, Makarem believes that it would depend on the strength of the place to offer something unique which would draw the consumer to them instead of the cluster, giving the example of Momo’s in the Souks which has retained its client base. “The good outlets which are run very well will always have their own identity being single. A single identity, which makes a place a destination by itself, has to be very strong, but clusters will pose a threat to the little bars with no defined identity,” says Makarem.

More projects in Dbayeh

[pullquote]In times of political instability, people prefer to stick to areas in their proximity, a situation in which these projects are taking full advantage[/pullquote]

In such hospitality clusters, developers need to acquire large pieces of land that can accommodate a series of venues in a relaxed setting, explaining why most of these clusters are planned for areas outside of heavily congested Beirut. “It is easier to find large undeveloped property out of Beirut as it is becoming nearly impossible to find land in Beirut and if you do, it’s usually very expensive,” says Makarem. 

This, however, raises the question of competition among the various clusters set to launch in Dbayeh, especially throwing in the mix Beit Misk’s Souk Misk, which is not far from Dbayeh and the Waterfront City, planning its own series of hospitality outlets. 

The developers Executive spoke to do not seem worried about this and believe Dbayeh can accommodate them all, especially since it is seen as the center of the Metn–Keserwan area. “The country can handle this competition and volume of clusters in Dbayeh, especially if external turmoil stabilizes,” says Makarem. 

While the outlets in ABC and Le Mall are ideal for daytime meetings for those in the region, residents of Dbayeh and its surroundings seem tired of heading to Beirut for a night out. Enab’s Moghabghab says they will consider it a success if they get a mere 10 percent of ABC’s clientele to frequent their project. Both Makarem and Moghabghab say the strong demand on their Beirut outlets — Clé and Enab respectively — from the Metn area residents was what prompted them to bring their venues to Dbayeh.

Ayoub explains this by saying that in times of political instability, people prefer to stick to areas in their proximity, a situation in which these projects are taking full advantage. Should the country stabilize, Ayoub sees it working to their advantage as tourists would tend to stick to Beirut’s attractions while locals would branch out.

Developers Executive spoke to admit that Dbayeh is indeed a mature market in terms of its café outlets but believe it needs both a wider choice and more refined offerings for both day and night. Therefore each of the clusters in the area is differentiating itself through its unique tenant mix with Makarem focusing on the seasonal beach atmosphere, Ayoub on the bars and nightlife, and Moghabghab highlighting cafés in a relaxed setting as opposed to the crowded street cafés currently in Dbayeh.

Only time will tell if the bets these projects placed will pay off, but Ayoub, for one, concludes: “Develop it right and the people will come, but develop it wrong, and even if it is the middle of Beirut, they will not come.”

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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. Send mail

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