The news struck first at the Jordan World Economic Forum: a consortium under leadership of Saad Hariri is creating Saraya Aqaba, a major new leisure project in the Gulf of Aqaba, Jordan’s Red Sea destination regarded as very promising for international recreational and aquatic tourism.

Ten years ago, the Aqaba region featured little more than 1,000 hotel rooms and an interesting topography and spectacular coral reefs nearby. Today, the area is focus of two huge tourism development zones with several large-scale projects each, and after visitor numbers to Jordan last year began rebounding from their 2002/2003 lows, hotels are hot properties.

Partners in Saraya Aqaba from the private sector are Hariri’s Saraya Jordan enterprise and the Arab Bank, teaming up with the kingdom’s Social Security Corporation and Aqaba Development Corporation on the public sector side. What made the news of Saraya Aqaba savory from an investment perspective was that the developers, besides putting up initial capital of $242 million, announced a $120 million private placement and appointed Jordanian investment bank Atlas Invest, a daughter of Arab Bank, as lead manager.  

According to Atlas Invest, Saraya Aqaba will indeed be a mega-project. Situated on a territory where a 100 meter stretch of coast line has been developed into a man-made lagoon with a 1.5 kilometer beach front, the project will comprise four five-star hotels and one six-star hotel with a combined 1,500 rooms plus commercial areas, conference and sports facilities. Built up area is projected at 648,000 m2 on a total land surface of 610,000 m2.

“The initial cost projection for the tourism complex is $620 million,” corporate finance expert Fares Hammami of Atlas Invest told Executive, while residential construction on the outskirts of the development would bring the total scope into the $1 billion range and be running on a fast track. While being constructed at the same time as two competing projects in Aqaba, “Saraya will be done within three years, faster than the others,” he said.    The commitment to fast execution of the project is reminiscent of Rafik Hariri’s breakthrough project in Taif in 1978, when he built the city’s first hotel in nine months.

But the existential question for investors in the project is of course if a tourism venture is rational, secure and rewarding from a financial angle. Conventional wisdom says that in the past, the construction of hotels and forays into new tourism ventures were the sole domain of hospitality sector experts who had the expertise and confidence to run such an enterprise in the often unpredictable business of attracting and serving foreign visitors. Investment banks thus are not all always eager to enter into tourism ventures. “It is a very special field, where the key criteria is revenue generation. This is totally different from financing real estate, which often is a one-time shot,” said Walid Mussallam, CEO of Beirut-based investment bank MECG.

Tourism is a volatile business, acknowledged Hammami and his asset management colleague Sami Naboulsi at Atlas Invest. To secure that the Saraya Aqaba project stands on sound fundamentals, they said Atlas Invest had it valuated by two independent consulting firms, one based in Jordan and one based in the UK.

“From an investment banking point of view, investing in tourism is capital-intensive and long-term. Real estate in Jordan is still among the cheapest in the region and this, plus the political stability and the country’s role as gateway to Iraq, attracts foreign investments,” added Naboulsi.

The Saraya Aqaba project is well in tune with the recent surge of huge tourism-related projects in the Arab countries. Within Dubai ‘s development pot that is boiling with projects under the motto, the bigger the better, tourism ventures such as Dubailand and mega-hotels make up huge chunks. The fever has also struck Qatar, which launched a $15 billion program for creating its tourism infrastructure.

Such moves in directing abundantly flowing oil revenue are definitely more promising for regional development than the shopping sprees which Arab capital undertook in the US and Europe during the first oil price boom. But that does not mean that the individual investment projects could not overheat.

“If you are creating a green-field (something out of nothing) destination, the biggest challenge is that you have to spend tons of money. It only works if you have government support and a critical mass,” said Naji Butros, Beirut-based partner in the international firm Colony Capital, which is engaged is several large tourism enterprises and projects from Sardinia to the US and the Far East.

Such investments need a long-term vision, while capital in this part of the world mostly is trading capital, with a limited horizon, Butros said. He cautioned that raising private equity and seeking an Initial Public Offering for a venture prior to it being up and running creates hype. “Investors are making money from the hype of a project. As disciplined institutional investors, we don’t evaluate these projects. After the hype there will always be a return to basics.”

According to Butros, investing in tourism projects, especially green-field projects, needs a long-term vision, large size, preparation through extensive independent studies, a loyal base of wealthy clients at the project, a clear view of the competition, and avoidance of hype.

Although it has not been caught by a wave of enthusiasm for over-sized investments, Lebanon has its share of both large-scale and smaller tourism investment projects, and tourism is by far the biggest point of attraction to regional and foreign capital givers, many of whom are pure financial investors and not hospitality operators.

Under the Investment Development Law 360, the Investment Development Authority of Lebanon (IDAL) has been offering its attractive package deal contracts since 2002 to investors with projects valued upwards of $50 million. According to article 17 in the law, package deal benefits can entail an income tax exemption for up to ten years, exemption from land registration fees, and up to 50% reduction of construction permit fees and fees related to hiring foreign employees.

The procedure of granting a package deal contract starts with presenting an application for the project to IDAL, which then reviews the proposed project under feasibility, environmental impact and job creation aspects. If the agency determines the proposal to be meeting the required criteria, the project is presented to the council of ministers after which, when approved there, it benefits from the incentives, in addition to further assistance from IDAL in dealing with Lebanon’s labyrinthine bureaucracy.

IDAL-administered package deals are available in six areas of economic activity, among which tourism projects have gained an outstanding role. “We have the mission of promoting the investment climate in Lebanon. Tourism has a great potential and it is the sector that is simplest for us to promote,” said Nabil Itani, IDAL chairman and general manager.   

After the $64 million Royal Hotel Resorts project of the investor group headed by Marwan Kheireddine was approved last month, the share of tourism projects climbed from 57 to 63% in IDAL’s statistics on successfully closed package deals, which means from the agency’s perspective that a project has received approval in the Council of Ministers. Among projects that have already been submitted and are currently in the pipeline for approval, an even higher 89% are classified as tourism deals.

This group of projects does not yet include the Sannine Zenith venture, but Itani said that he expected developer Tony Abou Rached to call on him at any moment. And since closed deals furthermore include 28 % [check] of “mixed projects” with a strong tourism component, the trend points in reality to over nine tenth of IDAL-supported investment arrangements in Lebanon as being in tourism, and continuing to be so.

A weakness of the current package deal structure is that many projects in metropolitan Beirut, with their high land costs, easily satisfy the requirement to be worth at least $50 million, whereas such a dimension often is not feasible for interesting projects in rural areas. Here, Itani said, “we need to develop lower criteria for attracting investment projects to regions within the north, south and the Bekaa, in order to achieve economically balanced development.” One region with predominant tourism potential where a program for improving of the investment climate is currently being finalized, is the Ibrahim river valley, he added.

While IDAL has an edge in assisting big developments in Lebanon, small and medium ventures in tourism have been supported by the loan guarantee program of the Kafalat corporation. Kafalat has been a success story in supporting Lebanon’s entrepreneurial invigoration and economic diversification through small and medium enterprises in tourism and other sectors.

The range of enterprises financed through Kafalat-guaranteed loans encompasses mostly restaurants, but also about four dozen small hotels and furnished apartment enterprises as well as some 15 tourism operators and service providers, Kafalat chairman Dr. Khater Abi Habib told Executive.

Counting 382 tourism-related companies under the wings of Kafalat, with a combined loan value of $45 million, Abi Khater said that the company was working on increasing the ceiling of loan guarantees it can provide from $200,000 to $400,000, albeit at a lower level of guarantee to the bank issuing the loan.

As the rate of loan defaults under the scheme had been exceptionally low, banks apparently are still too conservative in evaluating applications and lending to small enterprises, Abi Khater pointed out, which is an indicator that the financial company and its loan guarantee scheme is still going to be “needed for the foreseeable future.” 

It was a positive, not to mention mildly surprising sight late last month, when workers descended upon Beirut’s downtown pedestrian area and installed dividers to finally separate the outdoor seating areas of cafes and restaurants from the public space reserved for pedestrians and emergency vehicles. Positive because for the past four years, ever since the downtown started to take off as recreational and tourism attraction, each year had been worse than the previous in terms of the ruthless encroaching on vital public areas. Surprising, because some 15 months ago, top officials in the Beirut administration had stated emphatically that the barriers would be installed before the 2004 summer tourism season. But nothing happened.

Instead of moving quickly towards implementing measures that were recognized as clear necessities, Maarad, the area most affected, became embroiled in the matter of the walkway overlooking the Roman ruins. Here it seemed that final construction works requiring only a few days were not carried out because obstinate private sector players refused to commit themselves to obeying rules as demanded by the administration (until the heady days of the spring awakening, a typically Lebanese solution saw the walkway area used for accommodating restaurant guests).    

It is almost needless to say that the officials, however adamant in decrying the deterioration of the urban recreation quality of Maarad and adjacent areas, refused to speak on the record in spring of 2004 and thus could not be held accountable for not acting on what clearly needed to be done. In the meantime, some businesses continued to reap profits from the chaos in the downtown while, more honest operators struggled.

So it seemed that the notion of bringing administrative leadership to bear so that the public and private sectors cold sing from the same sheet was fanciful. Over the past three years, the ablest demonstration of successful cooperation that has seen actual application of policies have occurred (ironically, given the government’s puny financial muscle) in the area of supporting tourism projects through the activities of IDAL, subsidized loans and the Kafalat scheme. (see box on page xx)

And so, the most unguarded secret relating to tourism development in Lebanon is the dichotomy between the need for public sector policies and the absence of such policies. Although not allowing to be quoted on it, stakeholders from the private but also from within the public sector itself, talk regularly and extensively about the fact that the country is lacking a tourism strategy and plan for infrastructure creation, development and management of tourism resources. 

One set of issues is the implementation of everyday operational standards in the tourism industry. For instance, incredibly overdue are measures to tax, or otherwise reign in, those beach resort operations that were built sans permit during the war years and which illegally exploit the coastal public realm. At the same time, practical ways for developing public beaches and ridding the Lebanese coast of its untreated garbage mountains and inflows of liquid waste, are not to be found.

The restaurant trade, too, is yet to be effectively supervised. While it must be emphasized that as a rule, the better restaurants and hospitality enterprises of Beirut as well as many establishments in the provinces offer memorable experiences of cuisine and hospitality in general compliance with applicable regulations, a guest could last month still sit down at a downtown café or budget eatery and be served not only items that he never ordered (a fruit platter or a 1.5 liter bottle of water for one) but also a check where VAT was liberally added at the bottom of the bill – even as the menu stated specifically that the Value Added Tax was, as mandated by law, was already included in the price of every individual item.

It is astonishing that such an unlawful practice as “boosting” a bill by 25% should happen under the eyes of the authorities, but the same can be said about the lax implementation of existing standards of waste handling, hygiene and environmental behavior of restaurants, and the lack of adherence to building codes and requirements.

On the second and larger front of tourism development, coordination between the ministries involved in building tourism infrastructure is largely amiss, while the ministry of tourism continues to operate under budget conditions that force it to rely on the goodwill of private sector partners in order to embark on all initiatives. Besides the ongoing planning and coordination malaise that had been pronounced further by the national political crises of the past nine months, in he longer-term, Lebanon also lacks a national tourism development strategy concept of private sector initiatives through a clear set of selfless priorities.

How important policy making in tourism is for the evolution of leisure travel worldwide is illustrated by the World Tourism Organization’s global Code of Ethics in tourism. Formulated as guidelines to tourism stakeholders around the world, the code was adopted four years ago by the UN’s Economic and Social Council and endorsed by the UN General Assembly in late 2001. A World Committee on Tourism Ethics was instituted last year and in May 2005 conducted its first meeting actually examining specific complaints over violations against the code.

As it stands today, the code is an unwieldy document seeking to address major policy issues for sector stakeholders in wordy phrases under headlines reaching from “tourism’s contribution to mutual understanding and respect between peoples and societies” and being a “vehicle for individual and collective fulfillment”, to the rights of tourism entrepreneurs and employees and the obligations of tourists in visiting foreign countries. However, as a symptom of the growing alertness to global standards of behavior in the tourism culture, the efforts of the WTO underscore that governments have to take proactive roles in setting policies for tourism and respecting the huge economic importance of tourism in their politics.

In the Middle East, the latter recognition is a matter of its own urgency, and delicacy. Here, it is not only the de-facto instability in regional security but also the pro-forma war and state of non-peace that impedes tourism growth. As travel between Lebanon and Israel is officially neither permitted, directly nor indirectly, a very significant potential for international package tours to the historic and religious sites in the Near East remains blocked on political grounds.

This serves to remind that tourism is a key development issue in context of the greater Palestinian crisis. The tourism industry has been one of the few truly bright spots in development of the Palestinian economy until the outbreak of the second intifada. Studies have shown that the Palestinian tourism trade virtually crashed and suffered tremendous losses from the unrest following Ariel Sharon’s “visit” to the temple mount. Sadly ironic, researchers even found that Palestinian owners of tourism ventures in East Jerusalem faced the danger of losing their properties to Israeli banks during the crisis, because of defaulting loans. Only in the last year, first modest steps towards a recovery of, mostly religious, tourism brought some relief to parts of the Palestinian economy.

In purely economic terms, a resolution of the obstacles to travel of international tourists between Lebanon and its southern neighbor undoubtedly would boost receipts from visitors here. Main target groups for cultural travel to the holy and historic sites of Jerusalem, Bethlehem and the Sea of Galilee as part of larger Near East package tours would include educated European and Far Eastern visitors with attractive spending behavior.

For Lebanese hospitality enterprises, such tours would also contribute towards improving the seasonal distribution of business, since the main period for visiting the holy Christian sites of Jerusalem is between November and April. Finally, as impoverishment is recognized as one of the main factors for heightening the susceptibility to terrorist action in marginalized populations, the potential of tourism for bringing new economic growth to the Middle East might in the long term provide an not to be underestimated contribution to social stabilization, always on the precondition of increased security and political stability.    

There may be no short-term solution for the problem that regional politics and realities have been detrimental to Lebanon’s potential as high performer in hospitality and while domestic policies and politics in tourism and for tourism have been visibly unable to enhance the activity in impressive ways, it may be best to take consolation in tender mercies. While it can take an extra year to implement a policy decision for installing a bunch of decorative dividers in the downtown, sensible public sector measures evidently can still come about; and late is much better than never.

Advocates of rural development allude often to the large number of micro-climates that allow for specialty produce to be grown here easily in a larger range than in most other countries. In a nutshell, Lebanon is a small country of huge variety.

This is true not only for raising fruits and vegetables. Culturally, historically, climatically and in terms of geography, Lebanon has both been blessed with and aggregated a diverse wealth. Some other countries can match this portfolio of riches – but it is no hyperbole to say that not a single other country will do so in such condensed a space and, consequently, in the same intensity. This constitutes Lebanon’s uniqueness, and its selling point.

Said characteristics also define the possibilities and limitations for developing Lebanon’s tourism profile. Even as ventures such as the Sannine Zenith development have the makings to become green-field destinations with their own clientele, such undertakings will not put the country on the same footing as Switzerland or Tyrol and a host of other mountain vacation destinations. Plus, Lebanon has scarcely room to accommodate one mega-sized Alpine recreation development. And while the coast sports an also this year increasing number of attractive resorts, the country on the whole would be hard-pressed to create an image of a beach environment able to rival that of the leading Mediterranean aquatic vacation destinations.

Thus, while mountain and beach resorts have reached improvements in their appeal and quality and may still go much farther in both regards, they appear unsuitable for creating mass destinations and thus define the tourism brand of Lebanon in the way of one or two dominant recreational activities, such as sunbathing on Ibiza, gambling in Vegas or mountain climbing in Nepal.

So what is to do where small size and high density are inescapable parameters in operating the economy? If modern tourism can be regarded as the creation of destinations, the avenues for achieving this here then lie in the utilization of existing natural and cultural resources in their diversity. The question to ponder is whether Lebanon can optimize its offer of diversity and become perceived as a boutique tourism nation.

In modern hospitality, the term boutique was adopted by hotels at the beginning of the 1980s as a mark of new distinction. Where the tiered classifications of hotels by basic criteria had lost their differentiation capacity, fine small hotels since then have resorted to the appellation “boutique” to set themselves apart from both the cheaper and the larger competition. Other avantgarde classifications in the upscale hotel industry segment were lifestyle hotels, design hotels and a whole array of more narrowly defined sub-categories.

While the term boutique hotel comes with a degree of imprecision, three things are essential for a hotel to be accepted as such: a (relatively) small size, a luxurious setting, and superb service. Tied into the concept of travel as an individual experience with addictive qualities, the boutique concept is also often understood to refer to the individual character of each room and the specificity of every hospitality experience as inimitable. 

Here Lebanon may have its opening. It fits the ticket of being boutique as a whole: it is small, the overall inclination of its hospitality industry is towards luxury (even while the country’s socio-economic reality is often not), and the culture is one of astounding, welcoming hospitability (even there where service details have not been perfected).

Hospitality and tourism experts are in agreement that the country moreover has an underused collection of niche attractions. The aspects are there and can be easily accessed in their entire variety: besides beach and mountain, immersion in rural life, cultural discovery, ecological adventure, religious exploration, and wellness travel have untapped potentials, just as do shopping and nightlife, business and conferencing travel. 

Whereas Lebanon is still far from optimizing those niches, one notable effort to market Lebanon’s diversity of rural, nature, culinary and heritage destinations saw a beginning last year with the Discover Lebanon program, an initiative funded by USAID and carried out by international consultants SRI with support from the ministry of tourism. According to SRI director Jim Billings, the project has sustained its momentum well, despite a slowdown in the spring as part of the collective national shock of the Hariri assassination and subsequent events.

Combining new and often innovative tour offerings from several specialized operators into a handy catalogue, Discover Lebanon is this summer in its third season. Billings, who says that tourism is one of the few possibilities for economic growth in rural Lebanon, anticipates that the program will receive continued funding after the expiration of the current grant in November of this year.

The program has been devised under a long-term approach, meaning that its first aims were to entice citizens and residents of Lebanon to attractions of the country that were practically unknown to them. In the course of evolving further, the now ongoing formation and intensification of operator capacities and the creation of locations and activities could very well lead to formulating a new appeal for Lebanon as target offering a multi-faceted bouquet of highly diverse vacation options in a uniquely intimate space. 

The idea of shaping an entire new destination identity here – thus far, no country seems to have ever occupied the “boutique tourism nation” niche and label – might be further supported by the fact some hotels and resort enterprises here have already succeeded in establishing their individual destination niches. Examples for ventures that set themselves apart range from the Moevenpick Resort on Beirut’s Raouche coastline and the city’s successful boutique hotels to some of the ski and sports resorts, with an equal or larger number of such ventures giving the impression that they also could achieve such status. 

The range of potentials continues further into both commercial and cultural attractions. Shopping and nightlife and urban experiences have all been proven as tourism niches but, with the possible exception of the clubbing and nightlife scene scoring major points in attracting many regional visitors to Lebanon, are all much more potential than exploited today. As special example for the untapped diversity of Lebanon as international destination can serve that the country has strong appeal in the opposing realms of nightlife and religious tourism.

With communities representing the two large branches of Islam, several Christian confessions and the Druze faith, Lebanon offers a natural setting to attract both pilgrims and persons who travel to learn about the world’s many-colored religious traditions.

Various communities in Lebanon have increased efforts to promote religious tourism and offer visitors in convents and retreat centers alternative accommodations to the country’s hotels. Thanks to an active dialogue culture among representatives of the country’s faiths, inter-religious youth encounters and summer camps have been established. Advocates of Lebanon’s potential for spiritual tourism do point to growth in the numbers of people who journey to study religions at their historic roots. The ministry of tourism seeks to promote it and some among the active tourism developers emphasize the potential of religious tourism and plan to incorporate it into projects.

Within the various approaches to being a boutique location or lifestyle destination, an all-important factor is that the visitor demands a unique experience of genuine hospitality. The amazing fact about Lebanon is that with all its shortcomings in tourism infrastructure, damages from wrong planning, absent planning, incompetence, sleuth and corruption in public domain and environmental degradation, pollution, insane construction on account of big and small private sector players, is that the country has not only the small size and high diversity but also, despite all the myriad testimonials to sheer ignorance and selfishness, still has the hospitality that could make it a boutique nation.

(BOX)

Taking it big

The latest reality check on the nation’s prospects for developing a new niche, namely as conference destination, could be provided in the next few years by the Habtoor Grand Hotel Convention Center and Spa, which is in the final stages of completion as this issue of Executive goes to print. The multi-million dollar facilities of the already operating, spanking new convention center are infinitely larger than domestic demand can fill.

Offering 2,300 square meters of luxurious and high-tech event space in the main Emirates Hall alone, the center can comfortably accommodate 3,000 persons in a single setting. The hall is easily among the largest such facilities in a triangle between Algiers, Dubai and Istanbul.

But its real selling point is not mere size. With its combination of top-end event attributes – a ceiling height of 10 meters in the hall, an LCD-projection screen measuring 5.8 by 5.8 meters, simultaneous translation equipment for six languages, and 400 attached hotel rooms and suites provide the hard evidence, not to mention the air of opulence permeating the concept from every chandelier in the hall up through the hotel tower to the (two) 1,100 sqm pent house suites – this event location currently seeks its equal in the entire Middle East, and the Mediterranean. 

The Habtoor Grand has aspects that appeal primarily to the local market, such as its extensive spa, and to the leisure visitor who between the two Habtoor properties in Beirut and the Habtoorland theme park in nearby Jamhour could revel here in a self-contained cosmos. “It’s a world of its own,” the group’s Lebanon PR manager, Rita Massaad, is fond of saying.

Mainstay of the enterprise, however, will have to be the conferencing and banqueting business. Massaad could not specify how much of the entire Habtoor investment into the new hotel complex, totaling over $300 million according to earlier reports, went exactly into the convention center. It is self-explanatory that such an investment, where alone the movable dividers in the Emirates Hall cost $1.7 million, has to draw on a large market. Thus the regional promotion of the convention center to major event organizers was begun already in summer of 2004 and the first bookings were taken nine months ago. The coming 12 months will see a campaign to build awareness first among corporate customers in Lebanon and then in the Middle East and Europe, Massaad said.

Besides conferences, trade events and corporate exhibitions, the wedding events market is important for the operation, more specifically the market for oriental dream weddings of the most lavish kind. “Our targets are Arabs and weddings from outside,” said Kamal Sader, director of banqueting and conventions at the Habtoor Grand. The hotel invited important wedding organizers from the region to inspect its facilities and the first large wedding was celebrated in the Emirates Hall last month.

That the convention center is outsized for local needs is one reason why it has to bank on regional business. Even with the Lebanese love for fairytale weddings and gatherings including every last relative, not every nuptial celebration could aspire to assemble the minimum of 450 guests required as guaranteed attendance for staging an event in half of Emirates Hall.

Another factor is the associated price tag for an event, naturally. According to Sader, the absolute bottom range of the Habtoor Grand’s menu selection for either conference or wedding is $50 per person in guaranteed consumption, meaning that for dining and dancing the wedding night away on the full floor of Emirates Hall, one has to calculate some $55,000, bare minimum. Any organization staging an event at the site equally has to allow at least $27,000 per day of conferencing when using only half of the hall. Hotel room accommodations for event participants on top of that do not come cheap at the Habtoor Grand.

Having positioned itself in the global upper class of event hotels, the Habtoor Grand has a clear mandate and sustainability requirement for further elevating Beirut’s status as conferencing address, to a premier location for the entire Middle Eastern and Mediterranean realms. Since the late 90s and starting with the reopening of the Phoenicia, the city’s luxury hotels could record growth in the international conferencing business. This was not in a small part due to the work of the nation’s best-known figure, late Prime Minister Rafik Hariri, who helped bring the Arab Summit and the Francophonie conference to Lebanon.

However, it cannot be overlooked that the past six, seven years were an uphill battle for attracting conferences to Lebanon. The francophone countries were not the only aspirants for a Beirut meeting to postpone their gathering here, and both political and security obstacles still mar the outlook for bringing substantial events here on what would have to be practically a weekly basis, in order to fill a site such as the Emirates Hall. On the plus side, the Habtoor Grand is a clear indicator how much Lebanon could benefit from a role as Euro-Arab, Middle Eastern and international event platform. With its operation going full force this month, the hotel, convention center, spa, and shopping mall of the complex will provide direct employment and contractual work to over 1,000 women and men.    

Optimism has cult status among Lebanese tourism professionals. Having suffered blow after blow over decades, the sector’s seasoned practitioners today display a measure of immunity to bad news and business downturns.  But you look at the numbers and wonder if quiet weeping or the occasional liberating scream of frustration might not be justified.

According to the statistics published by the ministry of tourism, the numbers of arriving visitors in the first five months of the year registered at 301,446, a 19% drop from 372,689 in the same period last year. The month of May showed no difference from the overall downward trend, as it saw arrivals fall by 21% over May 2004, from 85,133 to 67,026 incoming tourists.

This immediate picture is not set to improve for June, according to managers at international hotels. Although events such as the Arab Economic Forum, the Operation and Maintenance Conference, and hospitality show Horeca brought in coveted business travelers and boosted occupancy rates for their durations at some properties to above 75%, on some other days in June, a 5-star hotel might have had to get by on 25% occupancy.

Extrapolating the performance of the tourism sector for the first six months of 2005, it seems wholly improbable that the half-year visitor count would climb above 400,000 arrivals. These underwhelming figures turn gloomier by another shade if they are gauged against predictions.

A year ago, when the summer was shaping into a record season among the post-conflict years, the ministry of tourism had formulated great expectations: Lebanon could anticipate visitor numbers to grow by 20 percent on annual basis until 2010, was declared by both then minister of tourism Ali Abdullah and the ministry’s director general, Nada Sardouk.

The hopes were higher than the predictions of the World Tourism Organization (WTO), which several years ago had issued a 9% annual growth projection for Lebanon’s inbound tourism until the year 2010. But whether one draws upon the ministry’s predictions or those of the WTO, the discrepancy between what 12 months ago was a reasonable expectation of 550,000 to 600,000 tourists for the first half of 2005 (based on the half million visitors in the same period last year), and what can be realistically expected today, comes out as a gap of 150,000 to 200,000 visitors who otherwise would have enjoyed Lebanon and spent very respectable amounts of cash.

This translates into a staggering combined damage of direct losses and unrealized revenue for everyone, the fiscal authorities (losing millions from VAT that didn’t happen and visa that didn’t get issued), hospitality enterprises, retailers, transportation and other services providers, and the economy at large.

In addition to these difficulties, the political storms of the first half year impeded the ministry of tourism’s maneuvering capability just as much as other ministries and perhaps even more than some. In what should have been the game of pitching for Lebanon as 2005 destination, a new tourism minister had to step up to the plate every couple of weeks, while the ministry’s bases for promoting the country were anything but loaded. 

Already perennially under-budgeted, the ministry’s financial shortage apparently became so acute during this year’s political turmoil period that funds for all but the most elementary activities dried up. Thus there was no way that the ministry could have launched a rapid initiative to save the main tourism season and reassure the country’s clientele of Gulf Arabs that it was safe to come to Beirut and remind them of the things they cherish about vacationing in Lebanon.

In this context, it becomes easily explicable that a gathering of private sector companies took it upon themselves to create an ad-hoc campaign last month in a concerted effort to entice Gulf tourists to return to Lebanon for the summer. The “Sayf Lubnan” campaign was launched in mid-June by fashion retailers Aishti, confectionary specialist Patchi, retailers ABC mall, Bank Audi-Saradar Group, Groupe Mediterranee, the InterContinental Phoenicia Hotel, and national carrier, Middle East Airlines.

Implemented between June 14 and June 30, the Sayf Lubnan campaign focused entirely on promotion of Lebanon in the Gulf markets and Jordan, aiming “to gain back the destination as summer resort to Arab people who may be scared to come,” said Carol Hanna, group account director at the advertising agency HC Leo Burnett, who handled the campaign. Using a mix of print, outdoor, radio and television ads on LBC Sat and Future Sat, Sayf Lubnan communicated messages of partying on the beach, enjoying the mountains, relishing good food, and nightlife. 

The concerted efforts of the seven firms behind the campaigns were driven by the realization that a well-timed advertising push might swing decisions of Arab holiday makers in the last minute towards spending the summer in Lebanon, explained Maya Maatalani, marketing manager at Aishti. That’s why conducting the campaign before the end of June was crucial, she said, “in July it could be too late.”

While planning to provide additional incentives in further promotion of the summer season, participating companies had not decided on the exact nature of their offerings by the time the campaign started, added Maatalani who emphasized that Aishti and other firms contributing to the campaign has been affected by the downturn in tourism over the past few months, but not in a threatening way.

All seven companies put money into a joint basked for financing of the campaign; and additional in-kind contribution of television airtime reportedly came from the Choueiri Group and through the support of Saad Hariri. Singer Guy Manoukian donated the tune representing the campaign on the radio, “summer is back in Lebanon.”

Given the predilection of regional vacationers to take their holiday decisions in the last minute, the results of the Sayf Lubnan campaign will only become visible between mid July and the end of August. In looking into the second half of 2005, and beyond, executives at some of Lebanon’s top hotels voiced a mixture of temperate expectations and very substantial long-term optimism.

“2004/2005 was perfect for us until February 14. Compared to some colleagues who faced much stronger problems, we didn’t lose money this year, but this summer will not be the same [as last year],” said Michel Perret, general manager of the Beirut Mövenpick Hotel & Resort in Raouche.

Standing at 50%, the hotel’s reservations for July were 30% less than at the same time in 2004, and “a little less for August” but with a positive outlook, Perret said when talking to Executive in mid-June.  “I forecast 90% occupancy for August at almost the same room rates,” he specified, “assuming that two weeks post the elections nothing bad happens. The diaspora and the flat owners will all check in.”

The strength of the Mövenpick in weathering the crisis was based in part on its location, away from the direct 2/14 damage zone, and on having the advantage of having been repositioned under Perret’s leadership as city hotel with strong conference and banqueting activities besides its resort facilities and marina. But the operation also benefited from succeeding in immediate crisis response following the Hariri assassination, through implementing a Profit Protection Plan (PPP).

At the LeVendome InterContinental, one of the hotels hit very hard in February, management and staff by last month had advanced the recovery of business to a comparable situation. “What we have on the books today in reservations amounts to 60% of what we had in the same period last year, but we are expecting a heavier last-minute booking pace,” general manager Josef Coubat told Executive. The hotel, which had suffered operating losses for four months, was returning into the black figures in June.

In Coubat’s estimation, the summer will be moderate. For bringing results really up, “we count a lot on the year-end,” he said, referring to the holiday season in the last quarter of 2005 and the start of 2006. Commencing in early October with the fasting month of Ramadan, the season’s well-spaced chain of religious and social highlights this year has its first peak with Eid al Fitr in early November, followed on the foot by the Christmas season, the New Year, and topped off by Eid Al Adha around January 10, 2006. 

Addressing the extended future, both managers were emphatic about Lebanon’s potential as destination. Lebanon could use “its European style of life in an Arab country as unique selling point” in attracting visitors. It’s a perfect niche destination,” said Perret.

 “The Lebanese love to go out and are hospitable to foreigners, that is what makes this country different,” said Coubat, “it has a big potential market and we are still trying to make it happen.”

How much could tourism contribute to the Lebanese economy? Another international sector expert made it clear. “It is still not yet recognized how important tourism is for the Lebanese economy. The government treats tourism as a sideshow, while the economy really is tourism,” said Jim Billings, Lebanon director for international consultants SRI. With funding from USAID, his team carries out programs in support of economic development in Lebanon, specifically in the realms of tourism, agriculture and information technology.

It is a curious thing that foreigners living in Lebanon, as well as Lebanese returnees to the country with international experience, often seem to sense the country’s tourism charms with intensity and positive infatuation, expressing this in ways that sometimes exceed the insights of life-long native Lebanon dwellers into the country’s huge economic tourism potential. 

But luckily, there are those, Lebanese and non-Lebanese, who can see the country for what it could be and, more importantly, put their money where their heart is. These include investors and proprietors of tourism ventures, large, medium and small. It is  reassuring for the hospitality future that the rate of business failures in the sector over the last four months apparently did not increase dramatically and remained within the expectable parameters of bankruptcies.

At the Kafalat corporation, which guarantees loans to small and medium enterprises, chairman and general manager Khater Abi Habib observed only one request from a company in the tourism industry to have its loan rescheduled in light of the recent crisis. Both smaller hotels and restaurants working with Kafalat-guaranteed loans would have suffered from the crisis but might depend more on the internal economy than on inflows of foreign visitors and find time to recover from now on. “I anticipate that the ones with losses of revenue will be offered a period of four to six months where we will reduce their payments by one quarter to one third, to get their finances back in order,” he said.

Highly encouraging for the tourism prospects of Lebanon are various further news of the continued professionalization and growth of tourism operations. New investments have been implemented during the past quarter, from the doubling of capacities at the Edde Sands resort to the completion of the Habtoor Grand Hotel, Convention Center and Spa, where notwithstanding several concept adjustments such as changing its name away from the original Metropolitian City Center, construction pushed ahead at full speed this spring and operations are scheduled to be fully on stream within this month. And as hitherto largest tourism-related project to apply for and be granted package deal support through the Investment Development Authority of Lebanon (IDAL), the Landmark project in the downtown has been provided with this contract at the end of May.

Moreover, IDAL chairman and general manager Nabil Itani disclosed to Executive that beyond tourism projects that have already received contracts or applied for them with IDAL, several significant seaside projects are in preliminary stages of planning, including resorts in Jiyyeh and Damour to the south of Beirut and a $90 million project for a 1.3 kilometer spanning beach resort with marina in Tabarja north of the capital, and a major resort projects in the Bcharri Cedars region is pending with investors based in France who envision to build there a resort that allows for summer skiing and includes four 5-star hotels.      

But as it is self-explanatory that a new development project is automatically a great and beneficial project, the hotel executives investing their careers into the country also were not shy to point out that from the perspective of its attractiveness in tourism, Lebanon today is a very mixed bag of good and bad, with a tremendous need for change.

“As public and private sector, we didn’t understand that the heritage is every single building that we can preserve and make shine within this city. The last 30 years were a disaster [and] I don’t see anyone today fighting for this, which is our competitive edge,” said Coubat. He leaned back. “The beauty of the city is our guarantee for the future. We have a beautiful country but no preservation, and the ugliest coast ever. I am frustrated,” he sighed. “We need something to sell.”

Lambasting the same problems of pollution and degradation of Lebanon, Perret exclaimed, “It is not acceptable! The politicians should agree to clean up this country.” He further cautioned that Lebanon should not try selling itself down-market, saying, “Lebanon will not be a mass destination. We should not go the way of competing with Egypt as mass destination.”

Managers of several of Lebanon’s international hotels actually have recently started to explore possibilities of forming a new NGO in support of developing tourism in Lebanon. As the head of an informal club of managers at top hotels, Jean Baptiste Pigeon, general manager of the Crowne Plaza Hotel in Hamra is spearheading the initiative. “Our approach is that based on the strength of our companies, we want to be an added support to whatever public initiative can take place,” he told Executive.

At the same time as currently inquiring with lawyers about the establishment of an NGO under Lebanese law, the group has started working on a tender document seeking offers from international marketing companies for one, three and five year concepts in marketing the destination Lebanon. If the NGO plan turns reality, the organization would aim for a wider membership of hotels and seek to collect funds from annual membership fees and contributions.

“There is no point to ask the government for money,” Pigeon said, giving as reason for the initiative, “Lebanon has so much to offer, a lot of potential. It is a waste to see that this has not been exploited.”