Executive Magazine

Making hay while the sun still shines

by Ahmed Moor January 1, 2010

written by Ahmed Moor

Oil and gas markets face a number of challenges to their continued development, with producers confronting three main issues: peak oil, alternative energy and/or nuclear power and the risk of geopolitical instability.

The United Arab Emirates is as affected by these issues as any other energy-exporting nation. Dubai is already experiencing the effects of peak oil, as its reserves dwindle to nearly insignificant levels. The country is pursuing nuclear and renewable energy to offset its consumption of fossil fuels. The UAE also relies heavily on the Strait of Hormuz for most of its export capabilities — leaving it vulnerable to the potential effects of war with Iran.

Peak Oil

Peak oil represents one key theoretical challenge to producers in the oil industry. The idea is that because global stores of oil are finite, the world will one day reach a point where it is extracting the maximum amount possible, and will thereafter confront a period of decline in oil output. While some analysts expect peak oil to occur around 2030, others expect it to occur sooner than that. Analyst and author David Strahan expects the net global production to reach peak oil by 2020 at the latest. According to him, oil production is shrinking in 60 of the world’s 98 oil-producing countries. Indeed, he predicted in 2008 in a speech at the World Energy Summit in Abu Dhabi that the total oil output for non-Organization of Petroleum Exporting Countries (OPEC) states will reach its apex in 2010.

The United States Energy Information Administration (EIA) appears to agree on this point. According to a report it published, “the EIA projects the total non-OPEC supply of crude oil will grow by just over 1 million barrels per day [bpd] to an average 51.5 million bpd in 2010 — the largest year-over-year increase since 2002. The increase in total non-OPEC supply for the year is the result of higher production in the United States, Brazil, China, and Russia.”

But after this bumper year, the EIA expects non-OPEC supply set to drop by 280,000 bpd in 2011 — the third time in the last 15 years that non-OPEC supplies have fallen year-over-year. Previous declines in 2005 and 2008 were primarily the result of supply disruptions in the Gulf of Mexico related to hurricanes.

There are other indicators that peak oil may be a serious concern in the coming decade. For instance, the 30 biggest oil companies upped their exploration budgets by 45 percent to more than $400 billion in 2006 alone. Yet, oil and gas reserves only grew by 2 percent despite the massive investment.

According to Kate Dourian, Middle East editor at Platts, yields from existing fields are dropping about 5 percent to 7 percent annually. At the same time, analysts predict that 30 to 40 million barrels of new daily capacity will be needed to meet global demand between now and 2030. That’s due to the fact that the capacity expansions currently underway in the Gulf don’t cover the difference. “There will be a supply shortage if people don’t invest now because of the long lead time” in exploration and delivery to market, she said. But because of the increased viability of alternative fuels, producers are reluctant to invest. “It’s difficult to ask producers to pour billions into the ground to keep it there,” she explained.

Alternative energy and nuclear power

A wide range of alternative energies are being brought to the market and there is some expectation that they will displace oil and gas market share globally, which today is generally estimated to be between 80 and 90 percent. According to the International Energy Agency, in 2005 nuclear generation provided 6.3 percent of the world’s total primary energy supply and its share of the market is likely to have climbed. Alternative fuels encompass a range of sources such as biodiesel, chemically-stored electricity, hydrogen, vegetable oil and biomass sources.

There are two main reasons for why governments and people around the world seek to become less dependent on fossil fuels. First, the consumption of oil and gas creates greenhouse gasses, which are heavily implicated in global warming and the destruction of ecosystems worldwide. Environmental degradation is arguably the direst threat confronting the world today. In the words of United Nations Secretary-General Ban Ki-Moon: “Business as usual cannot be tolerated, for it would condemn millions — no, billions — of children, women and men around the world to shrinking horizons and smaller futures.”

Indeed, climate talks may be having a chilling effect on the amount of new investment oil and gas producers are making in increased production, even before any viable alternatives hit the market. Dourian explained that: “The producers are saying ‘Well hang on a second we don’t know how Kyoto is going to impact future demand; we don’t know how much is going to be displaced.’” The Kyoto protocol is an international agreement designed to combat climate change that expires in 2012. Efforts are underway to replace the agreement with similar or more robust international agreements.

Second, as economies in the developing world grow — most notably China and India — they will require ever larger amounts of energy. Energy from oil producing states is far from guaranteed in the long term, and renewable energy that can be produced within a country’s own borders is often preferable. Many governments regard energy security as a priority, and a heavy reliance on foreign governments exposes them to potentially destructive consequences.

The UAE is already making provisions for nuclear energy in response to increased domestic energy demand and to further capitalize on petroleum’s exportability. At present the country is in consultation with the International Atomic Energy Agency (IAEA) to create a nuclear program, and it accepted a $20 billion bid from a consortium of South Korean companies in December of 2009 to build four nuclear power plants for commercial use by 2020. This is in keeping with Dubai’s plans to produce 20 percent of its energy from renewable sources by 2030.

The UAE is a signatory to the Nuclear Non-Proliferation Treaty. It also signed and ratified an additional safeguards agreement with the IAEA in 2003. In 2008, the country appointed an ambassador to the IAEA.

Geopolitical disturbance

The Middle East and parts of Africa are some of the most politically volatile areas of the globe. They also contain the largest stores of fossil fuels, which means that global supply lines are threatened by every regional conflagration.

The Iran-Iraq war, the first Gulf war, the 1973 war, and ongoing strife in the Niger Delta all precipitated spikes in the price of oil and natural gas. Today, there is a real possibility that Western countries and/or Israel will attack Iran under the banner of quashing its nuclear capability. If that happens, the Iranians may retaliate by striking tankers and cutting supply routes through the all-important Strait of Hormuz, through which passes approximately 17 million barrels of crude oil per day. While many countries have energy reserves (America’s stockpile consists of about 700 million barrels of crude oil), they probably will not be enough to offset the adverse effects of a war with Iran. Such a conflict would thus likely lead to a ‘double-dip’ global recession.

There are many challenges to the continued provision of steady oil and gas supplies to the world market. The industry is being forced to grapple with steadily shrinking supplies, adverse environmental effects which result from fossil fuel consumption and a high-risk supply area. While much can be done to mitigate these risks in the short and possibly medium term, these are likely long term, irreversible trends. In other words, the world will continue to move away from oil.

January 1, 2010 0 comments

Capitalist Culture

Arab Perestroika

by Michael Young December 17, 2009

written by Michael Young

In early November, the Western media was awash with material celebrating the 20th anniversary of the fall of the Berlin Wall. Not surprisingly, these echoes had turned into a hollow clang by the time they reached the Arab world. So, are Arabs really incapable of grand transformative change, particularly democratic change, and if so, why?

The question is both fair and beside the point. Everyone will provide a different answer; trying to nail down such a momentous query is unlikely to lead far, raising only more questions. Aligned against those, present company included, who believe that the region is capable of deep democratic change, there are those who will present “culturalist” arguments to the effect that Arab states don’t have the historical baggage required to set up democratic orders.

As their societies have always been autocratic, the argument goes, Arabs are therefore predisposed to autocracy. Others will go further to assert that Islam doesn’t inherently allow for democracy, even though no convincing evidence has ever been presented to justify such a sweeping conclusion.

These opinions are terribly constricting and self-reinforcing. If a society is perceived as being incapable of opening up, of pursuing liberal outcomes, then there is no motivation from their governments, let alone foreign governments, to ever take popular preferences seriously. Yet as East Germany in 1989 showed, as did Lebanon in 2005 and Iran this year, even when presented with small openings, societies under tight control — whether domestic or foreign — will take steps toward emancipation, which, even momentarily, can fundamentally improve their situation.

Unlike the former communist states of Eastern Europe, the Arab world is more complex when it comes to economics. By and large the region’s economies are under the control of the state, or its representatives. Even private sectors, where they exist and even thrive, can in many ways be undermined by rulers and the absence of independent judiciaries.

Yet economics and finance have also been rare areas in the region where regimes have left society some room to maneuver; in most places the notion of a private sector is encouraged, so long as leaders and their acolytes are reserved a cut of state profits and political realities remain unaffected.

But these hybrid economic systems have failed to create more liberal societies. An assumption of numerous Western projects directed at the Arab world has been that the loosening of economic controls might ultimately be mirrored by a loosening of political controls.

This was, for example, a pillar of the Barcelona process set up in the mid-1990s by the European Union. In reality, the link between economic and political openings has been tenuous at best, which is why the political expectations surrounding Barcelona have virtually dissolved, with the process focusing almost exclusively on economic reform.

In that case, what would it take for the Arab world to have its own Berlin Wall moment? Is such a thing even conceivable, particularly given that the region is not held together by a unified intimidating power similar to the Soviet Union’s, where a loosening of the straps at the center could ultimately bring the entire edifice down?

That the George W. Bush administration imagined Iraq’s liberation might be such an event raises hackles today, even if the impact of what happened there has yet to be fully grasped. Grand projects tend to die in the Middle East. Instead, the region seems only to breed stalemate and a sense that nothing will ever change.

But that may not be true. One could easily imagine, for example, that a sudden breakdown of Iran’s autocratic order, which is now devoid of any revolutionary ideological fervor, would send shockwaves through neighboring Arab states. Had post-Saddam Iraq succeeded more quickly (for it will likely emerge from its nightmare stronger), its democratic reverberations could have been more effective than they are; even now, the country’s emerging pluralism deeply worries its neighbors.

In a Middle East where the status quo has prevailed for so long, a sudden swell of change akin to the fall of the Berlin Wall may be more plausible than we think. Arab states will not become freer and more liberal through economic reform. And if change comes, states will not have the benefit of a democratic neighborhood, such as the European Union, to frame their future actions and integrate them into the safety of a liberal, capitalist and multilateral structure.

That’s why if, or when, the Arab wall falls, the consequences may be much direr than those found in Europe two decades ago. The wall may collapse on our heads.

Michael Young

December 17, 2009 0 comments

Luxury Retail

Faces of fashion

by Executive Staff December 17, 2009

written by Executive Staff

Toni Traboulsi Executive manager, Middle East Luxury Group

E Rumors of money laundering activities have sometimes beenassociated with some prominent Lebanese luxury groups in Lebanon. Some retail clients have also complained about unfair return policies and voiced doubts as to the original quality of goods sold by some of the luxury sector’s mammoths. How, as a member of the luxury retail industry, do you perceive these serious accusations and do you believe they reflect on the Lebanese luxury sector as a whole?

I am aware of these accusations but I believe that this type of talk is common in Lebanon when an individual or a company becomes very successful. However I really cannot say for sure if there is any truth to such allegations, but given that our industry is a very sensitive one and our market an extremely sensitive one, such accusations are certainly detrimental to the image of the Lebanese luxury retail as a whole.

Regarding accusations of counterfeiting, I do not believe it is practiced by large groups as you mentioned, but certainly by some smaller retail stores, some of which openly display copies of famous brands and are located in the vicinity of the Lebanese parliament. There should definitely be more of a governmental effort to rein in such unlawful practices that harm the Lebanese luxury retail industry. As for complaints about the return policies and quality of service provided by some boutiques, I believe that brand policies differ from one market to another and especially in Lebanon, due to the mentality of some clients who tend to abuse the system. We at MELG take, however, very seriously any complaint regarding product defect and immediately replace any faulty item, if sold at one of our boutiques. We also involve the manufacturer every step of the way.

Christiane Boustany Business manager of the fashion division, Malia Group

*“Lebanese designers have exported luxury to the world”*

E Do you believe that the financial crisis put an end to the luxury retail party in Lebanon? Or on the contrary, do you feel that Lebanon will be spared by the overall financial contraction?

I highly doubt the party is over for Lebanese retailers. And yes I do believe Lebanon still has major potential as a regional luxury shopping destination. One has to keep in mind that the country’s precarious political situation and permanent state of instability has reflected negatively on our growth and left us lagging behind other luxury retail destinations for quite some time.

We’ve come a long way but we still have a lot to achieve. However, Lebanon’s position is unique in the Middle East; not only has it become an importer of luxury brands, it has been able, through a pool of talented Lebanese designers such as Elie Saab or Zuhair Murad, to export luxury to the world.

Grace Sehanoui Brand manager, E and E Group

E Do you believe that with the current economic crisis, there is more of a future for diffusion brands than for haute couture creations?

*“Without haute couture there is no future for diffusion brands…the democratization of luxury will never be able to cross certain boundaries”*

The world of luxury fashion will always be defined by haute couture. It is true that diffusion brands have today become part of a wider trend: the world’s luxury fashion houses are looking to grow through lower priced items dubbed as secondary brands. It is also interesting to note that some famous designers, such as Jimmy Choo, are entering the low cost retail market by creating special collections for other retailers, which are international companies like H&M. These diffusion lines, which have lower margins than luxury lines but higher volume, are growing in importance. But at the end of the day, many big fashion names rely on the visibility of their high-end brands and the glamour of their Paris, London or Milan défilés to bring in the numbers. While the strategy of some of the fashion powerhouses will be to expand in diffusion lines, because they can increase sales turnover, higher profit margins will remain in haute couture which, ultimately, help boost all other lines with the brand image they diffuse and the quality and creativity involved in their production process. Without haute couture there is no future for diffusion brands and I believe that the democratization of luxury will never be able to cross certain boundaries.

Izzat Traboulsi Managing director, Hugo Boss for the Middle East

*“We need to preserve the exclusive character of downtown”*

E How, in your opinion, should Lebanese luxury retailers position themselves in order to differentiate Lebanon as a luxury retail destination from other international shopping capitals such as Dubai, Paris or London, and what can they do to capture a larger portion of the Arab clientele?

As luxury retailers we need to focus, develop and further promote our downtown area as a luxury shopping destination. Beirut’s downtown is comparable to New York’s Sachs Fifth Avenue area — which is delimited by the 40th and 50th street quadrant — or the select Paris Avenue Montaigne. We definitely need to preserve and promote the exclusive character of our downtown area by building a proper brand mix, while staying away from lower cost brands that might hurt the luxury image we would like to achieve. Ultimately, Lebanon is, today, providing shoppers with a beautiful open air space, a naturally handsome setting that features glamorous brand names. We have been able to create a high-end destination that other countries in the Gulf can’t really compete with. Even in countries like Syria, which actually have a downtown area, it is very difficult for them to offer a similar shopping experience due to the setup of their urban areas, lacking proper brand mix and where shoppers will encounter sandwich eateries sitting side by side to luxury stores. Besides a naturally beautiful setting, Lebanon also has the advantage of the savoir-faire and know-how of big retail groups that define the meaning of luxury in our country.

December 17, 2009 0 comments

Luxury Retail

Ritz blitz

by Executive Staff December 17, 2009

written by Executive Staff

Is the party over for luxury retail? In Lebanon, in spite of noticeable changes in consumer behavior, the answer seems to be a definite “no,” according to the Fashion powerhouses interviewed by Executive.

“Luxury is a word eponymous to life, happiness and the highest standards of quality. Its intrinsic, rare and exclusive qualities are a reflection of an individual’s status,” says Roger Mrad, owner of the Wadih Mrad company, exclusive agents of Cartier, Dunhill and Chanel, among other designer watch brands.

The Lebanese, who many consider the regional fashionistas par excellence, value all things luxury.

“The Lebanese are strong believers in designer brands,” says Grace Sehnaoui, brand manager at E and E, who operate international fashion franchises such as Kamishibai, Tod’s, Hogan and Vilebrequin. With the country’s political situation gaining stability, many Lebanese are rekindling their love for big spending.

“During the 2005 and 2006 period, which was marred by brutal bombings and violent conflicts, retailers understandably experienced a real freeze in consumer spending,” explains Sehnaoui. “That freeze is starting to thaw.”

Momentum created by the country’s renewed peace was somewhat counterbalanced by the global financial crisis, but, as Wajdi Abdel Hadi, Vertu’s regional manager for the Middle East and South Africa says, “things are definitely picking up.”

Different styles

Luxury retailers have detected differences in Arab and Lebanese consumer behavior.

Mrad explains that, in his experience, Lebanese tend to be loyal to their national companies and shop at home instead of abroad — a trend also noted by Izzat Traboulsi, managing director of Hugo Boss for the Middle East. Expats returning home accounted for much of their 2008 sales figures.

Retailers have also noticed differing customer demographics, depending on the location of their stores.

“About 80 percent of our customer base at ABC are Lebanese, while this figure drops to 70 percent for our downtown boutiques,” says Christiane Boustany, the fashion manager at Malia Holding — a Lebanon-based organization owning equity in various luxury stores, such as Secret Pon-Pon, Mariella Burani, Sebastian Shoes, Paul and Shark, Miss Sixty and the Facco jewelry brand.

Mrad adds that their ABC Ashrafieh location “retains about 70 percent of expatriate purchases, while they only constitute 40 percent of total sales at the Dbayeh store.”

Toni Traboulsi, executive manager at the Middle East Luxury Group (MELG) — representatives of brands such as Gianfranco Ferre, Just Cavalli, Giuseppe Zanotti, Plus IT and the 109 multi-brand store — notes that 60 percent of the group’s client base are Lebanese nationals, 30 percent Arab tourists from the Gulf and the rest is a mixture of various nationalities.

Karen Nehme, brand manager at Ferragamo, points out that their downtown Beirut Bank Street store witnessed a 40 percent increase in purchases from Arab clientele, thanks to improving political conditions.

Sehnaoui says that in the case of her stores, it was Lebanese customers who usually drove the company volume.

“Arab spending accounts for increases in sales volumes during certain seasons, but not for more than a 25 percent spike in total sales during a given month,” she says.

Sehnaoui adds that demography is also evolving in terms of client age and gender.

“We are counting more and more young people as our clients, especially those currently residing abroad and who are slowly developing a taste for designer brands. More women are working and thus increasing their spending habits,” Sehnaoui explains.

Toni Traboulsi says he had noticed that shoppers were more aware of budget constraints and seem to have less purchasing power on average.

However, Nicolas Ferneini, manager at the Joseph Eid Group, believes that the Lebanese aren’t necessarily spending less, but sticking to more classical styles while trying to trend them up with accessories.

Seasonal spree

“Our main challenge was the general negative economic spending mood that prevailed at the beginning of the global crisis,” says Chucri Cavalcanti, managing director of the Elie Saab Group. “Customers are more selective and up to date on international fashion trends,” In spite of a change in consumer behavior, the downtown luxury destination seems to be bustling with regular activity. Many retailers are also rejoicing over the coming holiday season, noting stronger sales volumes are usually witnessed at either the beginning of the new fashion season or around the annual vacation time.

“Lebanese tend to seek the cream of the crop of every collection, which implies that they tend to shop right at the beginning of each season,” says Malia Holding’s Boustany.

According to Sehnaoui, E and E stores perform best during the summer season, which is noticeably longer than others and attracts significant numbers of Lebanese expatriates and Arab tourists.

Trabousli broke sales down further, specifying that for MELG, July and August represent about 30 percent of the company’s total sales, adding that December accounts for the highest percentage of monthly sales volume, with 17 percent of the company’s yearly turnover. At Elie Saab, sales peak during the yearly holidays and the summer season, and represent some 65 percent of total sales.

Izzat Traboulsi says that Lebanon has managed to keep attracting Arab shoppers because of the faith Gulf tourists put in the Lebanese flair for fashion.

“[Gulf] residents…enjoy shopping in Lebanon because they trust the Lebanese buyers tastes and trendy styles,” he says.

MELG’s Traboulsi says that most people managing brands in the region are of Lebanese origin: additional proof of Lebanon’s unique position in the world of luxury fashion.

But Arab trust does not seem to prevail when it comes to Lebanese retail ethics.

“Gulf shoppers have become much more educated in terms of the value of designer products they buy and unfortunately there has been some abuse on the part of some Lebanese retailers, who have deceived their Arab clients,” says Sehnaoui.

According to Mrad, trust remains Lebanon’s strongest brand.

“Lebanon’s luxury retail is all about a personalized approach, generally associated with local families,” he says. “As an example, if a customer buys a watch from Wadih Mrad, he is putting his trust in a family that has been in the business for three generations. We have to keep this tradition of personal relations alive, as it remains one of the Lebanese’s core strengths. “This type of approach does not exist [elsewhere] in the region, where the shopping experience has become more anonymous.”

Costly business

For most retailers, one of the main preoccupations remains the high rents imposed by real estate owners and companies around the downtown area. According to Izzat Traboulsi, rent accounts for some 30 percent of a store’s expenses.

“The luxury retail business is a highly profitable business in times of stability, but it also comes with a high price tag, as retailers have to disburse about $2,000 for every square meter rented in the downtown area,” he says.

This fact was underlined by Sehnaoui who says: “Rental costs represent a significant expense for retailers and are often diverted from marketing budgets.”

Property owners renegotiate contracts every three years, putting further pressure on retailers faced with ever tighter margins. According to Guillaume Beaudisseau, of Ramco real estate company, rents in downtown Beirut average $1,500 per square meter per year. The average floor-space of a downtown store is around 50 square meters.

Karen Nehme, brand manager at Ferragamo, says parking restrictions and security measures imposed by Solidere, who own much of the re-built downtown area, do not facilitate the work of retailers: “We are thinking of relocating deeper into the downtown area as our [Bank Street] store’s access has become quite difficult for our clients,” she adds.

Another concern voiced by retailers was the 10 percent value-added tax system.

“In Lebanon, VAT is paid by retailers upfront on the amount of the goods they import,” says Sehnaoui. “If a company imports goods worth $100,000, it pays the full amount, regardless of whether the merchandise is sold or not, with the difference being reimbursed later by the state. In France, VAT is only paid after the merchandise is sold. This has massive financial implications for retailers at large.”

In spite of the difficulties faced by luxury retailers, major fashion houses seem to be expanding massively in the capital, heralding what could well be — should the country’s fragile hold on peace remain firm — a new dawn for luxury fashion in Lebanon.

“The outlook…looks good, as is evidenced by in the upswing of tourism figures in Lebanon,” says Vertu’s Hadi. “I can’t find any reason restraining luxury retailers in Lebanon growing from strength to strength.”

December 17, 2009 0 comments

Luxury Retail

Boutique’s new boom

by Executive Staff December 17, 2009

written by Executive Staff

For international luxury retailers battered by the financial crisis in Europe and the United States, the Middle East has an enduring allure and has remained, in spite of weakening sales figures, an essential market. Unlike other countries in the region, Lebanon’s luxury retail sector has shown resilience and solid growth in 2009, with the sector also seeing dramatic structural changes.

In 2003, the Middle East retail industry was valued at some $200 billion; by the end of 2008 this value had swelled to more than $400 billion, according to a report by the Bharat Book Bureau, a market research firm. While Saudi Arabia and the United Arab Emirates are seen as the most vital markets for retailers in the Middle East — a role they are expected to maintain in the coming years — Lebanon seems to have slowly emerged from its slumber, with many luxury retailers launching stores in Beirut.

“The luxury retail industry is a billion dollar sector in Lebanon,” says Wajdi Abdel Hadi, Vertu’s regional manager for the Middle East and South Africa. “Lebanese are known for having a penchant for luxury and branded items, which accounts for Lebanon being one of our most successful regions.”

“The future of Lebanon’s luxury retail is being drawn today, as can be seen in the flurry of new exclusive stores that are opening in the downtown area,” says Izzat Traboulsi, managing director of Hugo Boss for the Middle East.

The country’s retail industry is transforming rapidly, driven by changing market dynamics and increased political stability: a key element to Lebanon’s investment appeal.

The wealth of Lebanon’s massive expatriate population, who are avid luxury customers and often return home to shop, as well as the formation and aggressive expansion of large luxury retail groups — such as Aishti, Middle East Luxury Group (MELG), E and E, Malia and Rodeo Drive — have contributed to the growth momentum.

“We have been able to maintain our growth from 2008 to 2009, in spite of the economic crisis,” says Toni Traboulsi, executive manager of MELG, which boasts high-end brands such as Gianfranco Ferre, Just Cavalli, Giuseppe Zanotti, Plus IT and 109 multi-brand stores.

A year for growth

Roger Mrad, owner of the Wadih Mrad multi-brand watch stores — agents of Cartier, Panerai, Piaget, Chanel, Zenith, Frederique Constant, Bell & Ross and Dunhill — confirmed Traboulsi’s statement, adding that in spite of the fact that Lebanon’s luxury retail figures did not improve from 2008 to 2009, they fared much better than other countries in the region, which were plagued by sales losses — averaging between 40 percent and 60 percent in the luxury watches segment alone.

Chucri Cavalcanti, managing director of the Elie Saab Group, explained that at the beginning of the crisis sales in the ready-to-wear segment were affected for a minimal period of time, but the haute couture segment remained unscathed.

“Now that we are emerging out of this crisis, there is a definite up-turn in growth,” says Vertu’s Hadi. “Luxury brands are continuing to pour into the market, which is definitely a good sign.”

Karen Nehme, brand manager at Ferragamo, estimates that 2009 was extremely successful in term of turnover, and a year that brought “huge growth to the Ferragamo brand in Lebanon.”

Christiane Boustany, business manager of the fashion division at Malia Holding — a Lebanon-based organization that is part owners of companies such as Secret Pon-Pon, Mariella Burani, Sebastian shoes, Paul & Shark, Miss Sixty and the Facco jewelry brand — believes growth for the group’s luxury segment was in double-digit figures in 2009. Izzat Traboulsi puts this figure at 15 percent for the same period for the Hugo Boss Group.

“Sales literally took off in the last year, growing by as much as 30 percent,” says Grace Sehnaoui, brand manager at E and E, a company that owns franchises such as Tod’s, Hogan, Kamishibai, Vilebrequin and Pebbles.

Most luxury retailers interviewed by Executive showed optimism toward their future in Lebanon, so long as political stability was maintained.

“Sales by luxury retailers can achieve a 10 percent to 15 percent improvement in performance next year,” predicts Izzat Traboulsi — a figure that concurs with the regional estimation forecasted by the Bharat Book Bureau, which foresees growth of 14 percent in the Middle East between 2009 and 2013.

Boosted by solid growth figures in 2009, the Lebanese luxury retail sector regained its former dynamism, morphing dramatically to dovetail back into the Middle East’s retail culture, where smaller outlets have been progressively replaced by mega shopping malls.

The changing consumer demographics in Lebanon — with the emergence of a significant population of young professionals, largely employed in the oil-rich Gulf — accounted for an estimated $7 billion in remittances in 2009, helping to fuel the trend. This evolution translated to a shift from the traditional multi-brand stores to mono-brand luxury boutiques.

In Beirut’s downtown area, exclusive names such as Fendi, Dior, Feretti, Dolce and Gabana are popping up in the Carré d’or, or the “Golden Quarter,” stretching between Foch and Allenby streets.

Rumor has it that the Gharzouzi family is opening a Hermes store, one of the most exclusive luxury brands — it was the highest scoring in the Luxury Brand Status Index — while Louis Vuitton also seems to be joining the Beirut fray, choosing the Lebanese capital to host one of its new stores.

“Mono-brand stores are a matter of brand identity and image for luxury retailers, they do not compete with clients of multi-brand stores. On the contrary, they tend to push sales of products carried by multi-brand retailers,” says Mrad. “As an example, our turnover of Cartier watches increased by 27 percent when the Cartier boutique first opened.”

Boutique uber-alles

With the launching of mono-brand stores in Lebanon requiring larger investments, a semi-monopoly of segments of the luxury retail sector seems to be taking place.

“Small companies built on one or two brands can hardly survive in such a competitive environment and will eventually lose their representation,” says Boustany. As an example, Hugo Boss, which used to be distributed through one retailer, has started opening its own stores and diversified its points of sales.

“It is a matter of cost effectiveness,” says Toni Traboulsi from MELG. “Large groups have the infrastructure and the means to handle various brands. In such a framework, one buyer’s expenses can be spread over the budgets of several boutiques, thus minimizing costs significantly across the board. Additionally, management fees are also divided among the various stores and cost centers carried by one ‘mother’ holding company, making the process much more profitable.”

In spite of the growing enthusiasm of international fashion houses for mono-brand stores, Sehnaoui does not believe the trend is indicative of the imminent death of the multi-brand store in Lebanon.

“A few years ago we started witnessing a slow erosion of the multi-brand store concept. But recently it appears that the trend is reversing with a return to multi-brand boutiques,” she says. Sehnaoui underlined, however, that a growing problem for luxury multi-brand retailers around Lebanon resides in the fact that some fashion houses, which have been significantly affected by the global economic crisis, are distributing their products to more than one retailer, contributing to the cannibalization of brands.

“It is difficult for international brands to understand that Lebanese retailers are, contrary to ones operating in other countries, limited by geographical constraints, due to the country’s small size,” says Sehnaoui. “As an example, a brand which is carried by a store in Verdun, ideally should not be carried by a competitor in Ashrafieh, because both areas are so close in distance.”

Another problem faced by retailers lies in the fact that most mono-brand stores opening in Lebanon are operated through franchise contracts, imposing strict requirements pertaining to size, location, number of boutiques, decoration, budget and other targets.

“The promotional strategy imposed by the franchisor is sometimes not suitable to the particularities of the local market,” says Nehme.

Too much of a good thing?

“There is a general feeling in the retail business that some investors are opening stores randomly,” notes Izzat Traboulsi. “However, due to the country’s size and unstable environment, a multi-store approach for luxury brands, one that requires very high turnover that can only be generated by increasing tourist clientele, is still not sustainable. Such an approach will ultimately lead to market saturation in Lebanon.”

Traboulsi underscored that luxury brands require volume in order to survive, implying a heavy reliance on tourism: a sector directly linked to political stability.

Mrad shares his concern, warning, “Luxury brands stores require a constant infusion of new blood and are not profitable if they solely rely on the local population.”

However, this has not stopped retailers from expanding, with giant fashion groups such as Chalhoub and Boutique One opening stores in Beirut, while home-grown talent such as Elie Saab opening in fashion capitals like Paris and London.

“Our international expansion and the establishment of stores in major cities around the world has helped greatly in increasing the awareness of the Elie Saab brand,” says the Saab group’s Managing Director Cavalcanti, “And with it, certainly the appreciation for Lebanon’s luxury culture.”

December 17, 2009 0 comments

Automotive

Fashion driven

by Executive Staff December 17, 2009

written by Executive Staff

Nagy Heneine General manager, Bassoul-Heneine BMW, Mini, Renault, Alfa Romeo and Dacia

“Sedans used to be the Lebanese car of choice at over 80 percent of sales,” said Nagy Heneine, general manager of Bassoul-Heneine. “But in 1999 we launched the BMW X5, the first sports activity vehicle [SAV], and since then 4×4 sales haven’t stopped growing. Over 50 percent of sales are now in the SAV segment. In Lebanon, the two most popular styles are the X5 and the X6.”

“In Lebanon we still don’t have a fuel efficiency concern, but in the popular car segment efficiency is more important,” he added. “This is where the government should be more strict, as the environment should be a major concern. Many cars are very pollutive, but the government does nothing. They should enforce rules, have laws on imports and offer incentives. In the mindset of the people the environment is increasingly important. BMW is a pioneer in this, and it has been awarded best car company for lowering emissions. The future of cars in five to six years will be electric vehicles.”

Next year BMW, along with other brands will introduce hybrids, which Heneine pointed out are even faster than normal cars, a fact that could prove a boon for sales despite the higher price tag.

“In some countries there are incentives to drive hybrids, and its makes sense to buy them. There is an [awareness of the benefits of hybrids] in Europe but not in this region, although it will come one day.”

Fayez Rasamny Vice chairman, Rasamny Younis Motor Company Nissan, GMC, Infiniti and Kawasaki

In October, the Lebanese authorities banned motorcycles and mopeds after 6 p.m. following clashes between young men riding two-wheelers, in addition to cracking down on riders without helmets and unregistered mopeds.

“It is not a permanent law and the authorities had to do it,” said Fayez Rasamny, vice chairman of Rymco, dealer for Kawaski motorbikes. “There are a lot of scooters (“mobilets”) running around town, and I would ban used scooters and only sell new ones, not for $100 but $1,000. These mobilets are causing a number of problems and many are un-registered. But it has not affected our sales [of new motorcycles].”

Sports Utility Vehicles (SUVs) are “image boosters. They are a practical decision for Lebanese roads, and there is a common perception that you can’t own a home without an SUV.”

Rasamny said Lebanese consumers are “not concerned” about fuel consumption. “You know Lebanon, they prefer to have a SUV and not think about fuel consumption.” As for environmental awareness, “it will never pick up. Environmentalism should be endorsed by the government, not by the private sector. But you do what you can do for the environment.”

Negib Debs Brand manager, T. Gargour & Fils Mercedes-Benz, Smart

For Negib Debs, brand manager of Mercedes at T. Gargour & Fils, the sports utility vehicle (SUV) segment is a “fashion statement.”

“People go for a brand because they see such and such a singer driving it, or an important personality, it’s a fashion and sales boom,” said Debs.

“For a family to drive up to Faraya, an SUV makes sense, but for a lady driving a Hummer in Ashrafieh, it doesn’t. It’s too wide for the roads, yet it’s a fashion statement. People also follow a design, and in my opinion I’m afraid of such trends because when people follow a design, after one to two years, max three, this design is obsolete and it is not a sustainable business.”

“When you start with an S-Class Mercedes nobody cares about fuel consumption or CO2 emissions, or what they’re concerned about in Europe,” he continued. “We’re still quite far off. In Europe, you pay $1,000 more for a cleaner car, but here people don’t care, there is no civic consciousness yet. People are not yet asking about fuel consumption, unfortunately, but they know everything else about a vehicle. The Lebanese love cars, and many come here knowing everything about the vehicle, including particular details.”

The number of new and luxury cars on Lebanese roads often puzzles visitors to the country, given the low GDP per capita of $11,100 per year and a minimum wage of $333 per month.

“Around 5 percent of people can afford luxury cars, which is around 100,000 people, so with total new car sales per year of 33,000, this makes sense,” explained Debs.

December 17, 2009 0 comments

Automotive

Exiting the fast lane

by Executive Staff December 17, 2009

written by Executive Staff

Lebanese auto dealers have had to handle a mixed bag of issues in 2009 as they worked to retain last year’s 45 percent rise in sales.

For the dealership Bassoul-Heneine, BMW sales were up 56 percent this year, the second highest growth for the German brand in the Middle East after Syria, with sales up 94 percent on 2008 — a stark contrast to the region, where sales dropped 8 percent in 2009.

“Our business plan was to sell 680 BMWs, but we will reach 1,000 units. In 2007 we sold 512 units, 624 in 2008 and this year until October, 824 units. For all our brands, our [total] target became 2009 units in 2009, and we’re going to do that,” said Nagy Heneine, general manager at Bassoul-Heneine, which is also the dealer for Mini, Alfa Romeo, Dacia and Renault.

Heneine attributed the rise in sales to the new X6 Sports Activity Vehicle, the broad range of BMW models and purchases by rental companies.

“The X6 had huge success. We were not expecting this and had budgeted on 120 cars at the beginning of the year, but we’ve sold 270 units as of November,” he said.

Fleet sales to car rental companies also boosted sales, since the summer months saw a boom for the sector.

“In this country nothing has changed, yet everything is upside down,” said Negib Debs, brand manager of Mercedes and Smart dealership T. Gargour & Fils.

“Usually the summer is the worst time [for sales] but in 2008 [they were] our best months ever, and this year too. And we are not selling cars to Saudi [summer tourists], but to Lebanese,” he added.

US troubles didn’t knock sales

For American brands, 2009 has been a tough year. United States manufacturers sought financial aid from their government and underwent severe restructuring of administration and production.

“At the beginning of the year we were a bit skeptical [about the year ahead] but after 10 months, sales are almost like last year,” said Cesar Aoun, manager of the Chrysler Car Group of Chrysler, Jeep and Dodge, which reported 25 percent growth in 2008. “This is despite everything the US brands went through — near bankruptcy, Chapter 11 [of US bankruptcy law] and all the turbulence.

“But this did affect the brands’ images and consumers were hesitant to buy US, [which is] why US brands have dropped by 16 percent to date in volume, although we will close the year at the same level as 2008.”

“However, compared to the rest of the Middle East, we are the only country maintaining the same level [of sales] as last year,” he added.

Ford is another American name to have seen an up-tick in sales, from 75 units overall last year and 63 units at end-October 2008 rising to 101 units sold this year at end-October.

Aoun said that Jeep sales have performed the best for the Chrysler group, followed by the Chrysler and Dodge brands.

“The four door Wrangler has been a hit, and the four cylinders have been doing well, as people are keen on engines with low fuel consumption. Sales are positive despite all the turbulence and we are optimistic about the Fiat partnership next year,” said Aoun.

Sales saved by advertising

Although sales have been buoyant this year, companies have had to invest heavily in advertising to entice customers; with mother companies having a tough year financially, Lebanese dealerships have had to dip into their own reserves to maintain ad spending.

“The marketing budget was cut, and we had to spend more from our own budget and move aggressively in offers and margins,” said Aoun.

But for companies like T. Gargour & Fils, it has not been the financial crisis that has affected marketing so much as the degree of advertising in Lebanon that assaults the public, on billboards, in magazines, in newspapers and on television.

“Advertising is increasingly crowded, so whatever you do has no effect, due to the mass out there. We are now focusing more on [organizing] special occasions and test drive events. And maybe we’ll try to shift to more below the line ads by [direct] mailing and by being more niche orientated,” said Debs. Advertising is shifting from the traditional product-based approach to focus on after-sales provisions and customer service.

“We are positive and are marketing very actively to position ourselves outside the box with the Jeep brand, improve customer service and at the same time have aggressive sales and pricing,” said Chrysler Car Group’s Aoun.

Middle class sales dip

While Lebanon appears to have weathered the global financial crisis without suffering major damage, the crisis has affected consumer habits — as have higher fuel prices, rising in cost this year to a dollar a liter.

Out of the three consumer layers in Lebanon — mid to low income, medium to high, and luxury consumers — it is the middle layer that has been “really affected,” said Fayez Rasamny, vice chairman of Rymco, dealer for Nissan, GMC, and Infiniti.

“The SUV consumer, who has been more affected by the financial meltdown, held off purchase decisions, whereas the Nissan Sunny buyer still needs a car,” he added. As a result, SUV sales have been fairly stagnant across the board, with sales strongest for sedans.

“Lebanese have not been affected much by the crisis but are conscious of fuel consumption and there is a trend for smaller cars,” said Aoun. “The SUV segment is [quite] stable, although not up much. People want small cars but also need to fit five.”

Smart cars, part of the Mercedes-Benz group, were hoping to tap into this market for smaller cars, but it has been a perception problem to shift units, said Debs.

“Customers don’t perceive the Smart S42 as it should be — it is a very safe car, able to crash into say an SUV without even a break in the windshield,” he said. “People have the notion that a small car is not safe, but it is expensive, at $19,000, because it is safe. However, we’re still selling 30 to 40 units per year.”

Italian opulence

Italy’s Lancia returned to Lebanon in November with the Delta, a 1.8-liter mid-size car, distributed by G.A Bazerji & Sons. A new version of Lancia’s Ypsilon is expected in 2010.

“Lancia interrupted production of mid-range cars since 1997 for a decade or so, and so was out of the Lebanese market,” said Managing Director Nabil Bazerji. “We are very optimistic, provided the situation in the country [remains] positive.”

G.A. Bazerji & Sons is also the distributor for Maserati, which saw sales grow by 75 percent from 8 units in 2008 to 14 units in 2009. All sales were to Lebanese, which Bazerji put down to confidence, unlike in the Gulf, where luxury sales have dipped 30 percent.

“The Gulf is a balloon, it was in good health for 30 years during which Lebanon was at war and in recovery,” he added. “Give Lebanon a chance, have normal production and everything will follow. Then we can compare the two regions.”

Association of Car Importers in Lebanon (AIA)

New cars registered in Lebanon by AIA members in 2009

December 17, 2009 0 comments

Automotive

Downshifting an industry

by Executive Staff December 17, 2009

written by Executive Staff

Car sales in the Gulf dipped by an estimated 27 percent this year in the wake of the financial crisis, but Lebanon, like Syria, has had a second successive year of burgeoning sales, defying the tumultuous 16 months car manufacturers and dealers have faced in most of the world.

However, while growth in 2009 met and in certain cases exceeded 2008’s record year, the sector has not been immune to the global financial crisis. Dealers have had to adjust to restructuring at mother companies, American brands have had to handle their manufacturers’ brush with near bankruptcy, and marketing budgets have been constrained.

On top of this, there has been a surge in imports of used luxury and sport utility vehicles (SUV) from impacted markets in the United States, Europe and Japan, due to excessive inventories and dealership downsizing. Currently two used cars are sold for every one new car bought in Lebanon, up 10 percent from an estimated 60/40 split in 2008.

These used high-end vehicles foster the perception that the transportation of choice for the Lebanese is in the luxury range, whereas in terms of actual volumes of new cars sold it is the less flashy mid-range cars — the Nissan Sunnys, Renault Clios, and Hyundais — that account for the lion’s share of sales in the Lebanese market.

Dominating the sector is Rasamny Younis Motor Company (Rymco), dealer for Nissan, GMC and Infiniti, with 6,182 units sold as of October, the bulk in Nissan sales at 5,638 units. This is up 8.57 percent from the 5,193 Nissan units sold in the same period of 2008.

Last year, the car sector had an “exceptional year, the best year ever,” said Cesar Aoun, manager of the Chrysler Car Group of Chrysler, Jeep and Dodge, with the sector up 45 percent from 2007, increasing from 20,082 registered new units to 35,416 new units in 2008. As of October 2009, new car sales totaled 26,664 units, down by 2.48 percent on the October 2008 count of 27,341 units, according to the Association of Car Importers in Lebanon.

Last year set a new benchmark for the sector, said Fayez Rasamny, vice chairman of Rymco, adding that while 2009 may not be as strong a year, “it is a good indicator for the auto sector that the market has increased considerably.”

That new benchmark is now between 31,000-35,000 new units a year. But back in January, few dealers expected a successive year of strong sales, thinking that consumers would be wary about purchasing in the uncertain world financial climate and ongoing political turbulence of Lebanon.

“We started 2009 pretty weak and I don’t know what happened, but June, July and August were fantastic. We are projecting 2009 sales will be up 9 percent on 2008,” said Negib Debs, brand manager of Mercedes and Smart dealership T. Gargour & Fils.

BMW was also caught off guard, said Nagy Heneine, general manager of Bassoul-Heneine, dealer for BMW, Mini, Alfa Romeo, Dacia and Renault.

“Nobody expected the market to be as strong as it was,” he said.

Riding market fluctuations

While sales have defied expectations, Rasamny expects cumulative sales for 2009 will be “a bit less” than 2008. Profit-wise however, 2009 will not be as good as last year.

“The margin on sales has definitely deteriorated because of promotions and inventories,” Rasamny said. “Even if Lebanon has not been affected by the recession, consumers are well aware that they can bargain for prices and purchases. All companies have campaigned to liquidate stocks. Companies are really scared to have large inventories,” he added.

Dealerships have been offering a slew of incentives to entice customers, from low interest payments to subsidized interest, trade-ins, lotteries and assorted gifts. But it is loans from banks that have been crucial to keeping sales buoyant at a time when financial institutions elsewhere have reined in lending.

“At the beginning of the year banks were a bit cautious about lending, but from June to July onwards [it was] back to aggressive competitive offerings and it helped the sector not be affected by the financial crisis,” said Aoun.

The summer boom appears to have tided the sector over given the slow start to the year, with the fall months seeing a downturn in consumer purchasing.

“We started seeing from September onwards that the market was slowing down, like the crisis had hit Lebanon with some delay,” said Heneine. “October and November have been weak and did not meet sales expectations, but we’re confident we will hit 1,000 cars this year.”

It is sales to rental companies that have been the real boon for the sector, as firms had held off purchasing new cars on a mass scale after being stung in 2006 during the July war between Israel and Hizbullah, with rental companies having significantly expanded their fleets in the expectation of a bumper summer. The following year witnessed reduced demand for rentals, rising again in 2008 and this year. Bolstering demand was the legal requirement for rental companies to buy new cars every three years.

“Every year something happened [politically in the country], so rental companies didn’t buy until they had to,” said Heneine.

But such unexpected demand has presented problems for dealerships in regard to inventory, cagey about ordering too many in case there is insufficient demand, yet given the time lag for delivery, wanting to meet consumers immediate needs.

“It’s like juggling with fire,” said Debs. “You need a lady with a crystal ball because sometimes you hold onto stock too long, then suddenly in three months you’re empty and need more. The hardest thing to do is inventory.”

“We don’t have anything to hook onto and say, this is sustainable when you have 60 percent growth in one year – who would’ve expected that? And is this a new trend? We hope so,” he added.

A dime a dozen

The biggest struggle for new car importers has been the flood of used cars into the country, with used car dealers and individuals taking advantage of the glut of cheap, secondhand cars on sale in the US from Americans selling up and downsizing. This is in addition to the thousands of dealerships affected by forced closures, with GM eliminating up to 40 percent of its US dealers and Chrysler closing 789 dealerships this year.

“Any individual has the right to import cars from the US and sell them under their house, it’s a joke, and control is starting to be a joke, despite the “mechanique” [required road safety tests at authorized mechanics],” said Debs. “We are not only competing with used car dealers, but with doctors and lawyers who have friends in the US. When the euro went up, all used car dealers rushed to the US. Some dealers have so much stock there is no space in their parking lots, so there are cars for sale even out on the streets.”

Heneine said that used car sales have risen from 60 percent of the market to 70 percent.

“I don’t want a war with the used car dealers, but they’re waging a war on us,” he said.

Damaged goods

Dealers say that the used car sector needs to be better regulated, as it is not only affecting the sales of new cars, which pay higher taxes to the government, but it also results in inefficient vehicles entering the country, cars that would not be allowed on roads in other countries. One dealer highlighted this with an anecdote about an acquaintance that bought a used car and had the vehicle checked with a key reader, which can assess mileage.

“When we checked the key reader, we found that the car should have been put out of circulation,” he said. Other dealers related accounts of cars that were flooded during hurricanes in the US being on sale in Lebanon.

“There should be a government strategy to improve the quality of vehicles on the roads of Lebanon, and a correlation in duties between new and used cars,” said Aoun. “To change this, to have safer and more ecological cars, needs a whole strategy between ministers.”

“You can still import cars from 2001, and the majority come with high mileage that are changed here, or they are damaged and then fixed here,” he added. “I don’t understand how it’s open for everyone to import and compete with a registered company that employs people, pays taxes and has proper representation.”

“The government should apply a lot of laws, and be strict on the flow of cars, such as those from the Gulf as many people bring luxury cars, don’t pay customs or VAT and profit in the long term at the expense of dealers and the government,” he said.

Car importers have lobbied the government to bolster regulations, with scarce results.

“We will always try, but we didn’t succeed in the past,” said Rasamny. “If the tax on new vehicles was dropped by 5 percent, income for the government would go up by 50 percent. When you decrease taxation you promote sales of new cars and take out all the used crap, as used cars are not as environmentally friendly. What’s happening is the recycling of a whole industry,” he added.

A mixed forecast

Dealerships are upbeat about the year ahead, although they realize that sales may not reach the same levels as this year, due to inventory expansion in the rental car sector, as well as after effects from the financial crisis. Nonetheless, with new models being launched, dealerships are banking on new inventories to keep sales buoyant.

“We expect growth again in 2010 from new models, and 2011 even more volume due to new vehicles,” said Aoun. But with a new benchmark set for the sector in 2008 and 2009, any decrease in sales will be difficult for the sector to handle, particularly when reporting back to mother companies expecting such strong growth.

“At the beginning of 2008, we thought maybe we’ll reach 500 units, but we closed near 600. Now it is difficult to go back to these [lower] figures,” said Debs.

Rasamny expects a good year ahead, albeit with a need for cautious optimism.

“I think 2010 will be similar to 2009, but we need to increase margins, be smart about inventories and focus on after sales to sustain the market,” he said. “But if in 2009 we sell 32,000 units, it doesn’t mean 2010 will be the same, we need to be careful.”

December 17, 2009 0 comments

Tourism

Elie Marouni (Q&A)

by Executive Staff December 17, 2009

written by Executive Staff

Elie Marouni was appointed Lebanon’s minister of tourism in July 2008 and held the chair until the new cabinet was formed in November 2009. Executive sat with Marouni shortly before he left office in order to discuss the strategy that the ministry had adopted to promote tourism in Lebanon and the major issues and concerns of the tourism industry.

E What is the Ministry of Tourism’s marketing strategy to promote Lebanon?

We do this in several ways: first, by signing tourism cooperation agreements with other ministries of tourism or other responsible authorities. We sign agreements for tourism exchange and promotion. This year we signed 12 of these, the most important being with Spain, China, Mexico, Kuwait, Egypt and Jordan, among others.

Other than that, we are members of the Arab Tourism Organization, which aims to strengthen tourism between Arab countries, and the Lebanese Minister of Tourism (being myself at this time) was elected to be the president of the Arab Tourism Organization until 2011. We are also members of the World Tourism Organization, based in Madrid. This international and regional exposure is the first way.

Second, we have promotional movies about Lebanon that are broadcasted on international television channels and through embassies, and also through direct collaboration with the companies responsible for organizing incoming trips.

Last, we participate in international tourism exhibitions, in London, Berlin, and Moscow, as well as elsewhere around the world. We also organize exhibitions in Lebanon for all countries to have tourism stands. Next year the exhibition will be in April and a lot of Arab countries will be participating.

E What are the major obstacles facing the ministry?

Today, in a country like Lebanon, the economy depends heavily on income from tourism. And in a country where there is no oil and not enough agriculture and manufacturing, we need the tourism sector as well as the ministry to be well supported so that it can perform all its duties.

Unfortunately, the ministry of tourism has the smallest budget in the Lebanese government, and therefore the first problem it faces is a weak financial status. The other weakness is the lack of coordination between the different ministries, because today you can’t have tourism without roads, without electricity or water, and you can’t have tourism in a polluted environment. All of these need emergency solutions in Lebanon, in addition to problems we face in regards to some hotels and restaurants, which also need immediate solutions.

E What problems are there with hotels and restaurants? And what is the role of the tourism police?

With some restaurants, we had problems with price manipulation; they weren’t abiding by the prices on the menus. We also had problems with booking cancellations made without customers’ knowledge. Sometimes it is because [owners] are greedy and think one customer will pay more than another — therefore we also need more tourism police. Their role is to monitor prices and implement the decisions we make regarding the complaints that we receive, and also to monitor problems… Their role is to implement the decisions of the ministry. Now the number [of tourism police] is very low and the ministry’s abilities are very weak – if their number increases, we will be better able to do our duties.

E How much is the budget?

The budget does not surpass $6 million or $7 million a year, including wages.

E When we say that this country depends on tourism and services, why do you think that the budget is still so low?

Because there is a misperception that says we depend on the private sector, so let it do the promotional work. There is also the perception, from some authorities, that Lebanon is a tourism destination and that people will come with or without promotion. And that is wrong, because there are generations that know Lebanon but others don’t. And because of my own travels and conversations I’ve had, I realized that some people don’t know anything about Lebanon — therefore publicity becomes essential.

E Since the budget is that low, are you trying to work with the private sector?

We are collaborating with the private sector when it comes to festivals; we contribute to them financially despite the circumstances. We are contributing to the Baalbek festival, as well as those in Saida and Tripoli. We also contribute symbolically to small festivals in towns. We also make many promotional movies.

All of our work is with the private sector, because the ministry cannot, for example, open a restaurant, but it offers licenses and monitors, and all the things related to the revival of tourism.

E I’ve heard that there are not enough three-star hotels in Lebanon and other hotels are expensive – is this one of the reasons why Europeans are less keen to visit? Do you think that is true?

Yes it is very true, because those who come from the United States or Europe come for cultural reasons, and don’t look for five or six-star hotels, they look for cheaper and more affordable hotels. So we need a high number of two to three-star hotels in order to stir activity for the middle class. Now there is more awareness and some old two-star hotels are being fixed in order to absorb these people. We are also trying to secure some loans with the collaboration of banks. More than that my concentration was to develop balanced tourism so that it is not concentrated on the capital, but in all areas, especially in areas where we can showcase our natural beauty, monuments and religious places, which can attract a large amount of tourists.

E What kind of tourism is the most targeted? Is it mostly nightlife tourism?

No, that is not true. We have health tourism, and we have intellectual tourism. For example, this month there will be a gathering for Arab women writers that are coming to Lebanon, and a while ago we had the Francophone games, where 4,000 players came…and we have conference tourism. We also have sports and religious tourism, leisure tourism because some people travel simply to have a good time, and Lebanon is known for its hotels and restaurants, which are of a very high quality.

E Do you think we should concentrate more on cultural tourism?

We are observing millions on their way to see Jerash and Petra (in Jordan) and the Pyramids (in Egypt). Our historical tourism is a little bit weak, and we want to concentrate on the fact that we were able to take Lebanon’s Jeita Grotto to the final stage of the “Seven Wonders of the World” competition.

E Are there any other concerns that you would like to highlight?

I put forward a plan for Lebanon and called it ‘the visions for the manufacturing of tourism in Lebanon’, because in my view tourism is not a hobby anymore — today it is a whole basket of things, starting with the guest’s arrival at the airport, and extending to hotels, restaurants, means of transportation, and phone lines…all these should be secured.

I made my plan to accomplish balanced tourism development in the country and to include all these matters, and I submitted it to all the authorities and I will present it to the next minister in case he wants to follow it.

Also as a parliamentarian…I will follow up with the tourism committees to upgrade tourism regulations, because the problem is that tourism regulations are very old and obsolete and it is very important to upgrade them and to give incentives for investing in Lebanon.

A part of regulations refers to taxes and another part regards the bureaucratic process, which takes a very long time, so also we should ease these procedures in order to enhance tourism investments.

The ministry also needs to reinvigorate the labor force. We need new blood to enter the ministry and offer new ideas, because the ministry should present a beautiful picture of Lebanon and I think that the youth are the ones who can give that picture. The tourism ministry should be more highly regarded than it currently is due to the fact that it doesn’t contribute to the deficit in Lebanon but is in fact rather profitable, and helps to support the economy.

December 17, 2009 0 comments

Tourism

Ready to run

by Executive Staff December 17, 2009

written by Executive Staff

Ihab Kanawati General manager, Crowne Plaza Hotel

The most important thing in Lebanon is its natural beauty. That is a big advantage we should always remember. We are becoming a preferred destination and a safe haven for all business and leisure people. There is no reason to be afraid if our prices (room rates) exceed those of neighboring or other regional countries. We should also work on developing our advantages because if we are prepared to work hard and deliver exquisite service, there is nothing stopping us from climbing the ranks. At the moment, Gulf countries are the main source of tourists; however, we should open up to other markets like Europe, Australia, Japan…these are very big suppliers if we know how to tackle them. The private sector should also meet under the umbrella of the Ministry of Tourism, and not only to say Hello and Goodbye, but there should be an action plan, starting by pouring additional funds to advertise our country internationally and also creating new job opportunities to retain our talented human resources. The ministry should act upon this.

Paul Ariss President of Lebanon’s Restaurant Owners’ Association

The Beirut Central District is no longer an attraction for pubs, restaurants and cafes for locals. Only people who work downtown keep visiting the actual entities, and some tourists in the summer time. Nothing — nothing has been done to revive this area or to help the 104 restaurants that were operating there before 2007. Less than 30 remain and they hardly break even. Moreover, the decentralization of pubs, restaurants and cafes towards other parts of Beirut and Greater Beirut does not help the BCD recover.

Nather Auchi Vice president, Le Royal Hotel

*“There is no collaboration or support from the ministry”*

A couple of days ago, a delegation came from Germany. It was a group of photographers and TV reporters from the main tourism channel in Germany. They were doing a report about Lebanon to show the real image of this country. They were very impressed because they had always held the wrong impression about the country. We tried to bring them closer to the Ministry of Tourism in order to promote Lebanon, and it was hard for us to do so. There is no collaboration and support from the Ministry of Tourism. It is not a matter of money, but services for example. They are signing tourism agreements, but what are they and how will they affect the tourism industry? So there should be more collaboration between the ministry and the private sectors and it would have been better if there was backup from the ministry or from embassies abroad on this subject.

Sandro Saade Chief executive officer, Wild Discovery

*“We need to work on a solution to meet [all] budgets”*

To be able to attract a higher number of tourists, Lebanon needs to work on several issues among which is a public transportation solution. When tourists come to visit Lebanon, some of them can afford to pay on a weekly basis from $300 to $400 for taxis only and others cannot. Therefore, we need to work on a suitable solution to meet both the high and average budgets, a plus to the overall Lebanese tourism industry. The will is certainly there. There is also a large number of tourists who were planning to come to Lebanon this year; however, we believe that many of them did not because of the expensive image the country holds abroad. The ministry has put in great effort towards increasing the number of tourists and the target has been reached. Nevertheless, there is still a huge potential that we are missing out on from the Western countries.

Gordon Campbell Chairman, Campbell Gray Hotels

*“[Beirut] is the safest city in the world”*

Beirut is not a beautiful city, it is a big sprawling mix, it is beautiful, ugly, damaged, sexy, complicated, annoying, fascinating…all of the above. But beautiful it’s not, really. It is the safest city in the world: you can walk around at two in the morning and it is totally safe. I wouldn’t walk around London or Paris or New York in the morning without being very careful. So I am promoting that. But [foreign] people’s perceptions have to change. I think the driving is ghastly, horrible, and the police need to sort that out. You drive in Rome and it’s crazy, but no one is dying in Rome. Here they die. I had to drive off the road to save my life, and it’s not funny, that is the only thing I object to. The powers of the police need to be strong to say “stop it.”

Joseph Coubat Area vice president, Rotana Lebanon, Bahrain, Kuwait & Qatar

*“Travel still remains the internet’s largest business”*

Online booking provides hotels with a simple yet powerful way to sell their products online. All recently published statistics on Internet sales confirm that hotel bookings represent almost 50 percent of all Internet transactions worldwide, travel still remains the Internet’s largest business and it is set to grow even more. There is huge potential in this region for online technology and this sector will inevitably replace the more conventional methods of revenue generating communication and interaction with our guests. The region is catching up quickly and this is exactly why major online partners have now opened offices in the Middle East, as the potential is tremendous. In Lebanon this new trend is picking up as we are slowly seeing more bookings coming via online channels every day.

December 17, 2009 0 comments