Executive Magazine

Lebanese nightlife growing abroad. Pixabay | Geoff Gill

Exporting Lebanese nightlife

by Nabila Rahhal May 12, 2014

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

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

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.

May 12, 2014 0 comments

Economics & Policy

Ominous sentiments

by Thomas Schellen May 9, 2014

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.”

May 9, 2014 0 comments

Protesters wave flags and banners during the march

The Buzz

In photos: Misery and cheer

by Greg Demarque & Micheline Tobia May 9, 2014

written by Greg Demarque & Micheline Tobia

There are more than a quarter of a million foreign migrant domestic workers (MDW) in Lebanon, according to the International Labor Organization. Yet damning reports from New York-based NGO Human Rights Watch and local women’s rights group KAFA make clear that the majority of these people do not enjoy proper legal protections. Sometimes, this results in tragedy: a worker abused by her employers or another who commits suicide.

To draw attention to the issue, the MDW Coordination Consortium — which includes KAFA and several other NGOs — put together a three-day festival from May 2 to 4, just after Labor Day. There were several events: a book launch, readings, a street festival, a concert and a march.

The march, which was the closing event on Sunday, started in Beirut’s Dora intersection and ended in front of Mar Mikhael’s defunct train station. Hundreds of migrant workers and activists marched to demand more rights for the workers.

A woman applies henna during the Hamra street festival

A woman applies henna during the street festival Beirut's Hamra district

Food is served to passers-by and participants

Dishing out deliciousness to passers-by

Try before you buy — then enjoy

Not hungry? Take a look at the clothes and accessories on display

And why not have a good time

After the street festival, head over to the live concert

A sign saying in French: "What?!! Madam! Would you keep on working even if you were not paid on a regular basis? Answer me!"

A sign for Sunday's march: "What?!! Madam! Would you keep on working even if you were not paid on a regular basis? Answer me!"

"We need one day off" - One of the signs prepared for the march on Sunday May 4

Just one.

Migrant domestic workers leading the march

Migrant domestic workers lead the way

Happy Labor Day, sans smiles

Migrant workers holding their national flags during the march

"Imagine all the people..."

The list of demands issued by the MDW Coordination Consortium can be found here.

May 9, 2014 0 comments

Business Tourism 2014

Reviving Badaro

by Nabila Rahhal May 9, 2014

written by Nabila Rahhal

Strolling through the rather quiet streets of Badaro on any given afternoon, it is hard to imagine that the area was once a buzzing Beirut neighborhood with more than 12 pubs, clubs and restaurants in just one street. Even harder to imagine is that this calm, residential neighborhood is expected to regain this status within the next year and a half.

But Lebanon’s F&B sector is notorious for its application of the economy of proximity with investors rushing in to new areas as soon as one venture succeeds and Badaro is no exception. Already, there are eight new venues that are said to have signed contracts in the area and are expected to begin operations within the next year.

[/media-credit]View from Smallville’s rooftop pool, in Badaro

Old time residents of Badaro enthusiastically speak of its past vibrant nightlife recalling such names as the Manhattan Pub Restaurant, which relocated to Broumana during the civil war; L’Orientale restaurant with the famed First nightclub in its basement; and Badaro Inn, which was the first venue in the area to serve snack food back in the day.

With the onset of the civil war — and with Badaro’s location in the center of the crossfire — this once vibrant hub was transformed into a ghost town as many of the area’s residents fled their homes and hospitality venues slowly shut down as they lost their customers.

According to George, a Badaro resident since 1964, those who remained in the area after the war were the elderly. The few venues that were still in operation were only half full with residents and students of the neighboring schools during the day and deserted at night.

Yet Badaro, with its wide roads, comparatively good infrastructure and central location is regaining its appeal for developers and investors alike. Sami Hochar of Catertainment, the management company which owns Lina’s Cafe in Lebanon, says there are two new residential buildings on Badaro Street with a few more under construction as the older residents move to less busy areas or smaller houses and the buildings they inhabited are renovated or sold. “Within three to four years, Badaro will be a buzzing residential community,” says Hochar.

[/media-credit]The Smallville, one of the first new businesses to open in Badaro

Commercially, Badaro is in a central location close to the Palace of Justice which makes it a popular spot for law offices. There is also the Military Hospital, numerous medium sized enterprises, schools and universities in the area. Last summer, in a testimony to Badaro’s potential as a business center, The Smallville, a medium sized boutique hotel, became the first such project to open in the neighborhood.

Kissproof

All these attributes were noted by Micky Abou Merhy and the rest of the team behind Vyvyan’s and Happy Prince — two successful hospitality venues in Mar Mikhael. Having been among the first pioneers to venture into Hamra and Mar Mikhael afterwards, they decided to open Kissproof, a café/bar concept in Badaro, despite the area still being relatively empty. Officially opened in early January 2014, Kissproof has so far had a larger turnover during the evening than during the day.

Yet, Abou Merhy and his partner in Kissproof, Yves El Khoury, admit that Badaro is still a difficult area to operate in as people are not used to heading there in the evenings. “Badaro is still a ghost town at night and people still perceive it as being far, so we had to double our efforts here and offer a unique concept to attract our customers,” says Khoury.

[/media-credit]Setting in for the evening at Kissproof

Kissproof appeals to both day and night customers as it offers some of the best coffee in the city as well as the widest selection of draft beer. Their food menu includes special order charcuterie menu featuring Spanish ham, homemade pickles and toasted bread sandwiches.

Noticeably calmer during the day, Abou Merhy says they are not placing high hopes on the daytime clients yet as he believes there is still not a culture of eating out on lunch breaks here, unless it is a plat du jour. “We hope this will change soon as we will all benefit,” says Abou Merhy.

This risk is offset by the benefits of the publicity received by being one of the first ventures in an area should it take off. Also, of course, there is the benefit of low rents and Abou Merhy says that rent prices for similar sized venues to his in Badaro are now almost quadruple what he pays. Low rents are an important factor in the longevity of a hospitality venue, especially with the fickleness of the Lebanese who go out.

Lina’s

Hochar says Lina’s sees the potential in Badaro and will be opening a 400 square meter branch in the location that formerly housed the famed Badaro Inn within the next three months.

Recently opened in Rabieh, and soon to launch in Gefinor Center in Clemenceau, Hochar says Lina’s has adopted the strategy of opening Lina’s in residential urban areas with little or no cafes, such as Badaro, in an effort to attract the residents and neighboring businesses.

“Badaro is my generation; it had the best stores for sports gear and music and I always wondered why it died since it is in a central location. But, little by little, we noticed there is activity in the area and we got the call that Badaro Inn is on the table,” says Hochar, adding that just the idea of being in the same place as Badaro Inn will be enough of a pull for people from his generation to come to the new Lina’s.

[/media-credit]Lina’s is set to open a new branch in Badaro

Hochar says Lina’s Badaro will be more accommodating of Badaro’s culture, and will have a restaurant-like layout and hot food menu which will include a plat du jour: “Badaro was borne for the daily dish,” says Hochar, speaking of many employees and residents who favor this food.

Lina’s will still have sandwiches and coffee on the menu, which is the core of their business, but Hochar hopes the hot plate additions will attract families for Sunday lunches.

“The pub people rushed in because the trendsetters came to Badaro and many places have been rented out already,” says Hochar adding that he sees a vibrant, if controlled, nightlife in the area. “So far, we are focusing on the day but we believe it will slowly pick up at night.”

Abou Merhy generally welcomes these new ventures saying that some good players are investing in the area and will bring some needed healthy competition, ultimately directing more traffic to the neighborhood. Yet, he is apprehensive that some will invest in the area in the hopes of feeding off other’s successes and will end up ruining the ambiance for the more serious operators with unprofessional behavior.

Being a highly residential area, Badaro could face a similar situation to Gemmayze where the residents took to the street in protest over the loud noise and traffic in their neighborhood. Already, residents such as George are watching the hospitality developments with wary eyes: on the one hand, happy to see their neighborhood revived, but on the other fearing the disruptions that valet services and other disturbances, such as loud revellers and incessant music, might bring. “Residents in the new buildings here paid around a million dollars for their apartments and will not be happy to have their quiet homes disrupted by traffic and noise,” says Abou Merhy adding that Kissproof respects this and doesn’t play any music on their terrace.

[/media-credit]Badaro street at night

Others believe the area can be sustainable in terms of nightlife as long as the residents are respected. “They said the same thing about Mar Mikhael and it is still developing,” says Khoury.

Hochar sees a bright future for Badaro with more small, niche venues than loud bars and pubs such as the ones in Mar Mikhael or Gemmayze. His belief in the area also stems from the support he has received from the Badaro Traders Association which he says is very active and aggressive in promoting Badaro. “When you have many people working together for the success of something, it is bound to make it,” says Hochar.

For Badaro’s sake, we hope it’s true.

May 9, 2014 1 comment

Real Estate

Rumble in the urban jungle

by Thomas Schellen May 8, 2014

written by Thomas Schellen

Update: President Michel Sleiman announced he would not sign the rent law on May 7, 2014. The following article appeared in Executive’s print edition on May 1.

When Parliament approved the new rent law in early April, the document cleared a major hurdle, only to be confronted with a barrage of protests by people seeking to stop the measure while it was still on its laborious way to the printer via the presidential palace. The impact of the law, which would enable building owners to gradually increase annual rents to the equivalent of 5 percent of an apartment’s value, is difficult to assess given the country’s chronic lack of reliable data; however, it is clearly an issue of humongous proportions as up to 25 percent of rent contracts in the country are subject to the old law.

A lobbying group of tenants with old rent contracts staged street protests in Beirut’s main commercial districts of Ashrafieh and Hamra, making an outcry that the law’s implementation would force them out of their homes. They joined in a “day of pressure” on April 8 where demonstrators rallied for a range of salary demands and social issues, including a veto of the new rent law.

Brahim shows the rent contract of his parents' apartment. He owns a shop in Mar Elias district in Beirut. He makes around $660 per month of which he pays $220 for his parents' rent. With the new law, he says he will not be able to support his parents.

[/media-credit]Brahim shows the rent contract of his parents’ apartment. He owns a shop in Mar Elias district in Beirut. He makes around $660 per month of which he pays $220 for his parents’ rent. With the new law, he says he will not be able to support his parents.

Building owners, desperate to see the rent law enter into force after years of parliamentary indecision on the matter, took to the streets with counter-demonstrations and sit-ins, grumbling that the old rent law had left them destitute and accusing tenants of all manners of deceit and hidden wealth. Media and bloggers came down on either side of the issue with sympathy or indignation, depending on their ideological color.

The commotion is more than understandable, given that the liberalization of rents will have massive consequences for incomes and economic prospects of the two directly involved groups: tenants and owners of properties with rent contracts that are over 22 years old. More significant impacts of the rent regime’s liberalization loom for the entire property sector, from the market for developable plots to the strategies of intermediaries and to the project planning of real estate developers.

While the demonstrations by both sides illuminated the social import of the rent issue beyond any reasonable doubt, representatives of the real estate industry have been reticent to speculate on the legislation’s impact on the property market, arguing that they could not comment until the law was validated by the presidential signature and published in the Official Gazette.

No comment

Massaad Fares, the president of the Real Estate Association of Lebanon (REAL), which is the syndicate of intermediaries, told Executive that he was in favor of a new rent law but added that the implementation would require additional prudence and should be flanked by measures such as creation of a rent index.

Mireille Khorab, the secretary general of the Real Estate Developers Association of Lebanon (REDAL) similarly said that the law entails unclear issues such as the rationale for the timeframe of rent adjustments and is, in its current form, “not a very practical law.” She argued that it was nonetheless good to have the new law because building owners previously carried the burden of providing affordable housing, which in her view “defies all logic.”

A release of many properties into the market might suppress prices for urban plots, some intermediaries fear. Others cite a potential for new opportunities but agree that it is much too early to make any definite conclusions on the market impact of rent liberalization. Khorab emphasized that more competition was generally good for the market and called the potential influx of a large number of properties “interesting.”

Economist Nassib Ghobril, whose Lebanon This Week publication at Byblos Bank provided one of the few salient descriptions of the measures foreseen under the law as it was approved by Parliament, sees the main impact of the new law in allowing property owners to do with their properties what they see fit.

“It will certainly have an impact on the market because property owners will be able to generate real income from their property if they want to keep their tenants and agree with them. If they want to recuperate their property, they can decide to put it on the market or give it to their children, or some may want to refurbish it. It is an individual decision,” Ghobril opined. For tenants with old contracts, the law gives a transition period of up to 12 years during which they can decide on their options and this was fair, he added, because they previously lived in their apartments “practically rent free.”

An older quagmire

The previous rent regime was ultra-low cost for tenants because although the law stipulated the freezing of rents under contracts existing prior to 1992, the bulk of these contracts had been signed before Lebanon experienced a period of hyper-inflation in the latter part of its civil war. Where less than 4 Lebanese lira would still buy a dollar in the fourth quarter of 1982, the peak of currency devaluation saw a dollar change hands for LL2,400 in October 1992.

The Lebanese lira came down from exchange rate peaks in 1993 and settled on the central bank-maintained band of around LL1,500 to the dollar but that meant that values of any rent contracts signed on the basis of the pre-inflation economy were reduced to a fraction of their original intent in the new dollar-pegged Lebanon. Rent control on the basis of the old rents gave tenants a free pass to live in their apartments for amounts that could hardly pay for a daily breakfast of bread and labneh in the post-conflict economy.

[/media-credit]Corruption enjoys a fat cigar while the citizens get pummeled by their government

No one has ever alleged even a socialist twang in the policy mix of the various cabinets led by Rafik Hariri, but for understanding the rent control measure, it serves to recall that Lebanon entered the 1990’s in turmoil and social disarray, with masses of people living in squalor and often squatting in buildings that were not their own.

The issuance of the 1992 rent laws has been cited in media as rooted in legislation passed in 1944. However, given the approximate tripling of the population in that half century with no evidence of housing crises in the urban centers, the old tenancy laws of 1944 and 1974 appeared to be broadly supportive of social stability without causing huge distortions to the property market.

Protection of existing rental contracts via the 1992 rent law provided a minimum continuation of social stability and also an ad-hoc measure in the post-conflict period that kept people in their homes while the government had more than enough displaced and deprived families to worry about. The 1992 laws at the same time opened the market for new rental agreements and allowed for a minimal rate of adjusting old rents.

The same valuation dilemma as in rents applied to other social issues of the post-conflict period, such as the retirement remuneration of employees who accomplished a big part of their working life before the new currency fix. But while the severe problem of employee compensation is at least regressive with time, the rent stipulation with each progressing year became an increasing hardship for owners and has distorted the property market for at least the past 15 years.

Not only did the injustice of the rent controls mount over this period to an increasingly imbalanced financial tally at the expense of building owners, the market was artificially deprived of affordable rentals. Anyone moving to Beirut or leaving their parental home and seeking to rent faced a market with next to no choice of available flats and inflated rental prices for the scarce old apartments that were not rent controlled.

In this environment, no self-interested tenant under an old rental contract would be motivated to move into a newer, non price-controlled rental unit because no gain in ambiance and building quality could adequately compensate for the exponentially higher rent for a new unit. At the same time, tenants had no motivation to invest in upgrading the apartments they inhabited and building owners had absolutely no incentive to invest in refurbishment and structural upkeep of the non income-producing buildings. Thus Beirut’s districts increasingly turned into exhibition sets of the time-tested truth that rent controls are huge disincentives to gradual improvement of building stock.

Rent seeker vs. rent seeker

The old rent law’s market distortion is one of the factors that have contributed to today’s sharp contrast between new urban projects — all developed privately and based on assumptions of high per square-meter prices that can be realized from sales of new apartments — and the deteriorating or unimproved majority of building stock in the Lebanese capital.

The demands of both activist tenants and building owners smack of an economic behavior called rent seeking. The term is used in economics to describe efforts and expenditures made by individuals or companies to influence public policy for an economic gain without producing an added benefit to society.

Tenants who angle for continued rights to use their apartments effectively without paying or who ask for state subsidies in replacement of the old system are in this sense rent seekers. They act in their own interest but may be ignorant of the economic harm that Lebanon will incur by further cementing the current distortion of the property market.

Property owners who lobby the president to sign the rent law so that they can obtain higher revenues from their building stock aim to obtain — or recover — a surplus that has hitherto been pocketed by their tenants with the help of public policy can also be described as rent seekers. Building owners see themselves easily in a position of pursuing their rights but the desired extraction of value from the tenants does not necessarily mean that owners will contribute to a more productive and socio-economically beneficial use of the scarce and hideously mal-planned urban landscape.

[/media-credit]This building in Moussaytbeh area will be affected by the new rent law

Against the objective to make Beirut a more productive city, the liberalization of rents and enforcement of private ownership rights is not a mechanism for progress per se. However, not changing the rent law and allowing any further prolongation of the status quo could only lead to more imbalances in the market.

A practical measure?

In operational terms, the law seems fair and simple at first sight. It offers holders of old rent contracts nine years of protected tenancy during which they undergo a gradual alignment of their dues with an undistorted market rent.

However, assigning market value to a rental property may not be a simple proposition. Tenants and owners may each take to procuring valuations from different experts and sworn property assessors may be swamped with work if all the — numbering 140,000 according to the Lebanese finance ministry — flats with old rent need to be valued.

Moreover, according to property intermediaries, who have experience encountering divergent and unclear valuations in property deals, a share of disagreements will be programmed into the procedure. While a healthy portion of owners and tenants will reach valuation agreements amicably, court disputes are unavoidable in other cases and clearly the overburdened court system will struggle to digest this new wave of litigation.

The process of apartment valuations and defining the future rents is therefore a logistical challenge fraught with foreseeable bottlenecks in a market that has hitherto been driven by the opposite of perfect information. New transaction costs will ultimately come to bear on the pricing of both rents and properties without the benefit of adding social value, meaning that in all likelihood the costs of living in Beirut will go up, but the quality of living will not.

Having been voted in by Parliament, the new rent law is closer to reality than ever before in the past 22 years since the current regime of rent laws 159 and 160 were adopted. According to the Coase theorem, transaction costs and imperfect information are the key problems that are likely to cause bargaining to be less than optimally efficient for solving property disputes.

State intervention, however, does not necessarily solve the problem. What the state should do, according to this economic theorem named after British Nobel economics laureate Ronald Coase, is not to intervene directly but first provide a clear and well-bundled definition of property rights of both parties, meaning rights and liabilities of owners and tenants. The state is then best advised to create institutions that minimize transaction costs under the insight that economic incentives are more conducive to effective bargaining than legal impositions.

The larger issue of making Lebanon more livable and its urban economies more productive would be the even worthier objective, whereby a new rent law would be an avant-garde component of a greater package comprising: a census to gain vital information that is currently unavailable to both public and private planners, legal frameworks and prudent strategies for infrastructures and urban planning that can actually be implemented, and the best possible regulation of markets in recognition of the fact that markets must be regulated to be efficient.

May 8, 2014 0 comments

Buildings under the old rent law stand next to new competition.

Leaders

Rent law reform is needed

by Executive Editors May 8, 2014

written by Executive Editors

President Michel Sleiman announced he would not sign the rent law on May 7, 2014. The following leader appeared in Executive’s print edition on May 1.

Last month, Lebanon’s Parliament almost consigned to history one of the country’s most archaic laws. The old rent law artificially holds down the rents of tens of thousands of tenants across the country at astronomically low levels. In central Beirut, for example, thousands of families pay less than $100 a month for flats in prime areas. Similar-sized apartments not under rental protection can cost 10 times that (see article “Rumble in the urban jungle“).

While this may be a huge benefit for those residents, it is deeply unfair to the owners of the buildings who see their properties waste away, unable to charge market rates. Yet the issue is more than merely a battle of tenant versus landlord.

At a macro level, the old rent system has distorted the market and stifled movement. No self-interested tenant under an old rental contract could be motivated to move into a newer, non price-controlled rental unit because no gain in ambiance and building quality could adequately compensate for exponentially higher prices. This means that those outside the system have had their options reduced, thus inflating prices. Anyone moving to Beirut or leaving their parental home and seeking to rent in the city faces a market with next to no choice of affordable flats.

Many of the old rent buildings have inevitably fallen into disrepair. Tenants have no motivation to invest in upgrading the apartments they inhabit and building owners have no incentive to invest in refurbishment and structural upkeep of the non-income-producing buildings. This conundrum was perhaps most tragically illustrated in early 2012 when an old rent building collapsed in the Ashrafieh region of Beirut, killing at least 25. The landlord of the building had long feared it was structurally unsound, but with almost no revenue from tenants he merely allowed it to deteriorate.

While the liberalization of rents will not necessarily lead to a fairer system for all, the status quo is rapidly deteriorating. As such, the decision by Parliament to pass the rent liberalization law should be welcomed. While the exact details are still not clear, the new system will gradually ease rents up to market-based rates over five years.

The new law still awaits the signature of President Michel Sleiman. Those opposed to it have raised legitimate concerns that must be dealt with. It is key that issues such as arbitration and valuation need to be addressed in a way that does not disadvantage either side. Likewise the fund that will be established to aid those faced with increased rents must be set up quickly and in a transparent fashion. But reservations do not justify inaction. So far Sleiman has kicked the decision into the long grass, calling for further debate. The Lebanese Constitution gives him just 15 days to either accept or reject the bill, but he has already passed that deadline. He should not procrastinate any longer.

More fundamentally, the new law will not be successful in isolation. It needs to be coupled with a new approach to developing Lebanon’s cities, including a much-needed urban planning law, which should include incentives for the development of affordable housing.

The country’s real estate sector is hopelessly unregulated. This new law must be the start of fundamental change, not another stopgap.

May 8, 2014 0 comments

Economics & Policy Tourism 2014

Have a little faith

by Joe Dyke & Thomas Schellen May 7, 2014

written by Joe Dyke & Thomas Schellen

Michel Pharaon, a veteran of Lebanese politics, first served as minister of state in 2000. The March 14 politician may not have been hoping for the tourism portfolio, but since his appointment in February he has shown enthusiasm for boosting the sector. Executive sat with him to discuss expectations for the summer, tax breaks and the Gulf travel ban.

What brought you to accept this job in the current climate?

I was told that at one point maybe I would be minister of economy which is more my area [but] the prime minister thought I could do the job in tourism. So I said, “Why not?” because tourism is serious, but it is serious to be fun.

How bad is the situation for Lebanese tourism right now?

When I took office in mid-February things looked very difficult, with a big crisis in tourism. It was not that it was [just] a 10 or 15 percent drop in visitors. In 2010 there were 2.3 million visitors, in 2013 there were 1.3 million. There was no confidence anymore after three years of deterioration and political, security and economic tensions.

In fact when I talked with those responsible for those sectors, they brought up politics and security. It is obvious that security and tourism are twins, inseparable.

I see for tourism and Lebanon a hope of trust — it is not yet trust, but a hope of trust. Why? Because this government was formed more on a security agreement than a political agreement. You can say this government [is] calming down the political struggle, a pause in the political fight in Lebanon. This is why it is positive.

This security agreement [is bigger than] political differences. This is a guarantee. Immediately the government launched a security plan and we saw how it succeeded in Tripoli and in the Bekaa. It is working and it is holding because the security agreement tops political differences. We were on the edge of the cliff.

But all you have done is stop on the edge of the cliff, you haven’t reversed yet. You haven’t dealt with the political disputes.

We haven’t reversed politically and the Syrian crisis is still there, and the Iraq crisis is still there and the regional crisis is still there. But yes we have reversed totally security-wise. So you have now a very important margin. The tensions were becoming clashes but now there is really some hope.

Will this improvement in security have a short-term impact on tourism?

The Lebanese know that despite the security problems and clashes, there was security in 80 percent of Lebanon, which is maybe better than many cities in the world. The fear is high so [people think] ‘‘if we are not in Lebanon we should not go.’’ Now, there is security on the horizon.

While perception is important, numbers of Gulf tourists have declined dramatically. Do you have specific plans to boost these numbers?

I have decided that to have credibility we will wait a little bit for the security plan [to take hold] and we will not market [tourism in Lebanon] before end of April. And there is Arabian Travel Market [held in Dubai in early May]. We will go there and say, you can come and the government is responsible. In the government we were all ministers of defense and interior in the last few months, from the middle of May everybody has to be minister of tourism.

What we are saying is that you have security … we guarantee the security of tourists.

So Lebanese ministries are collaborating with you with the specific aim of improving the security environment for tourists?

Absolutely.

Last year at the Arabian Travel Market there were emphatic appeals from your predecessor Fadi Abboud to bring more tourists to Lebanon. But at the tail end of the event the UAE reiterated its travel ban against Lebanon. Is there any way we can have confidence they will not do the same again?

This is a good question. This is what I am working on with the president, with the prime minister and with the minister of foreign affairs — who has to be sensible. The last foreign minister was doing a lot of harm.

Some Kuwaitis are beginning to come back, even if there is no official lift in the travel ban. At one point in time there was a non-official travel ban, then it became official. Now there is a non-official lift of the travel ban.

Why are they not lifting it officially?

It is the same for some Europeans, who unofficially are lifting. When the ambassadors are contacted they all say, “Yes, you can come,” but they still have the travel ban for the general public. This is the situation now, so we will work on this.

Do you have a good budget for the promotion campaign?

No, this ministry has a very low budget. We are working with some agencies that are giving their advice for free and we think that the Lebanese are good ambassadors, and they are free marketing agents. You have to give them the tools, and the tools for them are security. Then they will come and bring others. There will be a marketing effort and we are putting the ministry on full gas to have ready by mid-May a special website to show all the tourist assets of Lebanon which will be totally new.

What about support for pre-existing organizations? Are there any movements towards tax breaks for hotels that are struggling? Did you manage to get these laws through parliament last month?

One of the bills [that was passed] was for touristic establishments, which was to lift the penalties on back taxes. The other thing we are trying to do with the president of the central bank is to bring back subsidies on interest rates, which were unfortunately lifted by the last finance minister. It was really a good incentive for tourism and I am sorry he did it.

The banks in the last two or three years have had problems with some credit so it was really putting some strain on the credit for tourism. We are trying to create an atmosphere to help it again because it is a very big sector, almost 20 percent of GDP.

On niche activities, you have mentioned healthcare tourism in recent interviews. Politicians have been talking about this for over a decade, but done little. In that time Jordan, Dubai and other countries have grown rapidly. What healthcare niches do you see for Lebanon?

To tell you the truth, the previous minister Fadi Abboud had planned a fair in Dubai for health tourism, a regional fair with special participation for Lebanon. It was supposed to happen in May but I postponed it to October because I saw there was not enough participation of Lebanese actors and the budget was quite high.

We have seen the way Jordan has developed into this niche, Dubai is developing into this niche, even Saudi Arabia is moving into this area. We still have a niche with the traditional exporters, which are now less in the Gulf, but with four countries: Iraq, Libya, Yemen and Algeria. For general hospital treatments [we have a niche with] these countries and there is still a very important niche from the Gulf for special treatments.

Are we talking cosmetic surgery?

Cosmetic surgery and these kinds of things. There is still a niche. This is my opinion but I want to discuss this.

Iraqi tourist numbers have grown rapidly and now Iraq is the largest Arab country in terms of numbers in first quarter of 2014. Do you have other specific projects to bring them to the country?

It is going well. We are monitoring the rise of Iraqi tourists to Lebanon. We are not promoting it and we don’t have to. We are monitoring it because it is a natural phenomenon. To encourage it, General Security has made some steps to facilitate their visas; they have even done some steps with other countries.

It seems you have major plans for the sector that could take years to implement. Yet your term is due to end with the election of a new president at the end of May. If you are building a “hope of trust” how can you guarantee this when the country may again have no government in a few weeks?

It is a good question. When you go into a company you say, “What can I do in two months and what can I do in one year?” So we are doing in two months what we can do and hopefully others will continue. Everything we do [can] be continued. There are some other ideas we will put on the table with a program at the end of May. We are going to do our work to prepare for the summer.

It is not that we have big programs, but there is something to be done and we are doing it.

May 7, 2014 0 comments

Tourism in Baalbeck may increase after new security measures

Leaders Tourism 2014

Fix it and they will come

by Executive Editors May 7, 2014

written by Executive Editors

The received wisdom goes something like this: Tourism is a mainstay of the Lebanese economy, and the country, rich in history, climate and culture, could attract even more tourists if the stars aligned properly. More tourists would equal more cash inflows, which in turn could help an insolvent government while enriching the average Lebanese person. So, the thinking concludes, let’s fix the sector.

The latest report from the World Travel and Tourism Council (WTTC) plays nicely into this narrative. Tourism directly accounted for 6.9 percent of GDP in 2013 it claims, and was responsible for 6.7 percent of jobs. Indirect effects were even larger — 19.2 percent of GDP and 18.4 percent of employment — and are set to grow this year, the group forecasts (see “The ghosts of seasons yet to come“).

The WTTC’s numbers are hypnotic. They are trumpeted by evangelists of the tourism-as-savior myth, from failed presidential contenders, to independent commentators, to the Investment Development Authority of Lebanon. But Lebanese citizens and policymakers shouldn’t buy into this reckless hype for three reasons.

First, the WTTC has been dead wrong on the major indicators for the past two years — according to the group’s own numbers. In its 2012 report, the group projected tourism’s direct contribution of $4.13 billion to the economy in 2011 would grow to $4.32 billion in 2012. Instead, it fell to $4.12 billion — but, the WTTC assured us, it would grow again to $4.2 billion in 2013. In reality, the numbers dropped dramatically to $3.16 billion. Rest assured, the WTTC again tells us that 2014 will see another rise to $3.23 billion.

Furthermore, there are excellent reasons why too much dependency on tourism could be a bad thing. Given the country’s small size and troubled neighborhood, Lebanon is uniquely vulnerable to shocks outside its control — events that can stunt tourism for a year or more. And internally, tourism does not provide the kind of high paying, knowledge-driven jobs that Lebanon will need to reverse the country’s massive brain drain. Jobs in tourism tend to be seasonal and low paying — precisely the opposite of the financial security needed to attract and retain talent.

Finally, the notion of growing any one sector is itself flawed. Lebanon’s sluggish economy is not due to improper focus on any particular area; it is caused by larger problems that affect broad swathes of the society.

When it comes to tourism, the problem should be obvious: poor security. No one wants to be murdered or kidnapped while on vacation. Those who can afford it will choose safer destinations, many others will just stay home. And no public relations campaign or government money can change this. The new tourism minister appears to have grasped this principle (see interview with Michel Pharaon), but then again so did the one before him, and the one before him. Yet they are essentially powerless when faced with such huge challenges and tiny budgets.

So let’s stop with the tourism happy talk — especially from politicians and policy experts who should know better. Secure the country first, and all of Lebanon’s economic sectors will improve.

May 7, 2014 1 comment

Editorial

The people, not warlords, should choose the president

by Yasser Akkaoui May 6, 2014

written by Yasser Akkaoui

Driving around Beirut last month, older Lebanese could have been forgiven for feeling a little nostalgic. Across the city, hundreds of cheaply produced posters of former President Fouad Chehab appeared, each encouraging him to return to the top job this month.

This seems unlikely, since Chehab died in 1973, but it is worth remembering a time when Lebanon’s politicians were made of sterner stuff. Throughout his period in government, Chehab succeeded in growing the country by reaching out to the best-educated Lebanese across the world. They brought their skills home and joined the public administration as part of a great nation-building exercise. At that time, working for the country’s state universities, civil service and other areas was something to be proud of, and it paid people appropriately.

In the mid-1980s, all that changed. A decade into the civil war, the Lebanese lira collapsed. As the violence became more vicious and random, all those with talent and brains left. The warlords were left to pick apart the carcass of what was once Lebanon.

Today these men may have swapped the Kalashnikov for the suit and tie, but they cannot command our respect. Unqualified to do anything except fight, they have failed miserably to build either a nation or an economy. And in the wider world they cannot command the respect of international leaders — no one wants to shake a hand with blood on it.

Yet these same warlords control our future and they are trying to pick our next president, due to be confirmed by May 25. Walid Joumblatt, Samir Geagea, Michel Aoun, Nabih Berri and all the rest are debating who gets to run our country in smoke-filled rooms, but no one thinks to ask the people.

So we did. In our in-depth survey it is clear that the nation wants an independent president who was not involved in the dark years of Lebanon. They want a strong candidate with a track record in defending, protecting and advancing the country. They want someone who can help the country get out of the vicious cycle these assassins have created.

The number of realistic candidates is few — but both former minister Ziyad Baroud and central bank chief Riad Salameh are great contenders. Both men have have sought to put the nation back together in a way so few have. For more on why we eventually backed Salameh, see “The right choice for president.”

The people have spoken, and they don’t want the status quo to continue. We must now fight to make the warlords listen.

May 6, 2014 0 comments

Economics & Policy Tourism 2014

The ghosts of seasons yet to come

by Thomas Schellen May 6, 2014

written by Thomas Schellen

The first quarter of 2014 saw tourist arrivals contract by 16.5 percent year on year, to 229,000 visitors. The Ministry of Tourism is preparing a shoe-string campaign to reassure Gulf travelers from this month on that Lebanon is safe for them. Is this news? In a factual sense, yes, but with zero surprise factor.

The fact that tourist arrivals declined in the first quarter of 2014 when compared with the first quarter in 2013 is entirely in line with the trend of the past three years, given that in 12 of the last 13 quarters visitor numbers declined. The only exception was the fourth quarter 2013, when visitor numbers edged up by about 6 percent when compared with the fourth quarter of 2012. If Lebanon’s inbound tourism were an economy in its own right (which it is not), the last three years would qualify as a deep recession. It thus comes as no shock whatsoever that Minister of Tourism Michel Pharaon says he saw “only bad news” when assessing the sector after assuming office in February (see interview with the minister of tourism).

It is equally unsurprising that tourism officials are talking optimistically about the coming summer. Last year, then tourism minister Fadi Abboud enthused from the Arabian Travel Market fair in Dubai how the Gulf emirate was seeking to enhance the ‘‘brotherly ties’’ of the Lebanese and Emiratis. At about the same time, one of Lebanon’s best-known hoteliers, Mazen Salha, told Executive of his hopes for a strong summer 2013 with a return of the Gulf, and specifically Saudi, clientele.

Reality did not bear out those hopes and instead of growing, the numbers of Saudi and other Gulf Cooperation Council visitors slumped further until the end of March 2014. In 2010, GCC visitors accounted for about 15 percent of all tourists spending time and money in Lebanon. In the first quarter of 2014, the overall contraction in visitor numbers — by about 40 percent when compared with the peak year of 2010 — was exacerbated by the fact that the share of GCC visitors was down to 6 percent of that low first-quarter tally.

In the absence of exact data on the average spending by visitor group, the shift in the composition of visitor streams in the past three years reveals some implications for the market based on the GDP per capita of important countries of origin. In the first quarter of 2014, 26 percent of Lebanon’s inbound tourists came from Iraq, Egypt and Jordan, three countries where GDP per capita according to the World Bank is between 30 and 70 percent lower than in Lebanon.

The second main source of visitors was France, the United States and Canada, at combined 21 percent share of the total influx. What these three countries have in common is that their per capita GDPs are broadly four times above Lebanon’s, but they are also known as countries where many expatriate Lebanese have acquired citizenship.

Notably absent from the figures are Syrian visitors, who are not officially counted as tourists.

Working with realities

In an intuitive view of these numbers, Lebanese expatriates and not Western tourists are in all probability the most stable factor in the current tourism economy but Arab countries with less purchasing power than the Gulf visitors are the main drivers of new tourism demand.

[pullquote]Unfortunately, assumptions that Lebanon’s tourism can rebound sharply are not borne out by the numbers[/pullquote]

The shifts in visitor profiles and demand have implications for the way in which Lebanon’s tourism operators plan their future. Currently, many industry members concentrate on lobbying for leniency in their credit obligations or obtaining new subsidies. Others are paving roads to diversification by venturing into Gulf markets such as Dubai, where they, on a very small scale still, experiment with exporting Lebanese concepts — recognizing the winter hospitality season in the GCC is a good counterbalance to the summer business peak in Lebanon.

The trend of taking Lebanese concepts to where demand exists works for some operators as an answer to structural challenges of the domestic market. However, it also points out that the sector was less successful than stakeholders hoped when announcing at various points in the past decade that they were aiming to diversify from summer tourism into other seasons and niche activities such as urban getaway, events or ecotourism.

Other challenges

Disturbing as the drop in Gulf visitor numbers is, it would be less troubling if the absence of Saudi and Emirati tourists were the only problem for Lebanon’s tourism and a combination of improved security with removal of the political travel bans by Gulf countries would transform the current downturn in tourism from a prolonged U-shaped ‘recession’ to a V-shaped recovery with a strong and fast rebound to previous levels of performance.

Unfortunately, assumptions that Lebanon’s tourism can rebound sharply and quickly to full growth are not borne out by the numbers. While the country had good years in 2004, 2009 and 2010 in terms of visitor arrivals, the bad and slow years were in the clear majority over the past decade. 2005 was a difficult year followed by a devastating 2006 when visitor numbers dropped back to 1 million. The years 2007 and 2008 were no bumper years and the 2011 – 2013 period, quarter by quarter, simply went from bad to worse.

Besides the caveat of Lebanon’s vulnerability to external shocks that are far more frequent than anyone can be ready for, the fairly extensive recovery periods after several crises in the past decade provide a warning on the viability of high-flying sector ambitions and associated foreign direct investments. Lebanon offers incentives to both domestic and international tourism investors through the Investment Development Authority for Lebanon (IDAL) and, for smaller projects, via the Kafalat loan guarantee program.

While projects implemented with public sector support have led to investments and job creation, the repeated periods of less-than-anticipated performance of tourism during the past decade are grounds for concern due to significant non-conversion rates of announced tourism investments into successful projects. According to IDAL, 4 out of 12 tourism projects that received the agency’s assistance between 2003 and 2011 were halted or, in one case (The Landmark Hotel) abandoned, noting that the project’s cancellation was because of important historic finds at the site.

However, unexpected halts of tourism projects have not been restricted to either antiquities discoveries or the political and security problems caused by the Syrian crisis. A European Commission-sponsored research publication on tourism investment opportunities in Lebanon named the “10 biggest FDI tourism announcements since 2013.” Of this list, only three projects have been delivered, and one more is delayed.

All these signs say that tourism, while a core contributor to the Lebanese economy alongside property development, banking and remittances, is not a sector where the country can count on linear growth.

[pullquote]The Ministry of Tourism’s headquarters in Hamra is an unfortunate allegory for the sector[/pullquote]

Sector studies and strategy exercises previously focused on rather simplistic projections such as one in which the tourism ministry in 2004 assumed 20 percent annual growth for the following six years (de facto making a bet that the country would have 4 million visitors in 2010). As reflected in failed or aborted investments, such overestimations of the market’s growth potential can become very costly and throw doubts on any efforts to generate serious future investment commitments.

Luckily for Lebanon, the tourism downturns in the past ten years did not translate into negative impacts on the economy of the magnitude that the far-stretched concepts of indirect and induced contributions of tourism to GDP would suggest. The share of tourism in GDP as direct contribution is still in the range of 8 to 10 percent — roughly the same as in 2003.

World on the leisure run

Tourism is one of the world’s growth engines. Some previously struggling countries this year look set to accelerate their economies with the voluntary assistance of visitors. Spain’s industry, energy and tourism ministry just announced with glee that the Iberian country attracted 10.1 million visitors in the first quarter of 2014 and feted this 7.1 percent increase as contributing to the Spanish economy’s rebound.

Globally, the United Nations World Tourism Organization (UNWTO) projected in January that tourism, as measured by international tourist arrivals, would grow 4 to 4.5 percent in 2014 on the back of 5 percent growth in 2013. Some regions will see arrivals swell more than others, however. Asia Pacific and Africa, the top gainers in the past eight years, are estimated to grow up to 6 percent.

The Middle East region, which entails parts of North Africa along with the Levant and the Arabian Peninsula in the UNWTO statistics, is not sharing the positive outlook, however. According to the UNWTO, tourist arrivals to the region slumped at a 0.3 percent increase in 2013 and growth in 2014 at best may reach 5 percent — depending primarily on safety in countries such as Egypt.

In the long term, the UNWTO expects global tourism to grow at strong rates. Between 1995 and 2013, international tourist arrivals doubled from 529 million people to 1.08 billion. In 2030, the UNWTO’s trend extrapolation of growth rates sees 1.8 billion people temporarily exporting themselves into other countries on leisure or business visits.

Lebanon will see some of these visitor streams. Market dynamics in global tourism dictate constant search for new destinations and development of new tourism niches. To address the potential for recovery and growth of the tourism industry in 2014 and further down the road, the protagonists of the Lebanese hospitality industry would be well advised to draw unbiased conclusions from experiences such as the impact of the Syrian crisis, and at the same time invest more into the industry’s own research and planning capabilities.

Tourism is an economic, social and cultural activity that requires private sector minds to be open to change without clinging to old assumptions. It needs the state’s attention from licensing and supervision to sustainable planning. But the public and private sectors have hardly done their homework. The building where the Ministry of Tourism resides in the Hamra district of Beirut is an allegory for the overdue need to move forward. The ministry’s meandering hallways contain office after office overflowing with papers — a scene that looks like the setting of a 1960s movie. The building itself is 15 years overdue for renovation. Inside and out, Lebanon needs a bold new beginning in the tourism sector.

May 6, 2014 0 comments