Lebanon’s hotels facing a bleak last quarter

Empty rooms

Photo by Greg Demarque | Executive
Reading Time: 5 minutes

During the winter holiday period hotels are typically full of life, from locals dining at the in-house food and beverage outlets, to tourists checking in to their rooms at the lobby—everything and everyone is covered with a festive sheen.

This year, however, if October and November performances are any indication, a busy festive season will not be on the cards for Lebanon’s hotels. When visiting five star properties in preparation for this story throughout November, this writer was struck by how eerily quiet the lobbies and adjacent cafes of visited hotels were.

Bright beginnings

The year did not start this way. On the contrary, all the hotel managers Executive interviewed spoke of an extremely positive year—marked with high occupancy at competitive room rates—up until the last quarter. Both Le Gray and the Four Seasons told Executive that until the onset of the October protests 2019 was set to be a record year for their property, the best since their openings in 2009 and 2010 respectively.

According to hoteliers interviewed, average occupancies in Lebanon’s hotels from January to October ranged from 70 to 81 percent at high room rates—in comparison to the decreased room rates most hotels were offering in previous years to attract business. Area General Manager at Le Gray Georges Ojeil placed average occupancy in his property at 81 percent, with room rates that at times exceeded $375 per night.

This success was due to several factors. The drop in the number of tourists from Gulf Arab countries in 2012 (which had only slowly begun to reverse years later) had shown those in the hospitality sector the merit of diversifying their clientele. Therefore, for the past four years, hoteliers and the Ministry of Tourism had been targeting new markets by partnering together for media campaigns and exhibitions that promoted Lebanon as a destination. These efforts, according to Tracey Bolton, cluster director of sales and marketing at Phoenicia Hotel, had finally paid off. The lifting of the travel advisory on Saudi nationals in February 2019 also had a positive impact on occupancy figures, as Executive reported in its June issue.

To Rami Sayess, regional vice president and general manager at the Four Seasons, nothing matters to tourists as much as stability. “This [our positive figures] was thanks to the efforts of the Ministry of Tourism through Visit Lebanon, plus what we have done as Four Seasons with our worldwide sales offices and other resources,” he says. “But the major reason behind this influx of tourists was the stability we had in the first nine months of the year and even before. When there is no negative media about Lebanon people want to come visit.” 

When good things come to an end

The perception of stability Lebanon was enjoying the first three quarters of the year disappeared overnight with the onset of the uprising on October 17 and the ongoing turmoil since. All hotel managers Executive spoke to say they had an immediate drop in occupancy from the first full day of the protests, meaning October 18. “The problem with our sector is when negative things happen, the reaction is fast,” Sayess says. “We dropped from a 100 percent occupancy the day before the events to 4 percent within days. So yeah, it was drastic.” 

Hotel managers in Downtown’s five star hotels said they expect to finish November with single digit occupancy rates, or at best low double digits, and have a similar outlook for December if the situation does not improve. These luxury properties in Downtown have been hit both because of their location in proximity to the protests and because of the high room rates and prices at their F&B outlets. Further away from Downtown, in four star city hotels in Hamra or Ain el-Mreisseh, occupancy rates are a bit higher—in the 20 and 30 percent range on average—but still nowhere near what they typically are in his period.

In general, all the hoteliers Executive spoke with agree that the situation the country is passing through now has had a larger negative impact on their business than anything in the last decade. “The hotel has been in operation since 2009, and we have never reached such a deep valley in terms of operation and occupancy,” Ojeil says. “Even in the worst days of the so-called trash crisis [in 2015], we were at 17 percent occupancy and there was a continuous inflow [of guests].” While tourists may not care about political squabbles, he says, roads blockage and street violence deter people away from Lebanon.

The economic situation, in terms of the on-and-off bank closures and the difficulty of accessing dollars, has also prevented hotels from depending on locals’ spending in their F&B outlets. “The issue with the banks needs to be resolved as well, since today locals have issues with spending—people are only spending on necessities and not luxury these days,” Sayess says.

Just breathe

The solid performance of the first nine months of the year have left hotels with “acceptable cash flow and reserves,” according to Ojeil. However, given the uncertainty of the circumstances, all hotels are operating on what Phoenicia’s Bolton calls “survival mode,” managing their cash reserves by cutting down on costs as much as possible. Common cost saving measures taken by all hotels interviewed included cutting down on energy expenses with some properties turning off power on several floors and reducing the number of elevators in use or decreasing gas and diesel usage. Hoteliers are also sending their staff on their annual paid vacations—which have already been budgeted—and have put planned projects on hold.

Ojeil says Le Gray is trying to limit purchases through managing their stock more efficiently, while Sayess shared elements of Four Seasons’ emergency contingency plan that includes sending employees to sister properties in the region to work there for two to three months. “The Four Seasons network has 114 hotels around the world, so we contacted the hotels in the region and asked who needs help, since it is the high season,” he says. “We have sent 60 employees so far, and their salary is charged back to the hotels they are working in—so this property
saves money.” 

These cost saving mechanisms will only help these hotels survive until the end of January 2020, according to those Executive spoke with, and then they will have to decide what measures to take if the situation remains volatile. “The good thing is that Lebanon always bounces back, but the issue is how long it’s going to take and at what cost?” Sayess says. “Because the longer it takes, the more seriously it will impact businesses. Some will sustain longer than others, but if this continues for five or six months, who will fall every month? There are 400 families, if not more, that depend on a hotel of our size for their livelihood.” In an interview on November 15, Ojeil told Executive that the hotel already had losses that exceeded $1 million (in terms of room and conference booking revenues) since the onset of the protests.

Even if a government is formed today, and serious work is put into resolving the economic situation and the political tension, some hoteliers believe it will take a while for the industry to get back on its feet. “The hospitality sector needs two months at minimum to pick up after everything calms down,” Ojeil says. “Leisure tourists need time to forget and rebuild their trust in Lebanon, while local and regional corporate bookings are influenced by the economic situation in the country and will not hold conferences or invite delegations to Lebanon.” 

As 2019 draws to a close, and hoteliers close their annual budgets, they surely cannot help but look back at this year with despair at what was lost. The hope is that they will still be able to rebuild and start anew when the situation stabilizes, as they—and indeed Lebanon—have done countless times before. In the end, there is no choice but to believe in the resiliency of Lebanon and its hospitality sector.

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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