As another year rolls by with a meager number of tourists, and more young Lebanese leave the country for greener pastures while those who stay complain of empty pockets, Lebanon’s food and beverage (F&B) sector has had to be resourceful as it determinedly weathers yet another storm.
[pullquote]Work is down by almost 40 percent from 2010[/pullquote]
The reality on the ground
“There is an economic crisis in the whole country, which has affected the F&B sector at all levels, from the snack shops to the clubs, and I would say work is down by almost 40 percent from 2010,” says Toni Rizk, CEO of TRI Concepts, which owns and operates several bars across Lebanon. However, he notes that 2014 was a better year than 2013 in terms of sector activity.
According to Tony Ramy, the new president of the Syndicate of Owners of Restaurants, Cafés, Night Clubs and Pastries in Lebanon, this economic crisis has led to an estimated 200 closures of F&B venues across Lebanon in 2014, citing locations like Zaitunay Bay, Hamra, Jounieh, Bhamdoun and Aley.
Yet there were still periods of high activity, such as the summer when many Lebanese expats returned for visits, according to Rizk. Overall, 2014 was a better year than 2013 in terms of sales in the sector, he adds.
Those in the hospitality sector have shifted their plans, going from catering to wealthy tourists or locals to relying on the seasons when expats visit and the local market, despite its limited purchasing power.
Catering to local demand with its lower purchasing power, in comparison to wealthy tourists who used to frequent Lebanon, is a different ball game from what the F&B sector was accustomed to when business was booming.
[pullquote]Lebanese want to go out and have fun, but without paying a large sum at a high end restaurant[/pullquote]
“The most important thing is to put ourselves in our customers’ shoes: it’s not like the good old days when people could afford to spend $200 on a meal without caring or when the waiting lists at clubs were a mile long. We now know that the Lebanese expat and tourism revenue is almost zero, so we all have to go for a much smaller client base — the Lebanese who live and work here. You have to give them affordable luxury, quality and service, while at the same time you have to be a very efficient organization to keep staff motivation high and deliver all that,” explains Ziad Kamel, the syndicate’s secretary general and co-owner of Couqley restaurant in Gemmayze.
The closure of high end venues such as Momo at the Souks and some of Zaitunay Bay’s fine dining restaurants are the clearest examples of the challenges facing the sector in 2014. In fact, cafés and casual dining concepts now dominate the strip in Zaitunay Bay. Employees at the few remaining high end restaurants, meanwhile, spend more time swatting flies than taking orders.
Speaking of the newly opened Al Mandaloun Patisserie in Dbayeh, an extension of Al Mandaloun Café’s terrace there, Michelle Souhaid, project developer for the company said: “The café concept is doing better this year than in previous years because Lebanese want to go out and have fun, but without paying a large sum at a high end restaurant. Here, our clients have coffee or a sandwich in a beautiful setting without feeling forced to order something big. Also, open air concepts are very successful among Lebanese who lack this green space in their daily lives.”
Ramy also thinks that street food, small bars, Lebanese cuisine and café concepts performed the best in 2014, offering up Al Falamanki, where he is one of the partners, as an example of a Lebanese cuisine and nargileh venue that is almost always full.
Catering to the local market can be challenging because it is relatively small; there are simply not enough clients to fill up Beirut’s venues. This increases competition among those in the hospitality sector. “It is the same group of people who are going out in Beirut and they migrate from one area to another based on what is new and popular at the moment. This understandably makes our business tiring as we have to put double the effort to attract this same group whose attention is constantly being sought after by others in the sector,” says Rizk.
One strategy to attract this smaller client base, according to Rizk, is to increase happy hours, promotions and discounts. Most pubs and bars in Lebanon are now offering such promotions, even on Uruguay Street, which targets the higher end of the market.
Another strategy, adopted by many in the field, is to offer novelty. This is why the same group of investors will open venues in different locations, sometimes closing those in nonlucrative locations, in keeping up with what area is ‘trending’ at any given time. This year saw the continuing growth of Mar Mikhael and Uruguay Street as bar and bistro destinations, as well as the emergence of Badaro and the rebirth of Hamra, with the new courtyard cluster of bars competing with similar concepts in Mar Mikhael.
Smaller investments on the rise
Ramy and Kamel explain this somewhat surprising growth in bars and clubs despite a challenging market by the level of investment in such places. “They generally tend to be grassroot, maximum 40 seater small bars with an investment between $150,000 and $300,000, split by many investors. The risk is therefore minimal and the margins are large. Also, because the business is small, it takes six months to a year to return their investment and therefore they can cash in before another crisis hits,” says Kamel.
“We don’t see venues that cost around $1 million to set up anymore,” says Ramy, giving the example of Sultan Ibrahim Downtown, slated to open in 2015, as a $5 million investment. Ramy had committed to the project before 2012, but says it is not something he would consider today or that is common anymore.
2015 through the eyes of the hospitality sector
Despite all this, those in the sector remain optimistic and insistent on growth. “We at TRI are expanding our business and have recently opened a new venue in Mar Mikhael, which has been positively received by the clientele there. The Lebanese have a positive spirit and will continue to enjoy themselves, even if at a lesser purchasing power,” says Rizk.
[pullquote]Those in the sector remain optimistic and insistent on growth[/pullquote]
Several hospitality cluster projects are set to make their debut in 2015 in Dbayeh, which is predicted to be the next ‘it’ destination. Speaking of planned developments in the area, Marwan Ayoub, partner in Venture Hospitality, says: “In times of crisis, such as the one we are passing through now, people tend to stay closer to their homes and so we will benefit from the clients in Dbayeh and the immediate surrounding areas. In time of prosperity, those residing in Beirut will head to Dbayeh to avoid the crowds of tourists, so projects in Dbayeh will benefit in both cases.”
Some in the hospitality sector are expanding to Dubai, with the idea that ‘if they won’t come to us, we will go to them.’
“Lebanese entrepreneurs who feel that the market here is too small are taking their concepts abroad, mainly to Dubai but also to Europe and the States. They are not waiting on the security situation; Lebanon will always be the creative and emotional hub, but when we talk business, it is abroad,” says Kamel, who is expanding Couqley and Angry Monkey, a bar concept, to Dubai.
Lebanese entrepreneurs in the hospitality sector have become experts in both crisis management and cost control, maintaining their viability, and indeed often their growth, despite the pressures and difficulties they are facing.
Correction: In an earlier version of this story, the lead photo’s caption (“Venues are struggling to fill empty tables”) improperly implied that Prune, the pictured restaurant, is struggling to fill its tables. This implication was improper to make. Apologies.