February 1997, when Hamra was blocked with shoppers and traffic was but a distant memory. The ads on international and regional satellite TV for the Lebanon’s February shopping festival may have become less frequent in the recent years, but few could have predicted its outright cancellation, hot on the back of record tourism figures and a new wave of modern massive shopping malls opening. To make matters worse, the decision came with no official explanation. “Political instability was the cause behind the cancellation,” said a source at the ministry of tourism. “The government didn’t want to allocate any resources to prepare for it.”
Merchants, however, will go ahead with the month long extravaganza as planned. “We prefer not to make any cancellations,” said Mohammed al-Khatib, President of Beirut’s Hamra shop owners. “Anyway they [government] didn’t do much last year,” he added.
The government’s role in the shopping festival, the first of which took place in 1997, is to coordinate all marketing efforts towards promoting the month long purchasing spree – be it through advertisements or hotel and air discounts. However, since 1999, the government has appeared to lose interest and tightened its belt and there has been little or no progress in developing Lebanon into a regional retail hub like Dubai.
Last year, during the first quarter of 2004, there were 202,422 visitors that came to Lebanon – a 33% year-on-year increase. However, economists predict, that while Lebanon’s overall tourism momentum will continue, monthly arrivals over the period of the “Non-Shopping Festival” will dip. In a somewhat damning indictment of ministerial planning and continuity, tourism minister Farid Khazen in January admitted that inadequate planning was the main cause for the cancellation of the festival. “We didn’t have enough time to achieve preparations,” said Khazen meekly, no doubt referring to the cabinet reshuffle in October.
MTC all set to slash
“It was one of the smoothest transitions we ever had,” said Said Nasir, MTC Lebanon’s chief commercial officer, speaking about replacing the telecommunications network inherited from Libancell by the Intelligence Network (IN) in mid January. A few people had trouble sending SMS for two days, but apart from that, the company received no complaints.
“IN is more transparent and easier to use,” said Nasir, “as both calls and SMS are not indicated in units, but in dollars. IN also enabled us to introduce a large number of value added services, which so far were reserved for people with a fixed line. Finally, as everything is indicated in dollars, it will also be easier to implement new tariffs.”
So far, tariffs have remained exactly the same: $0.47 cents for a phone call and $0.10 cents for sending an SMS.
MTC manages one of Lebanon’s two state-owned telecommunication networks, but can only do so within a pricing strategy determined by the ministry of telecommunications (MoT). However, according to Nasir, the MoT is serious about substantially reducing tariffs, maybe as early as spring. “The MoT is sensitive to public complaints and is well aware that Lebanon has one the world’s highest tariffs. In any case,” he added, “global research has shown that reducing tariffs will not reduce revenues. On the contrary, revenues increase as people are inclined to talk more.”
As early as June 2004, when MTC took over from Libancell, the company received a government proposal with seven possible ways of reducing tariffs, which included: a direct percentage cut, the introduction of off-peak tariffs, the billing of seconds instead of minutes and reduced tariffs for a client’s five to eight most dialled numbers.
Bling Bling
For a tranche of the Lebanese population, who in the words of one economist are “committed to conspicuous consumption,” New Year’s Eve was another opportunity to spend, spend, spend! Lebanon’s finances may be squeezed, but the country is still liquid; especially, it seems, on this biggest of party nights. One restaurateur revealed that revelers at his establishment had forked out as much as $1,000 each, double the average wage.
But just how much was spent? Economist Marwan Iskander conservatively estimated that around 25,000 to 30,000 people went out on New Year’s Eve, each spending on average $100 per person. This translates into rough countrywide 2004-2005 New Year revenue of around $3 million. “That’s a good figure for Lebanon,” Iskander said.
“New Year’s Eve is a big money night for us in terms of revenue,” acknowledged InterContinental Phoenicia sales director Maha Bourachi, who revealed that around 1,300 merrymakers paid up to $600 for dinner and live performances by Arab music stars Najwa Karam, Fadi Shaker and Nancy Ajam. In total, Bourachi said business for the night, including rooms, generated over half a million dollars for the hotel, roughly 16.5% of the country’s taking for the night, if Iskandar’s figure is to be believed.
Elsewhere, 1,400 punters, many from as far away as Japan, India and the United States, paid as much as $200 per head, to be – and be seen – at the hot-ticket, “Bling, Bling” party, billed as the biggest private party in town. Held at the Forum de Beyrouth, the bash generated revenues of around $200,000.
Not to be outdone, across town at the Regency Palace Hotel in Jounieh, 3,000 to 4,000 guests paid up to $400 a head to see Haifa Wehbeh, Georges Wassouf and the Four Cats. Wehbeh’s fee for the evening was a reported $30,000 per hour. Nice work if you can find it.
Bank shuffle signals end of an era
Fouad Siniora, the former minister of finance, was appointed as the new head of Banque de la Méditerranée, one of Lebanon’s largest and best capitalized banks. Siniora replaces Moustafa Razian, who helmed the bank for more than a decade, while Siniora during the same period intermittently took charge of the country’s finances. Banque de la Méditerranée is principally owned by the former prime minister Rafik Hariri, and that both Siniora and Razian have been Hariri’s advisors and partners within the Méditerranée group for decades. Razian – whose pay off was rumored to be in the eight figures – is expected to run Allied Bank on a full time basis. Allied Bank became Banque de la Méditerranée’s wholly owned subsidiary back in 2001, and is now aiming at becoming a specialized retail bank.
There is a sense of déjà vu. Siniora’s appointment is not a first. He was chairman of the bank prior to his first appointment as finance minister during Hariri’s first term in office as prime minister between 1992and 1999. Siniora’s re-appointment in the private sector has been interpreted by many within Lebanon’s banking sector as a sign that he is not likely to stage a comeback as finance minister any time in the medium or even long-term. Indeed, as many have pointed out, a chairman of a major bank such as Méditerranée needs to commit fully to the development of the institution and cannot afford to swap hats to suit the political climate. An intriguing notion then arises: should Hariri return for a third time, he would surely appoint a “new” finance minister. Say you read it here first.
IDAL targets local investors
The Investment Development Authority of Lebanon (IDAL) has wrapped up a nationwide campaign to raise awareness among Lebanese investors of the benefits of the Investment Development Law, raising the question what has it been doing for the four years that the law has been on the statute books. “We decided to launch this campaign now as we realized that too many people were either not familiar with the investment law or just didn’t understand how it applied to local investors,” an IDAL spokesman explained.
Entitled “IDAL beside you to achieve your investments”, the 2 ½ month long campaign which ended on January 31, 2005, held conferences in several regional Chambers of Commerce, to explain Investment Development Law 360 and offer incentives to assist potential investors implement and develop their projects according to a solid marketing strategy.
“Due to their unfamiliarity with the law, some potential investors aren’t aware of the many advantages the law offers, such as fiscal incentives, discounted work permits and so on,” added the IDAL spokesman. Adopted by the Lebanese parliament on August 16, 2001, the Investment Development Law grants a series of incentives to investors so as to stimulate the country’s social and economic development, as well as enhance its competitiveness.
Targeting the productive sectors of the economy such as industry, agriculture, agro-industries, tourism, ICT and media, the campaign also sought to encourage regional investment in Lebanon. “By launching this campaign throughout the country, we are also hoping to create more of an equilibrium, investment wise, between the regions”, the spokesman added.
IDAL was established in 1994 as a public institution charged with the promotion of investments in Lebanon and assistance to investors in the development of their projects. A One-Stop-Shop facility, it is meant to bypass all public administrations and authorities in issuing permits and licenses to investors.
Born again!
Born Interactive and Orange Clicks, two Lebanese agencies, merged on January 1, 2005, creating Born Interactive-OC, one of Lebanon’s largest interactive technology companies. Based in Beirut, the company is expecting a turnover of $1 million for the year 2005, 50% of which will stem from regional clients.
“The aim of this merger is to enhance growth and expansion for both of us,” said Fadi Sabbagha, general manager of Born Interactive. “By increasing our production capacity we can meet the growing demand for big, regional projects and compete with global and regional agencies.”
“Reaching a critical size is the main issue,” added Walid Hanna, general manager of Orange Clicks. “Because we have high fixed costs, we can double or even triple our revenue by increasing profit.”
While Orange Clicks has developed an important client base in Lebanon and in the Gulf countries, Born Interactive has built a portfolio of clients ranging from Lebanon to North Africa, France and the USA. “The two companies are very complementary in terms of market penetration,” said Hanna. “Furthermore, from an IT point of view, we complement each other as well: they have know-how that we don’t and vice versa.”
Both companies maintained the entirety of their staff during the merger, reaching a total number of 25 employees – a figure that is expected to increase. “We share the same company culture and vision,” said Sabbagh. “Although we plan on recruiting and expanding, we are also ensuring that our clients do not feel the transition.”
“Business wise this was a smart move,” admitted an industry insider. “In the website and e-solution industry, they are two of the most serious players on the Lebanese market.” The new company’s shareholders, composed of Walid Hanna and members of the Sabbagha family, elected Fadi Sabbagha as CEO. Hanna will be a board member and a minority shareholder, whose share is registered under the name of the TRINEC Group.
The SABIS effect
The SABIS International School will create a third school in Lebanon after signing a contract with Intered (the managing arm of the SABIS School network) and the Beirut-based Abniah general contractor company on October 21, 2004. The move comes as part of a greater international strategy, which will see the opening of six new schools in Syria, Bahrain, the UAE and the United States.
The new school will be located on the hills of Adma and is scheduled to open its doors to students during the 2005-2006 academic year. The 75,000m2 purpose-built campus will be comprised of ten buildings, including educational facilities, a performance hall and sports facilities, such as an Olympic-size swimming pool and a soccer field. It will offer kindergarten, primary and secondary classes, with the capacity to accommodate up to 1,800 students.
An educational system which started in Choueifat, Lebanon in 1886 as an all-girls school, SABIS now counts 27 schools across four continents – the Middle East, Africa, Europe and the United States – totaling approximately 25,000 students. It is all part of the school’s strategy of catering to “mobile” families. “We have 29 different nationalities at Choueifat, including children of United Nations employees, of foreign companies. Families that move around,” said Victor Saad, VP Operations and Developments.
The tuition fees for the SABIS schools vary, even within countries. At Choueifat, fees range from LL5.4 million per year at kindergarten level to LL6.1 million per year for the upper secondary classes. Fees at the school in Khoura are less. Those for Adma have not yet been set.
“Tuition fees are set according to local culture and income levels,” Saad explained. “You can’t have an expensive school in an area where people can’t afford to pay for it, but although the tuition fees are lower, the school will provide the same services and obtain the same results.”
Dora Mall
The much-heralded $80 million, 200,000m2 City Mall in Dorah on the northern edge of Beirut finally threw open its doors, after some delay, in time for Christmas. Behind the doors, though, much was still missing. Only the 11,000m2 ground-floor hypermarket anchor Casino Geant – the first in Lebanon – has been completed. Still to come, according to Michel Abchee, CEO of City Mall creators ADMIC, are ground floor specialty shops (in February), more stores and a food court on the upper level (in March or April), an 18,000m2 BHV outlet (which will serve as a second anchor), a sporting goods store (anchor number three) and a nine-screen multiplex cinema, both by the end of 2005.
The opening of the only Casino Geant, in a first phase, was part of a calculated, staggered approach, Abchee explained. “If we had opened the whole thing at once it would have been unmanageable,” he said. On opening day, wires protruding from the walls of the empty halls leading to Casino Geant from the underground City Mall car park spoke of ongoing finishing work. Inside the hypermarket, a few of the items on display bore no prices and salespeople were unable to say what the prices were. One salesman spoke of chaos.
But Abchee was upbeat. “It was a rushed opening, but a good opening,” he declared. “We worked long hours to ensure it. But we opened because we were ready. Of course, people are still working but very little was unfinished. Prices change before, during and after any mall opening, to suit the market. There were a huge number of products. Some didn’t arrive on time. All employees were trained; some were trained better than others. Mistakes happen. But a phased opening was the right thing to do.”
Real estate observers were impressed. “It has everything time-wise, size-wise and location-wise to make it a success,” said real estate expert Raja Makarem of RAMCO. “Success doesn’t depend on the opening. It depends on quality. And quality depends on professionalism and expertise – which the Abchee brothers have. They know how to run a good mall.”
Tsunami fallout
In December 2004, tour operators Emirates Holidays paid a marketing visit to Beirut, together with the ministry of tourism of Mauritius – a small, scenic island in the Indian Ocean – and the Mauritian Tourism Promotion Board, to tap into growing Arab tourist interest in Southeast Asian destinations. The visit was robust and upbeat, Emirates Holidays vice president, John Felix, said: “Interest in the Middle East in exotic destinations is increasing. Mauritius is one of them. Travelers are becoming more sophisticated. They are looking for affordable luxury. The uniqueness of destinations is becoming more appealing. Honeymooners, for example, want exclusive destinations and we can offer that.”
Then came the wave. A death toll of 200,000 is not good news for tour operators. “There are no more bookings for Southeast Asian destinations,” lamented Lilian Daher, assistant to Nakhal Travel Manager Elie Nakhal, “even those not affected by the tsunami. We have a person who deals with Southeast Asia bookings. Now she is doing nothing. We will have to find other destinations for her.”
Before the tidal wave, in the run-up to Christmas, Nakhal had been flooded with Southeast Asia bookings. Daher said she feared there would be no revival for at least six months. “There is no traffic towards South East Asia,” said an equally somber Ghassan Hitti, manager of the Association of Travel Agents in Lebanon. Things may pick up at the start of the season in mid-April. But there won’t be as many as before. People are afraid.” Emirates Holidays in Beirut were unavailable for comment.
Reaching for the stars
French-registered Star Airlines will begin services between Paris and Beirut on February 17, initially offering round trip fares starting at $452. Star will join more than 45 airlines already flying in and out of Beirut under an ‘open skies’ policy instituted four years ago. Until the high season kicks off in June, the airline will be offering two flights to Paris a week, leaving on Mondays and Fridays at 1:00am. Starting June 14, a Wednesday flight will be added.
Star says it is tapping into demand among the Lebanese in Lebanon and those who have emigrated to France for a cheaper alternative to the hitherto only direct link between Beirut and Paris offered by national carrier MEA in conjunction with Air France. In the past, travelers seeking lower fares had to use airlines offering an indirect service to Paris via a hub in Europe. Examples are Cyprus Airways, Alitalia, KLM, Lufthansa and Czech Airways. It is from airlines like this that Star hopes to poach passengers.
“We won’t be able to take a share of the MEA/Air France clients because they have three flights a day, a frequent flier program, and bigger aircraft offering a more exclusive business class,” acknowledged Samaha.
Star will be operating a 164-seat Airbus 320 on the Beirut-Paris route. Interest in the service has indeed been strongest in Lebanon and among the many Lebanese expatriates living in France. “At a later stage we will be targeting tourists. That will require a lot of work, because it takes time to establish and develop a product. For the moment our main target is the Lebanese,” said Samaha.
An MEA employee, speaking on the condition of anonymity, said: “Star Airlines offers two flights a week. Business travelers and frequent fliers will always want the flexibility of three flights a day. Star may attract leisure travelers who don’t need to come back ‘the day after tomorrow.’”
