Utilizing Big Data effectively offers big benefits
Business

Meeting the Big Data challenge

by Bahjat el-Darwiche & Walid Tohme
written by Bahjat el-Darwiche & Walid Tohme

Recent research on Big Data should sound an alarm bell for companies. On the one hand, there is a link between usage of Big Data and the quality of corporate performance, on the other, very few companies are actually making use of Big Data. Companies therefore need to grasp the commercial advantages that Big Data can bring, and determine how they can develop their capabilities and culture to exploit its potential.

Writing in the Harvard Business Review in 2012, Andrew McAfee and Erik Brynjolfsson revealed the extent of Big Data’s impact. They interviewed executives in 330 publicly traded companies in the United States and found that those organizations which believed most in the power of Big Data gained a marked advantage over their rivals. According to McAfee and Brynjolfsson, the enterprises that were in the top third of their industry in terms of using data-driven decision making were more productive and more profitable than competitor companies by average margins of 5 percent and 6 percent respectively.

Despite such findings, companies have not broadly adopted Big Data practices. Indeed, a 2013 Gartner survey found that less than 8 percent of surveyed companies had actually deployed Big Data technology. Although this figure is set to rise substantially in coming years, companies will need to adapt considerably to thrive in a data-centric world. In the Aberdeen Group’s “Big Data Trends in 2013,” the authors found that the proportion of executives who reported that their companies were unable to use unstructured data, and who complained that the volume of data was growing too rapidly, had increased by 25 percent during the previous year.

Stages of maturity

So while better technology will help to store and analyze the avalanche of data now being produced, what will make the difference is building the right capabilities and culture. To do this, companies will need to know where they stand in terms of a Big Maturity Framework. The framework consists of three elements — environment readiness, organization-internal capabilities and the ways in which Big Data can be used. It can help companies to see how far they have progressed, and identify what more needs to be done to get where they want to be.

[pullquote]In its most developed phase, it can radically reshape the business landscape[/pullquote]

The framework acknowledges that Big Data can be used in different, progressively more sophisticated, stages of maturity. It can have a limited scope, serving merely to improve the efficiency of existing operations. Or in its most developed phase, it can radically reshape the business landscape, transforming individual companies, and paving the way for disruptive, entrepreneurial start-ups and the creation of wholly new industries.

The first maturity stage, performance management, allows executives to view their own business more clearly through, for example, user-friendly management information dashboards. This would typically involve internally generated data.

The second maturity stage, functional area excellence, involves organizations using both internal and external data to improve selected areas of the business. This may lead to the enhancement of sales and marketing techniques, or to advancements in operational efficiency. For example, one German car manufacturer used real-time performance monitoring of production machinery to achieve a 20 percent increase in productivity. Each machine was closely monitored to pinpoint downtime, enabling the company to optimize the utilization of the overall plant.

The third maturity stage, value proposition enhancement, allows organizations to start to extract a new source of competitive advantage that goes beyond the incremental improvement of existing operations and services. This may entail real-time recommendations, or the personalization of services, to raise the quality of the customer experience.

For example, a global mass merchant was able to increase its profit per customer by 37 percent by applying advanced customer analytics to identify its best customers and then present them with personalized offers. The frequency of those target customers’ purchases rose by approximately a quarter, and the average basket size grew by around 10 percent.

Another example of this third maturity stage comes from a leading European bank. This financial institution managed to increase sales by 12 percent through diversifying its website content. When customers logged in, they were shown one of several alternative websites based on their individual transaction history and segment, and the company’s overall product portfolio. The content was adjusted according to the predicted needs of the customer in order to maximize potential sales.

The fourth and final stage, business model transformation, is when Big Data leads to fundamental change. Big Data practices become deeply entrenched within the organization, shaping the nature of the business as well as the mode of executive decision-making.

Enhancing insight

Both product and services organizations are capable of reaching this stage. General Electric (GE) is a product organization that has made clear that it believes in the power of Big Data. The company anticipates that machinery and equipment will soon be loaded with sensors which will display detailed service data in real time and across longer time periods. GE is therefore spending more than $1 billion on building up its data science capabilities to provide data and analytics services across business functions and regions.

The proposed merger in 2013 of the two advertising companies, Omnicom and Publicis, indicated a broader data-driven transformation among service providers. The advertising industry is moving toward a more science-based, data-driven business that aims to deliver personalized advertising messages. This new world will be dominated by those major players that possess the most comprehensive data about individuals. Although they called off the merger in May 2014, Omnicom and Publicis believed that their combined size would produce the desired volume of data.

Yet despite widespread interest in Big Data, companies face many pitfalls. Many of these relate to their own internal systems and culture.

One prominent obstacle is the shortage of available data-scientists with an advanced education in mathematics or statistics who can also translate raw material into actionable, commercial insights. Although many educational institutions have started to introduce relevant courses, the market demand for such people is already considerable.

Companies must also refashion their current decision making culture. Senior executives should be making more judgements based on clear data insights, rather than simply resorting to their intuition as in the past. Changing corporate culture in this way could well impinge on concerns relating to status, with executive instinct increasingly challenged by the facts of hard data.

[pullquote]Over the next five years, Big Data will become the norm and will enable game-changing opportunities in many industries[/pullquote]

However, while data can be of great assistance in solving an actual problem, it nonetheless holds true that senior management has first of all to ask the questions that the data at their disposal could usefully answer, rather than process it with no clear strategic goal in mind. What this means is that the value of an insightful executive will not be diminished in this new era, but rather can be enhanced thanks to Big Data.

Over the next five years, Big Data will become the norm and will enable game-changing opportunities in many industries. Organizations must react in a timely manner to determine how they can deploy Big Data in the most effective way possible, and then lay the appropriate groundwork. Without the necessary senior-level enthusiasm and sponsorship to realize the huge potential of Big Data, savvier competitors are likely to gain a potentially decisive advantage.

 

Correction: A previous version of this article, which appeared in Executive’s print edition on May 1, mistakenly claimed that Omnicom and Publicis had actually merged.

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Image from Sarah Francis's documentary "Birds of September" that is now showing at Cannes
The Buzz

Bringing Lebanese cinema to Cannes

by Susannah George
written by Susannah George

Starting today, film industry elite from all over the world will gather in the south of France for the Cannes film festival. Among the crowds will be a delegation from Lebanon including representatives from Fondation Liban Cinema and the Lebanese Tourism Office in Paris, a small team out to educate festival goers on the history of Lebanese cinema and promote contemporary Lebanese films.

Zeina Toutounji, a publicist and translator who’s been representing Lebanon at Cannes since the ‘Lebanese Pavilion’ first opened nine years ago, says when it comes to Lebanese cinema, most people at the festival have a base of knowledge. “If you talk to people who only go to see blockbusters, of course they may know very little about Lebanese cinema,” she says, “but for people who love cinema, they know there is cinema in Lebanon.”

This awareness is thanks in part to the strong history of Lebanese film at the festival. The first film from Lebanon screened at Cannes was Georges Nasser’s “Where To?” in 1957. The film, made before the 1975–1990 civil war that now dominates most Lebanese cinema, tells the story of emigration and sacrifice in the name of family.

Later, Maroun Baghdadi, considered a pioneer of new Lebanese cinema, screened “Little Wars” at Cannes in 1982 and in 1991 his film “Out of Life” won the Jury Prize.

More recently, Nadine Labaki’s “Caramel” and “Where Do We Go Now” premiered at Cannes in 2007 and 2011, respectively.

But despite these critical achievements, Lebanese film as an industry lacked an official presence at the festival until recently. That’s what Serge Akl, the head of the Lebanese Tourism Office in Paris, hoped to change with the Lebanese Pavilion. He wanted to create a space for filmmakers to talk about the business of making movies in Lebanon, as well as the artistic process.

“What we lack are big production facilities [in Lebanon],” says Akl. He says Lebanese businessmen don’t think of movies as a business, so young directors lack an infrastructure to help them through the movie making process. Most Lebanese directors write their own screenplays and Lebanese producers are often left to search abroad for backing to get movies made and distributed.

While there are no Lebanese films in the official competition at Cannes this year, the Lebanese Pavilion is organizing two screenings. “Stable Unstable,” the feature film debut from Lebanese writer-director Mahmoud Hojeij, will be showing. The film, set in a Beirut psychiatrist’s office on New Year’s Eve, is a collection of vignettes from an ensemble cast. While the country’s civil war is never expressly mentioned in the film, the characters’ struggles address the war’s lingering effects on Lebanon. Each patient, trying to make sense of the past year, is searching for stability in unstable surroundings: battered social fabric, shaky politics and economic uncertainty.

“Birds of September”, a documentary from director, screenwriter and producer Sarah Francis is also showing. The movie, filmed from a glass van roaming the streets of Beirut, is a collection of confessions and snippets of daily life in the Lebanese capital. The film depicts the city’s visible scars: long slow shots of street corners that show signs of rebuilding and neglect, buildings still riddled with old bullet holes. These images serve as backdrops for Beirutis from all different walks of life to tell tales of economic hardship, love and loss, as well as share idle chit chat, making passing references to the war.

Toutounji, the publicist at Cannes, says that for her, Lebanese Cinema is unique because of its voice. “All movies are telling stories; for us it’s the war,” she says. “In Lebanon, cinema is doing what the government hasn’t … it’s addressing issues of our collective memory.”

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Online persona
Business

Find your online persona

by Tara Nehme
written by Tara Nehme

If people in the Middle East did not have the faintest clue what creating the perfect résumé entailed, then I was one lucky girl. Because if they didn’t know, and I figured out how, all I had to do was create something that allowed me to exchange my soon-to-be-learned skill for their money. Soon I would be living the life of Scrooge McDuck. Safe to say, the story didn’t pan out that way. Following an intense period of learning about everything related to web design and that horrible language called code, I finally had a website to call my own.

In a matter of months I launched ticklemybrain (TMB) and even though I was utilizing what I assumed were effective online advertisements, the requests did not flow in at the rate I had initially hypothesized. In my search for answers, Steve Jobs came to my rescue. When asked whether he did market research for the iPad he responded, “None, it’s not the consumers’ job to know what they want.” The reality was that my future customers had no idea their résumés needed ‘tickling’ in the first place. That would be one of the many valuable lessons I learned on how to properly establish my brand.

Creating a company brand that is full of life and building an online persona that will perpetuate that life is unbelievably important. Knowing you have something amazing to offer your audience isn’t enough. Customers have too many choices and the competition is simply too strong for you to be floating in a sea of fast fish.

Here are eight tips to help you get there:

1. Research it. We can avoid common branding pitfalls by scoping out the competition. I googled every single business that offered a service similar to TMB. Most companies had a very professional look, as that is the general sentiment associated with anything related to the corporate world. I didn’t want my clients to dread accessing my website because it reminded them of their troubles finding a job so I built a website, though professional, that utilized fun animations.

2. Pick a look. I spent hours deciding between fifty shades of yellow back when I was making choices about my logo. You want things nice but there should be a balance between a minimum viable product and pure obsession (where I usually hang out). So choose a logo, tagline and the colors that make your heart smile. Then move on.

3. Good lingo. If you arrive to your job each morning and speak with a different accent, your colleagues will most likely find you weird. Same goes with your business. You need to decide on a tone, and stick to a method of communicating with your audience that is consistent. If you decide to be funny once a week when using social media, then always be funny once a week.

4. Be social. When it comes to social media, recruit someone who speaks the language of your business really well. The last thing you want is a spelling error on your Facebook page. Consistency of posts and style should be applied across social media platforms, and don’t create a Twitter account if you’re not planning to tweet.

5. Know your audience. Rather than selling the writing service itself, TMB changed to promoting posts that related to résumé facts in order to make potential customers realize they needed help. We ensured, for example, that every person who landed on our Facebook page knew that recruiters only spent 10 seconds looking at a résumé so logically, what a reviewer sees in these 10 seconds was worth investing in.

6. Set up a solid platform. Technology is your arsenal so make sure to have a proper website equipped with search engine optimization (SEO) tools and any other tools pertinent to your business.

7. Reel them in. Provide people with reasons to visit your website. One obvious approach is a blog that you can use to generate free, powerful content that adds to your credibility as a company. WordPress or Tumblr are good sites to generate blogs.

8. Tracking. If you don’t monitor your online presence with a tool like Google Analytics, how will you know what works and what doesn’t? Don’t ignore the numbers.

Your brand’s personality, and more so your online presence, brings you closer to achieving your business goals, whatever they may be.

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The 3D animated movie “The Prophet”, based on Gebran Khalil Gebran’s book, will premiere during this year’s Festival de Cannes.
The Buzz

“The Prophet” heads to Cannes

by Micheline Tobia
written by Micheline Tobia

The long awaited 3D animated movie “The Prophet”, based on Gebran Khalil Gebran’s book, will be partially screened for the first time during this year’s Cannes Festival on Saturday, May 17. The movie, produced by Salma Hayek and directed by Roger Allers (who was behind “The Lion King”) gathers a group of internationally acclaimed artists: the music was composed by Oscar winning Gabriel Yared, and voice casts include actors such as Liam Neeson, John Krasinski, Frank Langella and Alfred Molina.

“The Prophet”, first published in 1923, is one of the best-selling books of all times, having sold over 100 million copies. Gebran’s work has been translated into more than 40 languages, and he is one of the world’s most well known poets.

“The Prophet” had a $12 million budget, which FFA Private Bank co-financed by providing $4 million from different investors it represents. “FFA Private Bank’s Investment Banking division structured and proposed this investment to the bank’s clients as a way to diversify in an alternative asset class with high potential returns,” says Julien Khabbaz, head of investment banking at FFA.

The movie is not FFA Private Bank’s first venture into movie industry. It previously co-financed the French biographical drama film “Cloclo” in 2012, and the Hollywood action movie “Two Guns” in 2013 starring Denzel Washington.

Khabbaz is proud of the film’s initial success: “Being included in Cannes, the most prestigious film festival in the world, is a testament of this movie’s true potential and meaning; and it will be great for Lebanon to be represented in this way.”

 

Correction: A previous version of this article mistakenly claimed that the film would premiere at Cannes. Instead, parts of it will be screened for the first time.

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Joummana Salame, managing director at Hospitality Services sarl
BusinessTourism 2014

Hope for Lebanon’s hospitality sector

by Nabila Rahhal
written by Nabila Rahhal

Shortly after the 21st edition of HORECA, Lebanon’s largest food and beverage conference, Executive sat down with Joummana Dammous Salame, Managing Director at Hospitality Services sarl to discuss HORECA, the hospitality sector over the past three years and upcoming trends. 

 

Could you briefly describe the highlights and major events of HORECA 2014?

It was a beautiful show! We had a bit fewer exhibitors than we did last year — around 335 in total — but in the same size space so it was more spread out and comfortable.

We had more events and competitions this year though, with 19 competition categories at the Hospitality Salon Culinaire including the Live Lebanese Sweets, Live Pastry and the Junior Chef competitions for the students of the culinary and hospitality universities in Lebanon.

There were some new additions to the competitions this year such as the Lebanese Barista Competition, the Best Burger Competition (which is a rising trend in hospitality in Lebanon) and a competition among the chefs from the Lebanese Army sporting clubs.

Another new event this year was the Wineries Day in collaboration with the Union Vinicole du Liban. We invited wine journalists and writers to blind taste wine from all the local wineries that were exhibiting and to give their feedback and opinion. The objective here was not to reward the wineries but to educate visitors and experts on Lebanese wines.

This year, the theme for the Lebanese Food Industries National Day, an annual full program for professionals in the industry organized by the Syndicate of Lebanese Food Industries, was around innovation and creativity because of its importance in moving forward. The industry had a very good year in terms of exporting to other countries

We also had the Industry Lounge this year in collaboration with ELCIM (Euro-Lebanese Center for Industrial Modernization) and other organizations that held a series of short presentations relevant to the sector.

Aside from these major events, we had the usual book signings and the Chairmania Design Event, which gave Lebanese designers the opportunity to share their latest chair design creations with hospitality professionals.

 

What was the response and feedback you got from the visitors? How would you describe the mood in HORECA this year?

This is what I am happy about. We have been holding our breath this past year not knowing what outcome to expect. The feedback was absolutely fabulous because the visitors also did not know what to expect.

Everybody in the hospitality sector was toiling away in their own isolated corner for this past year operating in a pure survival mode and at HORECA people met! They saw each other, and they interacted, and when you do that and you network, something positive is bound to occur.

This is the magic that came from this HORECA specifically: there was such positive energy and vibes as people went out of their way to communicate with each other. The thank you’s we received on the visitors’ feedback form this year were more than ever.

 

To your knowledge, did any of the exhibitors at HORECA sell this year?

No exhibitor will give you straight figures on this but quite a few exhibitors told me they had sold out their stock.

 

Hospitality Services currently organizes three other HORECAs in the region: in Saudi Arabia, in Kuwait and now in Jordan. How would you compare the four?

HORECA Beirut has another flavor! It is the biggest by far and the most attended.

Hospitality is naturally in our blood in Lebanon. In the region, we are the capital of good taste, food and gastronomy.

It is fair to say we are the leaders in this industry, taking everything into consideration. We have more than 45 hospitality schools, university programs and technical degrees in Lebanon, more than in any Arab country.

 

Looking back at the past two years in Lebanon, how would you evaluate the performance of the hospitality and tourism sector?

We cannot deny that it has been a tough two years for the industry and it is has been severely hit. But the Lebanese are strong and have been through similar situations in the past. If you think about it, we have more bad years than good years overall and so we are used to operating in this environment.

Still it is not easy: The F&B industry has been badly hit and so have the hotels; though I cannot give you names [of hotels] some are going to close down this summer. It is truly a time when you either swim and stay afloat or drown.

 

What are some of the coping strategies those in the hospitality business can adopt to stay afloat?

There are techniques to survive this critical period: you have to minimize your costs and expenses, and also export concepts abroad.

You see more and more people in the industry going into franchises abroad now, mostly to Dubai. Maybe it is a good opportunity because ultimately things will calm down here and they can continue to grow their business locally while also having established themselves in another market.

 

How do you foresee summer 2014 in Lebanon?

There is a glimmer of hope in summer 2014. The new Minister of Tourism is working with enthusiasm and has adopted a plan that would make a difference.

We only need security, nothing else. The country is well loved in the region and tourists will return as soon as they sense stability. Also, there are many initiatives such as the one recently organized by the Traders Association in Saudi Arabia which highlights willingness to be open and receptive.

It seems there is an agreement to provide us with some stability to be able to breathe, so let us take advantage of that and do the best we can within this framework we are in.

 

What are some of the trends in hospitality in Lebanon this year?

We are working on promoting local tourism through the Travel Lebanon show where we encourage Lebanese to explore the country: our country needs us and we need to travel around it. In Lebanon Traveller, Hospitality Service’s latest magazine, we are promoting rural tourism.

There are a million things we can do in Lebanon, from hikes to culinary and wine tours to art events, but we are not used to that and usually venture out of Beirut only for Sunday lunches, though we should explore different activities. We took our international judges on a street food trip and to Burj Hammoud which they loved! At the recent “Museums at Night” event, there was a cue outside the National Museum. There are many things happening but you need to hear about them.

Though this [local tourism] will not make up for the lack of international tourists, let us build on it at least and promote our domestic tourism among each other, especially since it appeals to expats.

We have to save ourselves hand in hand as no one will do it for us.

 

What are the latest trends in the F&B sector?

This was a good year for street food, snacking and burgers. There is a global trend towards going back to one’s roots and traditions that has made its way to Lebanon, and so you find more Lebanese restaurants in heritage homes.

People are also looking for authenticity in their food and you can feel this. Again, we have to lobby for it and get more people involved in rural tourism because there are beautiful projects to be discovered.

 

Any final words?

This year was harder than last year for all the industry. We are part of the industry and feel their pain, and we felt that this year we made a difference: we put double the effort but it was part of our commitment to our industry and they felt it — and this was the magic we needed.

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Some tourism projects are on hold waiting for better days.
FinanceTourism 2014

Masters of crisis management

by Livia Murray
written by Livia Murray

Lebanon’s hospitality and tourism industry is in crisis management mode when it comes to dealing with its finances. As the number of tourists visiting the country has steadily declined, down 8.7 percent in January and 17.8 percent in February compared to the first two months of 2013, companies in the sector are running out of cash.

“The definition of good has changed,” laments Ziad Kamel, treasurer of the Syndicate of Owners of Restaurants, Cafés, Night-Clubs and Pastries in Lebanon and owner of Couqley’s and Gemmayze’s Alleyway. “Good used to mean you’re doing an acceptable margin, you’re paying out dividends regularly and you’re making money from your business. Today, good means you’re not in the red.”

Running out of cash

Different businesses have been put under different financial pressures by the Syrian crisis. In the domain of high-end hotels, businesses face slightly less pressure if they are owned by groups who can afford to continue injecting funds in them, at least until Lebanon’s tourism sector recovers from the crisis. Those who own the real estate can usually continue running and investing in the hotel without resorting to loans.

Two such cases are the Hilton Beirut Habtoor Grand Hotel and the Hilton Beirut Metropolitan Palace in Sin Al Fil, both owned by prominent United Arab Emirates businessman Khalaf al Habtoor, chairman of the UAE-based Al Habtoor Group, which also owns several Dubai hotels. While the two Lebanese properties are able to cover operational costs from their revenues, the investments to bring the two hotels fully up to the Hilton international brand standard are coming out of the pocket of the owner, according to Cluster General Manager Naif Zureikat who is tasked with keeping the hotel at those standards. “It’s a loan-free hotel,” he says.

On the other extreme, some hotels that aren’t operational yet have outright stopped investments. According to Pierre Achkar, head of the Lebanese Hotel Owners’ Association, some investments in hotels have been put on hold. One new investment, a Grand Hyatt project, was stopped to wait for better days.

For many of the remaining hotels in Lebanon that are still operating, but have bigger financial constraints, getting investment is difficult. According to Achkar, it is nearly impossible under these circumstances to find investors ready to buy shares, since their return would be close to zero or negative. In an attempt to find a way to sustain investment through these times, the Lebanese Hotel Owners’ Association has lobbied the government to pass a law making it possible to sell a room or restaurant within a hotel along the model of a “condo hotel,” the profits from which could go back into the business.

On the side of ticketing and tour operators, cash flows have remained stable with the exception of those businesses geared toward incoming tourism, according to Jean Abboud, president of the Association of Travel and Tourist Agents in Lebanon. However, the affected businesses are small, are not faced with repaying loans and could deal with their waning income by downsizing.

Companies in the food and beverage industry have had their cash flows affected adversely, making it difficult to repay loans. According to Khater Abi Habib, chairman of the loan guarantee program for small and medium enterprises Kafalat, there has been a rise in the number of failed loans in the past two years, which, though the numbers are still unaudited, has increased to over 3 percent in the past six months compared with its rate of 1.8 percent in 2011.

The high rate of failure in the industry, exacerbated by the Syrian crisis, has diminished the tourism sector’s drive to take out new loans to finance growth. In the first three months of 2014, Kafalat loans to the tourism sector reached $1.8 million, a 64.5 percent decrease from $5.1 million in the first three months of 2013.

Kafalat has also witnessed an increase in the number of rescheduled loans from their portfolio. Though Abi Habib estimates it is no more than 2 percent, he points out that it is rising. “And I expect it will keep on rising for the next little while,” he adds.

Banks and bankruptcies

For those companies that have taken out loans to finance their businesses, negotiating loans with banks has become part and parcel of the process of running — and closing — a business.

Banks almost universally require personal guarantees from the owners when they are applying for a business loan. “It’s difficult in Lebanon to get a new loan if you don’t own something else to cover it. In the States, if you have idea you can get a loan. Here, you need a personal guarantee,” says Achkar.

For this reason, shareholders of failed businesses often find themselves repaying the loan for years after their company has shut down. Kamel refers to one of his less successful experiences when he and his co-shareholders decided to shut down one of their failing businesses. In 2012, they closed a restaurant that was opened January of that year in Zaitunay Bay. “We opened in January 2012, then [Gulf countries] put the [travel] ban in May. Overnight our revenues decreased by 70 percent. Ever since then, we had a loss every single month,” he says. They were able to renegotiate the terms of the loan, and the shareholders are still personally paying it off.

By having loans guaranteed by personal assets, banks minimize the chance of defaults on loans. Banks will rarely push their clients into bankruptcy, opting rather for negotiations with their clients as they shut down their business. Their supposed lenience comes with a perk: by rescheduling loans, they make some gains on the additional interest that accrues from prolonging the repayment period.

Moreover, in Lebanon the owners of the business cannot file for bankruptcy themselves, according to Elya Haber, managing partner at Haber and Partners Law Firm. And in the unlikely event that their creditors initiate the bankruptcy, the owners of the business would not have a clean state like in the United States. Having a bankruptcy to their name, they would be blocked from many future business transactions such as taking out loans. “To tell the truth, the system of bankruptcy in Lebanon is helping people not go into bankruptcy,” says Haber. Indeed, this system encourages owners of failing businesses to quietly close shop and personally repay the loan.

Re-scheduling loans

Living up to its reputation as an active player in the industry, Banque du Liban (BDL), Lebanon’s central bank, is creating measures to help businesses ride out the storm with a modification to a 2001 circular that would let companies reschedule their loans with banks for an extra three to five years.

Last September, BDL passed an intermediate circular amending Basic Circular 80 that subsidized interest on loans to the tourism, agriculture, industry, crafts and technology sectors. This amendment made it possible for banks to reschedule subsidized loans approved by BDL prior to September 2013, for a total of 10 years. The move was designed to alleviate the financial burden on companies until Lebanon reached more economically prosperous times, according to the BDL’s legal department.

Though the time has been extended, the subsidy itself has not been increased, so a company would have to pay the extra interest that will have accrued from extending the time to pay back the loan. The subsidized loan has a minimum amount of LL50 million ($33,000) and maximum amount of LL15 billion ($10 million) or 20 percent of the bank’s capital, with some exceptions if a single economic group invests in different sectors, according to the legal department at BDL.

This is not the first time BDL has issued amendments to weather a storm. Following the 2006 war, the central bank facilitated one-year loans to the tourism industry, which they could even use to cover operational expenses for that limited duration of time. The amendment to reschedule loans is a slightly less drastic move. According to Achkar, there are efforts currently by the Federation of Tourism Associations to lobby the government and BDL to extend operational loans to companies in the tourism industry, which would help with the cash flow of the day-to-day operations. However, this type of loan would be risky to implement if the Syrian conflict and Lebanon’s low prospects for tourism drag on for a long period of time.

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The Kuwait Stock Exchange
Finance

Gulf markets hit new highs

by Thomas Schellen
written by Thomas Schellen

With the E-day of transfer to MSCI Emerging Markets status now less than a month away, the three soon-to-be-upgraded bourses of Dubai, Doha, and Abu Dhabi each moved in a different way in week 19. The Dubai Financial Market leapt out of a flat week 18 to a 300-point rise that took it to a six-year high by market close Tuesday. It ended the week only slightly lower than that peak, with a net weekly gain of 4.4 percent. The Qatar Exchange, which dropped the previous week, recouped lost territory with a 1.8 percent climb, but then ended the week below the 13,000 points line that it had breached on Monday and Tuesday. The ADX Index on the other hand dropped another 0.4 percent, continuing its retreat of week 18.

Stock indices

As the announcement of companies chosen by MSCI for inclusion in the Emerging Markets Index is slated for May 14, many eyes zoomed onto the real estate and banking shares in the running. Interest in Emaar Properties, one of the contenders, drove the stock up to a six-year peak on May 5. The share price receded slightly at the end of week 19, but interest in Emaar looked likely to get another boost as a report in The National newspaper said that Dubai regulators would adjust requirements to enable Emaar to undertake the initial public offering of its malls unit in June entirely on the DFM and not, as previously planned, spread the listing across DFM, Nasdaq Dubai and the London Stock Exchange.

Contagious optimism

Dubai stocks certainly do not look like bargain material after having risen more than 60 percent year-to-date according to Bloomberg. Perhaps the best example of an outlier is construction group Arabtec, whose share price last week was described as “looking expensive” by local analyst Shuaa Capital after more than tripling thus far in 2014. However, the attractiveness of DFM-listed stocks may still be able to feed on continued optimism as Dubai’s Department for Economic Development (DED) reported that the business confidence index rose 20 percent in the first quarter of 2014. Based on the long-term business prospects tied to the 2020 World Expo, large companies were the most confident, according to the DED.

The Saudi bourse, mightier and not concerned with the MSCI, saw the TASI extend its gain for a second week. This made Tadawul the week’s third Arab exchange besides Qatar and Dubai to report a multi-year index high. Now in a six week uptrend, the Bahrain Bourse is again edging closer to 1,500 points, a level last seen four years ago.

The Muscat Securities Market adjusted to the enthusiasm of the other exchanges in the Gulf Cooperation Council and rose 1.2 percent, marking its best weekly gain since falling below the 7,000-points line some eight weeks ago.

Rising tides did not lift all boats, however — the KSE Index fell 0.3 percent. Assessing trends in the Kuwaiti economy, the country’s largest bank, National Bank of Kuwait, last week reported that “real estate as asset class” has been a focus of activity, attributing an 18 percent increase in 2013 property sales to a record $13.1 billion partly to the softness in the equity market. The NBK analysts expect the country to see steady non-oil growth of 4 to 5 percent in 2014 and 2015 and added that the economy “could start to gather considerable momentum sometime in 2015,” contingent on government measures for economic reforms and implementation of infrastructure projects, which are both overdue.

Small change for the rest

In the Levant and North Africa, losers outnumbered gainers three to two, with all weekly index movements staying in the 0.5 percent range. The Beirut Stock Exchange dropped half a percent and the BLOM Index entered the weekend below 1,200 points for the first time since the Salam cabinet took office in early February. The Amman Stock Index did better than in week 18 but never fluctuated more than one percentage point throughout the week; its 0.2 percent net gain was in flat territory.

The MASI in Casablanca gave up half a percent between market opening on May 5 and the close of the week on May 9. The Tunindex of the Tunisian bourse on the other hand advanced half a percent in the same period, making its minute gain the best performance in the Levant and North Africa for the week.

Egypt, North Africa’s center of popular mass, saw its benchmark index fall 0.5 percent. As the country appears set to return into the political embrace of its pre-uprising reality, the primary market last week received its first IPO prospectus since 2010. According to Reuters, it is a flotation seeking $120 million and the measure is being undertaken — perhaps fittingly — by a heavy industry materials producer, the Arabian Cement Co.

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A protester holds up a sign "#NoLawNoVote"
Leaders

Open the doors of Parliament

by Executive Editors
written by Executive Editors

There is an old British adage about the frustrations of everyday life. “You wait an hour for a bus,” the saying goes, “and then three come along all at once.”

In the first week of April, after going over a year without passing a single bill, Lebanon’s expired Parliament reconvened and jolted the body politic into action. In total, parliamentarians confirmed over 70 bills in only a few days.

While this magazine agrees that action is certainly preferably to inaction, it is disconcerting that many of these bills only received a cursory analysis in a public forum.

As they rushed to push legislation through, numerous potentially important laws received fewer than 15 minutes deliberation in Parliament. When Executive interviewed Minister of Tourism Michel Pharaon, he mentioned a new bill he personally pushed through that, while potentially positive, has had little analysis by civil society. Even those laws that pricked the public interest remain shrouded in mystery, leaving those whose businesses or lives will be heavily affected at best anxious and at worst infuriated. And with Parliament’s committees often fundamentally rewriting laws, the result is seemingly paradoxical situations such as we saw in early April when women’s rights movement KAFA took to the streets to protest against the passing of a law they had written the first draft of.

More worryingly still, many of these new laws are yet to be signed by President Michel Sleiman and so have not yet been published in the Official Gazette — the primary source for the public and civil society to review new legislation. In simple terms, it is impossible to say whether Parliament’s newfound efficiency is leading to the confirmation of dozens of long-needed bills or pushing through badly written laws that could harm the country. This is yet another issue of a chronic lack of transparency in Lebanon’s politics.

[pullquote]The current system only furthers the public’s fears that politicians have something to hide.[/pullquote]

The country’s Parliament is notoriously closed to the public — major civil society organizations that help draw up legislation regularly have no idea about the status of those laws once they enter Parliament’s maze. Indeed, to get access to a draft law once it has entered the committee stage often requires personally going to a committee member’s office.

This must change. A bare minimum would be the establishment of a website that would allow people to track the status of all of the draft laws in Parliament. This would enable citizens to know who to hold to account when, as happens with alarming regularity, bills get surreptitiously changed. It would also enable the public (and media) to engage in reasoned debate over a draft law’s merits and shortcomings.

The technology is available and affordable. There is no longer any excuse for so little transparency. The current system only furthers the public’s fears that politicians have something to hide.

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Lebanese nightlife growing abroad. Pixabay | Geoff Gill
SocietyTourism 2014

Exporting Lebanese nightlife

by Nabila Rahhal
written by Nabila Rahhal

As conditions for the hospitality sector in Lebanon remain stagnant, more and more entrepreneurs in the field are exporting their concepts to greener pastures abroad. While successful restaurant concepts have been expanding to the Gulf and Europe for the past decade, mostly serving the Lebanese community there, these past few years have seen nightlife venues also make this growth.

Dubai, with Expo 2020 looming in the horizon, over 60 hotels in the pipeline for the next two years and a substantial Lebanese working community, is the natural choice for these enterprises. Expansion to the Gulf is also the perfect strategy as it provides complementary seasons, being more active in winter while Lebanon’s traditional peak season is summer.

Executive sat down with the founders of two of the main enterprises leading the Lebanese nightlife growth in Dubai.

Add Mind's famed White venue in Dora Add Mind’s famed White venue in Dora

WHITE – IRIS 

The past three years in Lebanon saw Add Mind move their famed club White to Dora’s seaside road, allowing them more freedom and space to attract international DJs, as well as larger crowds. During that time, they also opened Caprice, an outdoor lounge style venue in Antelias, which Karim Jaber, managing partner at Add Mind, says was a “big hit” featuring two theme nights — French Night and Bazaar Night — that always draw in large crowds.

“Basically whenever you do a good outdoor concept in a good location with the right PR, people and music, it will work,” says Jaber, adding that this year Add Mind will be focusing on attracting more international talent to their clubs in Beirut.

Jaber is hoping many expats will return to Beirut this summer, which in turn, will encourage the tourists from the Gulf to come visit. “We now work in Beirut on weekends but we need it to be like three years ago when we were working seven days a week and were full,” says Jaber.

Add Mind’s plans for this summer in Lebanon are to open all their outdoor venues and beach clubs — such as Iris Beach and Bonita Bay — with their team from Dubai on location, in an attempt to bring an international flair to the staff in Lebanon. They will also possibly be operating a beach club in Beirut.

Long term plans for the company in the country also include a new concept next year, part of a new hospitality development in Antelias, which will feature many venues in one park-like space. After this, Jaber says there will be no further expansions in Lebanon as the company has enough venues in the country and their focus in on Dubai, especially in the winter season.

According to Jaber, Add Mind has been planning to invest in Dubai for the past five years, wanting a leg-up in what they see as a booming city. “Dubai is close to Lebanon and we have good PR since we know the Lebanese community there well,” says Jaber.

When Add Mind opened their first venue MAD in Abu Dhabi back in the year 2000, Jaber says it was a bit more difficult to operate than it is now that they’ve built a name for themselves in the country. Last year, Add Mind opened Iris Yas Island, Abu Dhabi, three days before the Formula 1 races took place there, and it did wonders according to Jaber. Though Iris Yas Island is still performing well on weekends and theme nights, Jaber sees Abu Dhabi as a completely different market to Dubai when it comes to nightlife as there are more tourists there and more Lebanese who want to go out.

In Dubai, Add Mind started two years ago with the White Room, a ballroom they transformed into a club on a weekly basis, and then moved White to Midan Hotel when the outdoor season started. Iris Dubai, on the 27th floor of Oberoi Hotel overlooking Burj Khalifa, followed a year later and is full seven days a week.

Add Mind’s name recognition from Beirut made them an immediate success with Dubai residents of Arab origin in general, and the Lebanese community specifically, who were used to partying in their Beirut venues. Since White was one of the first outdoor clubs in Dubai, it attracted a multinational crowd though its main clients remain Arabs. “It’s full every weekend and the people waiting at the doors from 11 to 3 are more than the people inside,” says Jaber. White Dubai is even larger than White Lebanon. While Iris, with its loungy appeal, also attracts a multinational crowd during the week, on weekends it mainly caters to Egyptians and Lebanese.

The team plans to open a few more venues in Dubai in the years to come. “The good thing about Dubai is that as much as you see it booming now, there are a lot of concepts that aren’t there yet and have room [to grow],” says Jaber, adding that they are considering different bar concepts such as cozy small bars which Dubai lacks at this time.

Jaber says there is still room for concepts by Lebanese in Dubai, as the Lebanese understand each other and know how to cater to their community. “Lebanese still go for different concepts but, in the end, they want to be where the other Lebanese are and so end up at Lebanese owned venues,” says Jaber. The main difference in operation between Dubai and Lebanon is that Dubai is more regulated, with rules such as closing times and capacity limits. “This is good because it gives you structure and there are no unexpected surprises or problems in that aspect such as is in Lebanon,” says Jaber.

The challenge for Add Mind now, according to Jaber, is to maintain their level of success. “We have to come up with new ideas and ways to maintain our clients because competition is high,” says Jaber, giving the example of five other outdoor venues opening a few months after they opened Iris.

Add Mind is considering other areas in the region for expansion such as Egypt or Morocco but their focus is remaining on Dubai which they believe is the best place to be at the moment.

Music Hall's live shows are now in Beirut and Dubai Music Hall’s live shows are now in Beirut and Dubai

MUSIC HALL 

Michel Elefteriades, founder of Music Hall, maintains that the situation in Lebanon is not as drastic for the leaders in the hospitality industry as it is for non-professionals in the field. “They used to have 500 hundred on the waiting list, they now have a hundred but they are still full.”

The outdoor Music Hall opened last year, a year considered to be slow for hospitality in the country, and was full to capacity with an extensive waiting list that caused Elefteriades to expand the venue this year to maximize on profits during the short summer season.

“Every good businessman has a plan to grow and expand his business,” says Elefteriades, adding that Lebanon has room for only one Music Hall and so it was natural that he exports the concept, especially since there is a demand for it. “I know that it can do very well abroad. Some concepts do very well in a certain country but may not perform as well in a different country — either because they are culture specific or because they rely on the great location they have in one country — but not Music Hall,” says Elefteriades.

Elefteriades says Dubai was planned for 2008 but was put on hold due to the economic crisis that hit the country back then. It was, according to Elefteriades, chosen as the first location for an exported Music Hall because it is the only country that has a good nightlife and is worthy of investment in the Arab world, aside from Lebanon.

However, Lebanese expats only make up 10 percent of Music Hall’s clients in Dubai, and Elefteriades says this is not a coincidence. “For the shows, I take into consideration the ambiance of the country I am in. I always have one Lebanese performer in my line up but, in the end, I am not opening a place for the Lebanese community but more of a cosmopolitan place. Even in Lebanon, the international community makes up 20 percent of clients every night,” says Elefteriades.

Elefteriades says he finds operations in Lebanon easier because he has a good reputation and a well-known name in the country, but in Dubai this is unfortunately not the case, making things a little harder. For Elefteriades the strength of Music Hall is a well-disciplined, well-crafted show with a strong build up and solid performances. A well-experienced team is also a must for Music Hall. “What I do when I open a new Music Hall is I only use the same people who were working in other Music Halls for a year. Those who were in the management team during the Dubai opening were in Beirut’s Music Hall for years and so have our culture and knowhow, and our approach to things,” he says.

He advises Lebanese thinking of expanding their operations to Dubai to have a good concept that is performing well in Lebanon before they take this step. “When you have a solid concept it will work anywhere but those who do not have a good concept in Lebanon from the start should not consider expansion in a different country.”

Elefteriades believes that Music Hall could do very well in many places and says he has been approached for franchises in many countries, as far off as Brazil, but he is not interested in franchising his concept at this point.

He was offered a location in Egypt but says that he hasn’t given his answer yet as he is looking more towards Europe and considering locations in Berlin and Paris. Music Hall will be opening in London within the year and Elefteriades says that although Europe is known for its live music, these countries do not have the line up of artists with different backgrounds and cultures, nor the build up and development that Music Hall is known for.

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A US stealth bomber
Economics & Policy

Ominous sentiments

by Thomas Schellen
written by Thomas Schellen

Lebanon’s consumers ended 2013 wearier than ever and harbored little to no optimism about the country’s economic prospects in light of the miserable security situation and political bickering that dominated the year.

A report on Lebanon’s Consumer Confidence Index (CCI), produced jointly by the American University of Beirut and Byblos Bank offered a reminder of just how miserable the country was in the second half of 2013. According to a research document detailing index results and analysis published by the Byblos Bank research department on May 8, the CCI averaged 29 points per month in 2013, down 10.7 percent from 2012. Within the year, the index fell precipitously from a year-high of 35.3 in August to 22 points in September, marking the index’s lowest monthly reading since its inception in 2007.

Byblos Bank noted that the Q4 2013 confidence readings were more than 70 percent lower than those in each of 2008 and 2009, marking a steeply downward trend. And as a whole, the numbers from the second half of 2013 — which at 28.6 were the index’s most dismal ever when calculated on a semi-annual basis — were “alarming” in the analysts’ eyes when compared with the first half of the year because the H1 figures had already reached a record low. According to the bank, this nullified earlier assumptions that the weak readings of 2012 would constitute a bottoming out.

The unanticipated further drop in confidence in 2013 was “hardly surprising” in hindsight, according to the report, because of the “prevailing sense of instability, uncertainty and caution among Lebanese consumers.”   The year’s steepest fall in consumer confidence was linked to the threat of US air strikes against Syria in late August and early September 2013.

Look out below

The forward-looking part of the consumer surveys, measured in the ‘expectations’ sub-index of the CCI, dropped from an average 29.8 to 26 points from the third to the fourth quarters of 2013 — the lowest level since the start of the CCI’s calculations in 2007. Q4 2013 also showed consumers as less optimistic in their expectations than in their perception of the present situation. According to Bank Byblos’ analysis this pessimistic outlook is in contradiction to the general trend among Lebanese consumers to be optimistic for the near-term future.

After listing various political and security factors that influenced consumer confidence in 2013, the Byblos Bank analysis concluded that the CCI drop in the second half of last year “does not bode well for a substantial resurgence of economic activity in the near term.”

Nassib Ghobril, Byblos Bank Group’s chief economist said in a press statement earlier in the week that in his opinion, “a positive political shock of the magnitude of the Doha Accord” would be needed to remedy the current lack of consumer confidence and restore it to higher levels.

The CCI, which is composed of two sub-indices measuring perception of the present situation and expectations for the near future, is compiled based on 1,200 monthly face-to-face interviews conducted by pollster Statistics Lebanon. Results are stratified by region, age, income and religion.

According to the researchers, the CCI evolution since 2007 describes four phases defined by swings between uncertainties and relative stability. The highest CCI readings occurred in a period of relative stability between May 2008 and June 2010. The period from January 2012 to December 2013 is characterized as a phase of “deepening uncertainties.”

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