Overview

The regional health tourism market is worth an estimated $2.5 billion. The current market leader is Jordan, which receives a steady stream of patients, mainly from poorer Arab countries, such as Yemen, Sudan and Egypt. Lebanon has been working hard to position itself to attract high net worth individuals and, since 9/11, has been welcoming an increasing number of Gulf Arabs as hospitals, health and beauty clinics see the numbers of foreign admissions triple in the traditional summer season. Currently, the country attracts en estimated 25,000 foreign nationals who spend anything between $1,000 for a nose job and $25,000 for heart surgery, creating a market worth between $125 million and $250 million.

While, Lebanon’s highly developed medical sector targets mainly fellow Arab countries, there is long term objective to lure European and North America health tourists as health care and insurance costs in those in those parts of the world continue to rise. Lebanon also has the – so far largely untapped – potential of promoting its sea and mountain climate as a health, relaxation and recuperative destination.  It speaks for itself however, that attracting any kind of tourism into the country depends on a healthy political situation.

Definition

In the strictest sense, health tourism can be defined as travel abroad to obtain medical assistance, which in turn can be divided into two categories: essential and non-essential – i.e., open heart surgery or an organ transplant versus dentistry and/or plastic surgery as well as medical check-ups.

In other words, one doesn’t have to be sick to be regarded as a health tourist. Mary Tabacchi, a dietician and teacher at the Cornell’s University School for Health Management, defines health tourism as “any kind of travel to make yourself or a member of the family healthier.” In that sense, health tourism is not just about being cured, but also about preventing possible future illnesses. In fact, the lion share of the global health tourism market is made up of healthy people traveling to spas, meditation centers and fresh mountain air climates.

American websites, such as mindbodytravel.com and healthytravelnet.com, offer among other holidays an aromatherapy retreat in the French Provence, herbal health journeys to the Amazon, Ayurvedic diet trips to India and “a sacred woman’s tour” to Bali, where with lots of yoga and meditation you will be able “to connect to your inner woman.”

Brief history

Although health tourism may have a new age ring, it is by no means a new phenomenon. The ancient Egyptians would travel to the scared oasis of Siwa, just as people living along Lebanon’s coast would travel to take a bath in the temple of Eshmun near Saida. Bath in England and Baden-Baden in Germany have been famous for their thermal springs and spas since Roman times. Countries like Lebanon in the Middle East or Switzerland in Europe, both with alpine settings, have long attracted people with breathing problems.

Why Travel?

First, traveling for healthcare can be a result of a lack of professional care, equipment or expertise in the country of origin. In the Arab world, this is the case in countries such as Yemen and Sudan, both characterized by an underdeveloped medical infrastructure. In richer Gulf countries like Saudi Arabia, it is not a lack of equipment that makes people travel to the United States, France or Lebanon, but a lack of topnotch doctors.

Price is another factor that causes health tourism, which is why significant numbers of Canadians and Americans seek medical help in Cuba (see box), which offers state-of-the-art medical equipment and knowledge at a fraction of the price. The same is true for many European countries where the cost of medical care and treatment increases each year, making former communist countries like Hungary, Poland and the Czech Republic attractive destinations. Britain’s The Daily Express newspaper reported that a cataract removal costs $4,500 in Britain, $2,250 in France and $345 in India. In Lebanon, it costs $900.

Lebanon and the region

There is no doubt that Lebanon has the potential and capacity to become the region’s leading health center. The country has over 10,000 beds divided over 161 general hospitals and seven university hospitals, most of which are internationally accredited. A direct result of the civil war, in which each faction and confession built its own hospitals and clinics, the country is generally regarded as having an oversupply of beds. What’s more, most hospitals have state-of-the-art equipment with a lower patient ratio than many of the developed western countries. Lebanon has as many open heart surgery facilities, catheterization and lithotripsy centers as Germany and (perhaps even more than) the United States.

Since the oil boom in the early 1970s however, Saudi Arabia and the Gulf States have invested greatly in their own medical infrastructure, which includes top institutions with the latest equipment, such as the King Fahd Hospital in Riyadh. Jordan is currently the main recipient of Arab health tourists, with the bulk consisting of the some 80,000 Yemenis that seek medical assistance there every year. That part of the sector alone is worth an estimated some $350 million annually.

Last July, Lebanon signed an agreement with the Yemeni government to fly at least part of the health tourists to Lebanese hospitals. However, most experts agree that Lebanon’s competitive edge is not just its infrastructure and equipment, but also its wealth of human resources. The country boasts over 10,000 doctors, most of which are specialists. Some 37% of Lebanon’s doctors graduated from universities in Europe, varying from Moscow to Paris, and 11% from universities in America.

Since 9/11, Lebanon has been receiving an increasing number of Arab patients, who previously mainly traveled to top hospitals in the US. As a result of the general change in political atmosphere in the country as well as the hampering visa process, most Arab health tourists now prefer to come to Lebanon for everything from general check ups and plastic surgery to more complex procedures.

Seeing the potential of Lebanon as a health tourist destination, many projects have been underway to accommodate prospective patients. The newly established Beirut Government University Hospital includes a 50-room hotel for patients and their families, and the soon-to-open 105-bed Clemenceau Medical Center, which is affiliated with the American John Hopkins hospital, especially targets foreign nationals.

The AUH

Established in 1867, the American University Hospital is among the most respected institutions in the country. According to its director, John Rhoder, the Medical Center receives an average of 300 admissions a week, 20 to 30 of which are “foreigners,” mainly Syrians. In the summer, however, the number of genuine foreign admissions doubles, with most patients coming from the Gulf states – mainly, Saudi Arabia – constituting the majority of the health tourism market.

According to Rhoder, people do shop around while trying to find the best surgery for the best price, and even try to bargain down prices. In that sense, it’s a business like any other – not surprisingly, the price of a heart surgery varies between $6,000 in one of the less established medical facilities to some $20,000 in the country’s most well-known institutions.    

Following a well-established American trend, the AUH last year opened the Executive Health and Travel Center (EHTC), which offers a health package specially tailored for executives, top managers and family members from Lebanon and the region. The two-day-program offers a personalized head-to-toe medical examination and lifestyle assessment to prevent illnesses. The patient or client stays in a special hotel-like suite in a separate wing of the general hospital. Depending on the package, prices vary from $1,500 to $4,300. Upon request, the EHTC can also arrange for airline tickets, hotel reservations and even a leisure program.

Plastic surgery

The bulk of foreign health tourists flock to Lebanon to have plastic surgery or other corrective procedures. In the summers of 2004 and 2003, numbers doubled and even tripled, reaching an estimated total of some 4,000 patients. In the past decade alone, the country has seen the number of plastic surgeons rise from less than a dozen to over 60.

One of the main bonuses of coming to Lebanon for elective surgery is, of course, the cheaper prices. In Saudi Arabia and the other Gulf states, plastic surgery procedures on average are double the price in Lebanon. A nose job in Lebanon costs between $600 and $1,000, whereas in Riyadh it costs $2,500. Other than the price incentive, privacy is another factor that appeals to health tourists, because generally, people do not want anyone to know they have had corrective surgery.

Marketing

As is the case in Europe, Lebanon is not allowed to advertise medical services. Marketing is done by word of mouth and follows the traditional path of PR through medical conferences and publications. However, the ethical climate is slowly changing. The Clemenceau Medical Center is currently working with Saatchi & Saatchi on an advertisement campaign for the Arab world. The final slogan has not been determined yet, but its theme will be something along the lines of, ‘Why travel thousands of kilometers if you can have the best medical care in Beirut?’ Some other hospitals and plastic surgeons have produced brochures and travel packages, which include visa, hotel stay and surgery for an all-in-one price.

An important role is played by K&M International Health Tourism (KMIHT) based in Hazmieh, which, as the name suggests, promotes Lebanon as a medical care and health destination. KMI is supported by all of the country’s medical orders, as well as the Ministry of Health, which according to owner Khalil Malaeb helps in “opening doors.”

KMI regularly travels alongside ministerial and trade delegations all over the region, such as Yemen. Apart from promoting Lebanon as a health destination, KMIHT operates as a travel agency, establishing alliances with travel agencies in Dubai, Kuwait and Yemen, offering all-inclusive packages including visa, plane ticket, hotel stay and surgery.

Malaeb prides himself on good contacts throughout Lebanon’s medical sector. Who he sends where depends on what the patient can afford and on the medical expertise of the hospital. For example, a bone marrow transplant patient would be sent to Al Makased Hospital, a brain surgery patient to AUH, a hip transplant to Bhannes, AUH or Hotel Dieu, while for a heart surgery patient, there are so many choices available that the budget is the deciding factor.

Box: Maradona & Cuba

Cuba may be regarded as a poor country according to income per capita, yet surprisingly it boasts one of the most developed medical industries in the world. Education, science and health were key themes in developing the country after the revolution in 1959. Though under a strict US embargo, Cuba exported pharmaceuticals, vaccines and biotechnology worth $250 million in 2002 alone.

What’s more, it receives up to 10,000 tourists a year who want to profit from high quality medical care for a relatively low price. People travel to the Caribbean island for a core of medical treatment facilities, yet especially for eye operations, skin treatments and its Multiple Sclerosis and Parkinson’s disease centers, as well as its drug and alcohol addiction recovery programs, which most recently had Diego Maradona as its most famous client. Most patients come from Latin America, which is characterized by an underdeveloped medical infrastructure, while ever-increasing numbers come from the US, Canada and Europe to escape towering medical bills.

Spirits

The Lebanese drink approximately 3.6 million bottles of spirits every year, roughly one liter per person. Dominating the $40 million market with an estimated 43% share is whisky, with 280,000 cases imported into the country in 2004. However, vodka has steadily been gaining ground, growing by an estimated 4% to 5% over the last five years. In 2004, some 33,000 cases were imported into the country, although industry insiders assess this number to be closer to 40,000.

“Lebanon is following a global trend, which has seen increased consumption of wine and vodka,” said Nagi Hmouda, business manager with KFF Food & Beverage, whose brand, Absolute, has witnessed a 25% increase in sales in recent years. “Like RTD [beverages] and beer, vodka is a great entry point to the alcohol category. When people reach the legal drinking age, they want to drink something that will give them the effect of alcohol without the taste. While, their palate isn’t used to the strong taste of scotch or gin, vodka on the other hand is practically tasteless and can be mixed with anything.

The current market leader is Stolichnaya, followed by Absolute, Eristoff and Smirnoff, the four of which cover 85% of the vodka market. However, premium vodka brands such as Stolichnaya Elite and Grey Goose are slowly gaining ground.

Although, whisky accounts for nearly seven times more sales, sales of “regular” whisky – the top five brands are acknowledged to be Johnny Walker Red Label, Dewars, Ballantines, Jim Beam and William Lawson – have been contracting by an estimated 5%, a result of the introduction of the VAT in 2002 and greater competition from Vodka. Deluxe whisky – luxury blends and single malts – represent 15% of the whisky market. Distributors for this highly competitive market are reluctant to reveal figures, but it is clear that Johnny Walker Black Label – almost a national icon – leads the way with an estimated 60% of the market share, followed by Dewars and a resurgent Chivas Regal.

“People are more loyal when it comes to premium brands,” said Carlo Vincenti of the Vincenti Group. 

With over 80% of regular whisky consumption occurring in people’s homes, the whisky wars have been largely focusing on off-trade sales. “The consumer has been spoiled by the sales promotions of regular whisky brands – you have promotions going on virtually 365 days a year,” says Hmouda.

The alcohol sector ranks among the top 10 Lebanese sectors in terms of ad expenditures in 2004 but has witnessed a shift towards greater below-the-line advertising, which now accounts for more than 60% of the ad budgets. “Consumers attach less value to the brand and therefore investment in brand-building is much less than it is supposed to be and promotions have taken a bigger chunk [of the budgets],”admitted Hmouda. “We go for instant gratification: gifts with purchase, goods discounts, trade deals such as volume rebates. It’s a very dynamic category,” said Hmouda. “The margins in the trade are minimal, so the focus is on volume and visibility. We’re trapped now, without these promotions sales would drop. It’s a very unhealthy situation. We are following the textbook marketing approach of not to do.”

Total advertising spending on spirits is estimated at $15 million – $5 to $6 million (all media included) for above-the-line advertising and $8 to $9 million for below-the-line. Whisky takes up the bulk of this, with Diageo spending an estimated $5 million annually to promote Johnny Walker, while Fattal spends $3.5 million on Dewars and Vincenti $1.5 million on William Lawson, one of the biggest movers in recent years.

Beer

The Lebanese drink an average of 4.5 liters per person annually – far less than the Europeans who average 75 liters per year. In a country with a distinct preference for spirits, the beer industry has traditionally played second fiddle and is seen mainly a summer thirst quencher, a trend bore out by the fact that roughly 70% of beer sales occur during this period.

“Beer is much more of refreshment in Lebanon. It is seen as a summer product, for beaches and picnics,” said Ronald Voorn, head of Heineken’s operations in Lebanon, in a recent interview.

Heineken holds over 60% of Lebanon’s $50 million beer market, following its 2002 acquisition of Almaza, the country’s only brewery. The company’s stable now has the bulk of the market’s niches covered through its array of brands, ranging from the lighter, value beer in the form of Almaza and Laziza, to more expensive up-market brands with Heineken, to the stronger beers, with newly launched and competitively-priced Rex.

Approximately 60% of the market is held by local beer, with the remaining 40% going to imports, one third of which are Heineken and Amstel beers. The overall market favorite remains Almaza, responsible for over 40% of all sales. In the imported beer segment, Heineken leads the pack.

In a bid to promote the expansion of the market, the Dutch beer giant is looking into developing new beer products, such as flavored varieties. It also envisages boosting its line of non-alcoholic beers, which currently account for 10% to 15% of the local market, and has benefited from Lebanon’s tourist boom over the last few years, comprising a number of teetotal Arab visitors.

Sadly, recent political events have dealt a blow to the industry and the market witnessed a 35% drop in its February sales. With the political crisis ongoing, Heineken has temporarily put on hold its year-old plan of building a new brewery.

Wine

Wine consumption is on the increase as local tastes dovetail with international drinking habits. Chateaux Kefraya and Ksara dominate the local consumption, forcing many Lebanese producers to seek out export markets. The $27 million local industry is virtually a cottage industry by global standards, but new wineries are opening at a rate of two a year with a new generation of producers offering affordable, eye-catching wines. Local consumption has increased in the last decade and stands at just over a bottle per person. This is not only due to the influence of snazzy new local wines but also to the returning disapora, who have brought with them a modicum of Western “sophistication” and many Lebanese, always anxious to be seen getting it right, are gradually eschewing the once obligatory bottle of luxury-blend whisky in favor of wine with their meals. That said, the day when Lebanon can be called a genuine wine drinking nation, is a long way off.

Annual monitored advertising spending for wine in 2004 was $1.7 million, the bulk of which came from Chateaux Ksara, Kefraya and Domaine Wardy.

Ready-To-Drink

Ready-To-Drink (RTD) beverages made their first entry into the Lebanese market in 2001 with the launch of Bacardi Breezer. Bacardi Breezer and Smirnoff Ice control some 80% to 90% of the total market, with local brands such as Basally Chtaura’s Buzz in third. Following the worldwide craze for the affordable beverages, sales have rocketed, reaching their peak in 2002 with 105,000 cases imported into the country. “It was a category and a brand which was perceived as cool among the younger crowd,” remembered Vincenti. “Kids would drink it at beach parties, at clubs. It hit the market in a big way.”

The craze subsequently stabilized and the market has been declining over the course of the last three years by over 25%, reaching 75,000 cases imported in 2004. Today RTDs hold approximately 11% of the spirits market share in Lebanon, at an estimated value of $255,000. “It’s a high maintenance category, which requires constant product development and innovation, a lot of investment,” said Hmouda. “That being said, it’s also a highly profitable, if you consider the price you pay for the little amount of alcohol that is in it.”

RTDs introduced competition to both the beer and the spirits market, although for the latter, it has also provided a boost. “If RTDs do well, the motherbrand will eventually do well,” Vincenti explains. “Bacardi Breezer has contributed to the promotion of Bacardi rum, which has witnessed a 50% to 60% cumulative increase over the last few years.”

Cigarettes

British and American Tobacco (BAT) estimates the Lebanese cigarette market at roughly $400 million or some 7.5 billion sticks a year. By international standards, Lebanon remains an attractive market for the tobacco industry, combining few anti-tobacco regulations and a lax legislative environment, with high smoking prevalence rates.

Some 56% of the Lebanese smoke, 43% of whom are between 13 and 18, thereby in all likelihood ensuring the tobacco industry a sizeable market for at least another generation. Spurred by the low price of cigarettes (LL1,000 to  LL2,000), the average Lebanese smoker consumes around 3,300 cigarettes a year, or 165 packs.

Market shares between premium – Marlboro, Kent, Gitanes, Viceroy, Gauloises – mid-market – Fine, Rothmans, Craven, Pall Mall, L&M, Royale and budget brands – Brilliant, Winchester, Business Club, Sovereign – are distributed evenly, with each category holding respectively 38%, 25% and 36% of the market, according to a 2003 report by the Altadis tobacco group. 

Imports into the country are dominated by four of the world’s leading transnational tobacco companies, with Philip Morris in the lead at 45%, followed by BAT (29%), Japan Tobacco International (10%) and Altadis (9%). They collectively generate 90% of total tariff revenues reaped by the Regie Libanaise des Tabacs et Tombacs, which has a monopoly on all tobacco imports into the country. Lebanese taxes on cigarette imports reached an all time high in 1999 at 120%, but subsequently dropped to average 60 to 70%. Yet despite apparent favorable market conditions, the Lebanese market may have reached saturation as growth has slowed to around 1.5% since 2001.

“The market is essentially stagnant,” said Naushad Ramoly, head of Corporate and Regulatory Affairs at BAT’s Levant and Yemen operations. There has also been a shift in tastes as more competitively priced local brands – especially Cedars – have increased their market share by 18% since 2000. Others have not fared as well. In the late 90s, 93% of the market was dominated by international brands. By 2003, this share had dropped to 79%. Philip Morris and BAT, who controlled over 85% of the market in 1998. Five years later, they made up less than 50%.

Cedars’ impressive growth places it second in terms of current market share at 19%, behind by Marlboro, with 24%. Battling it out in third place are Winston and Viceroy, with around 13%, followed by Gauloises and Gitanes. Adding to the pressure is a proposed ban on all above- and below-the-line tobacco advertising issued by a group of MPs in May 2004. The ban has yet to be ratified by Parliament and the current political crisis leaves little reason to believe that it will be made effective this year. However, the proposal does indicate that Lebanon’s days as a liberal haven for tobacco advertising could be numbered.

Still, the tobacco sector’s $8 million annual advertising spending is in freefall and has, like alcohol, seen a staggering shift to promotional advertising, with BAT, slaughtering its above-the-line expenditure, once at 75% of its ad budget, to 5% last year.

“Tobacco advertisers have been affected by the economic situation and they don’t care about the reputation of the brand,” Mounir Torbay of the World Federation of Advertisers’ Lebanon Chapter said in a 2004 interview. “That is why media advertising has dropped so drastically. They need the ‘push’ and not the ‘pull’. They want people to buy more, to switch from one brand to another.”

Cigars

Despite its small size, Lebanon ranks as the 5^th highest Cuban cigar consumer in the world today. The driving force behind the promotion of this culture has been cigar superemo Mohamed Zeidan, Chairman of the Phoenicia Aer Rianta company, who enjoys a close friendship with Cuba’s President Fidel Castro and has the sole distribution and retail rights for Cuban cigars in Lebanon.

“From being the prerogative of businessmen and politicians, cigar smoking has expanded across the population, now also reaching the younger segments of society,” said Walid Saleh, managing director of the Phoenicia Group. “We engaged in major promotional activities in 1998 to 99, targeting the 22 to 25 age group, so as to educate them and prepare them for when they entered the job market and could afford more upscale brands. Cigars are now enjoyed by a wider age group and have become a product for every occasion.”

The total number of Cuban cigars sold annually on the domestic market and at Beirut Duty Free combined is estimated at four million, of which 35% are sold domestically and 65% at the airport. A major tax hike from 45% to 152% between 1998 and 2000 witnessed an intervention by the Cuban government to appeal for a reduction, and Lebanese authorities subsequently lowered the rates to 60%, where they remain today. The economic recession has had little effect on the market, according to Waleh. “Consumers might go down a notch in brand, buy a Montecristo rather than a Cohiba, but they will continue smoking cigars,” the manager explains. “The idea that the Cuban cigar is a luxury item is an erroneous one – you find cigars for as little as $1, so people can afford to enjoy them.”

The sturdiness of the market’s growth has undoubtedly been assisted by Phoenicia’s successful two-pronged marketing strategy. At Beirut Duty Free, the company opened the largest cigar store in the world. La Casa del Habano offers every brand of Cuban cigars, cigarillos, accessories, a VIP cigar lounge and a walk-in humidor. The unique retail concept paid off, becoming the largest point of sale for Cuban cigars worldwide. While cigars generally account for 1% of an airport duty free outlet’s sales, at Beirut Duty Free, this figure stands at 22-25%, reaching $15 million in annual sales.

On the domestic front, Phoenicia invests $700,000 on predominantly below-the-line marketing. “Our focus is essentially on the on-trade business, to bring direct added value to our clientele,” Waleh explains. “People already know our brands, so there is no need for brand building. What we seek is to increase penetration rate and spending rate.”

Gifts with purchases, promotions teaming up with products such as Cadillac, Ferrari and Glenfiddich, and monthly events held at Lebanon’s leading hotels are but a few of the array of promotional activities the company has engaged in. Its two latest innovations include a Montecristo platinum VISA card, which circumvents strict international anti-tobacco advertising regulations, and a Partagas calling card for travelers at Beirut Airport.

For the record, all 34 Cuban brands are sold in the country today and dominate the market by 98%. The top five most popular cigar brands are Cohiba, Partagas, Romeo y Julieta, Montecristo and Hoyo de Monterrey, all come from the small Caribbean island. Popular cigar sizes were initially Double Coronas and Churchills, but for the last five years, Torpedos, regular Coronas and Robustos have been gaining ground.