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Society

No season

by Anthony Mills January 1, 2004
written by Anthony Mills

Ever-optimistic tourist industry insiders contend that 2003 has been a satisfactory year overall and that Lebanon will continue to replace Europe and America as the destination of choice for high-end Gulf Arab tourists in 2004. In reality, however, some major prodding is necessary in the coming year for an underdeveloped sector that needs to overcome serious obstacles imposed by the government, extend a paltry two-month summer peak season and bolster the number of arrivals to the country by attracting a fresh brood of tourists from non-Arab countries.

Working with a government that critics say is doing little, if anything, to help buttress the sector will continue to be a main hurdle for the tourism industry throughout 2004. The ministry currently operates with a hopelessly low budget, an aversion to new blood, no marketing plan to counter media that portray Lebanon as a violence-prone country, fractious domestic politics that unnerve prospective visitors – even in the Gulf – and simmering regional instability.

“The government must understand that tourism is not only selling hotel rooms and restaurant meals,” said Paul Ariss, president of the union of restaurant, café, nightclub and pastry shop owners.

Also hindering the development of the tourism sector is a flawed infrastructure, which the government has yet to seriously tackle. Not only do the poor roads restrict tourists from visiting major tourist destinations in various regions of the country, water and electricity shortages occur at the height of the summer season. Power cuts in Bhamdoun and Aley in August 2003 prompted 20% to 30% of the Arab tourists staying in the region’s mountain resorts to pack up and head for Syria, or home.

Government policies adopted in 2003 will also harm tourism in the coming year. The recent decision to stop granting British citizens visas upon their arrival at Beirut airport, for example, will undoubtedly cause a decrease in British visitor numbers and reflect negatively on Lebanon as a tourist destination. Although understandable as a diplomatic tit-for-tat measure – Britain now requires transit visas for Lebanese with layovers in the UK – the move, critics say, is a case of cutting off your nose to spite your face.

“Unfortunately, politics in Lebanon very rarely takes into consideration the benefits of tourism,” declared Ariss.

Another threat to the tourism sector is the levy of burdensome government imposed taxes that is driving 50% to 60% of the some 3,000 or so restaurants to consider shutting down and moving to Dubai, Abu Dhabi and other Gulf cities, despite the fact that each have already spent an average of $500,000 in start up costs to open in Lebanon. “There is no logic to the way the authorities deal with the general economy, and with tourism. The tourism sector should not be overburdened with taxes and charges,” Ariss complained. A realistic view of Lebanon’s tourist sector shows that the country no longer enjoys the unassailable position it held before the civil war. It must now work to compete with rival destinations, such as Egypt, Jordan, Syria and Dubai. According to Pierre Achkar, president of the Lebanese Hotels Association, Lebanon will have to fight to compete with the tourism industries of these countries. “We are not competitive because our prices are high, due mostly to the taxes and charges,” he said. For the moment, however, critics say the government is seemingly under the mistaken assumption that because Lebanon is blessed with natural tourist assets, it will somehow blossom unaided as a tourism destination. “We need a real political decision at a high level to make this country a real tourist destination,” said Achkar. “The government has to understand that you have to do a lot of things – even if you have a nice country, nice people, a nice nightlife – to be on the international map of tourism.” But detractors allege the ministry of tourism is either unwilling or unable to do its job. “We really have a problem in the ministry. They need human resources and they need a budget,” stated Ariss. “The current budget is at a minimum and it’s forbidden to have new employees in the ministry, even though they don’t have professional people.”

Criticism has also been leveled at the ministry over its handling of this year’s Arab World Trade and Tourism Exchange (AWTTE), held in September 2003 at BIEL. The ministry awarded the management contract for the fair to a certain Lebanese travel agency, invoking the anger of its competitors, which then boycotted the gathering. This contributed strongly to weak participation at the event and its failure to impress.

“The tourism ministry sometimes helps very big industry investors and ignoring the small investors,” protested Achkar. He added that the hundreds of smaller players, who actually put Lebanon on the international tourism map and constitute a social fabric upon which countless families depend for a living, are being swept aside to make way for powerful companies. According to Achkar, one reason why no tourism-bolstering governmental decisions have been taken is because the government has been resting on its laurels since the 9/11 attacks and the impression that Gulf Arabs wary of travel to the US and Europe will continue to turn to Lebanon. But accurate tourism-related data would help smash the false sense of security. Information is needed on where visitors are staying. For example, when Lebanon registers a million tourists, the implication is they all stay in hotels. But in fact, observers estimate that as many as 50% of Gulf Arabs own property and houses and do not pay for hotels, and spend much less on restaurants and other outings. To ensure a successful 2004 season, industry experts agree that Lebanon’s constricted two-month summer tourism season should be extended. In other countries, Achkar noted, the summer season runs from the beginning of May until the end of October. “Turkey, Cyprus, Egypt, are all fully booked from the first of May until the end of October. For us, the summer season is July and August and we are losing a lot of money [as a result].”

Furthermore, in a joint campaign with the tourism ministry, the Hotels Association is to start aggressively targeting potential tourists from Eastern Europe, in particular Russia and Ukraine (for Eastern Europeans, the cancellation rates in Egypt during the Iraq war were far lower than for Western Europeans and it appears the are less susceptible to the regionally-generated jitters). However, marketing studies will prove imperative to determine which prospective tourist types and what countries should be targeted, and how they should be lured in. “The figures that are published by the government should be analyzed more accurately in order to decide where to invest and who are the targets,” said Ariss, adding that Lebanon should start to steer away from relying heavily on the Gulf Arabs that constitute the lion’s share of the country’s tourists. “We cannot say that we have tourism in Lebanon just because we have some Arab tourists who come here during very defined periods.”

January 1, 2004 0 comments
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Society

Q&A: Ali Abdallah

by Executive Staff January 1, 2004
written by Executive Staff

E: What was the ministry’s strategy in 2003?

AA: This year should see a robust and energetic campaign to promote the Lebanese tourist industry, especially in light of the encouraging figures that were recorded in 2003. Not since 1974, 20 years ago, have we seen over one million visitors and the business that was generated was in the region of $1.6 billion or 10% of GDP. This growth, which realistically began in earnest in 2000, should translate into the end of 2003 seeing 1.1 million visitors, mainly from Arab countries, compared to 936,000 for 2002.

E: How do you explain the fact that 2003 was an unstable year for the region, while the local tourism industry saw a considerable improvement?

 

AA: Well, we still have regional instability and some foreign countries still associate us in their media with terrorism, but the reality is that tourists are amazed when they come to Lebanon and see the level of security and quality of services provided.

E: Who is coming?

AA: In 2002, 44% of visitors were Arabs. This August nearly 200,000 Arabs visited Lebanon. Currently, information is being collected at the airport to get a clearer picture of all the different types of tourists coming to Lebanon.

E: Are those that visit Lebanon big spenders?

AA: Although we have a relatively small number of tourists, their daily spend is high. Tunisia needs five million visitors to reach our income. There, the average daily spend is around $60 per day, while in Lebanon the average expenditure per tourist per day is $250. Many Gulf Arabs spend as much as $500 per day. There are untapped countries like Japan and South Korea, whose tourists spend up to $400 per day. Lebanon has no tourism office in Japan. Today, there are talks to take exhibits from the national museum to Japan in an effort to help promote the country there.

E: What type of tourism is the ministry keen to focus on? Religious, shopping, archeological or conference tourism?

AA: We will have a clearer picture once the results of our research are finalized.

E: What about the more niche activities?

AA: We are trying to develop Lebanon as an upmarket destination, stressing on quality and luxury, but we are also promoting Lebanon as a destination for what I am going to call “medical tourism,” where we can offer packages to people looking for medical treatment and the ensuing recuperation period. Hospitals would be classified according to specialization and we would imagine a lot of Arabs would opt for this, as they respect our doctors and facilities. Cultural, eco and archaeological are other sectors we need to develop.

E: What do you anticipate will be the sectoral obstacles for 2004 and how do you intend to overcome them?

AA: Well, we need to improve the state of the roads. This is crucial if we wish to woo western tourists to Lebanon. We need to be seen as a safe country. We also need to work on our service skills, especially how we receive, talk to and help tourists, and this is especially needed in the public sector. We also need to develop modern laws for the sector and this will help hotels and restaurants overcome the problems that are limiting the inflow of foreign investment. The ministry has established a mechanism to reduce red tape. IDAL used to handle this but it was not doing a good job and that is why we decided to bring tourism-related investment development back to the ministry.

E: What is your strategy for 2004, assuming you are still in office?

AA: We are in the process of analyzing the tourism sector in every region in order to know what will be needed in terms of investment and then develop that region’s tourism potential. We will be promoting the country with an international marketing campaign, but domestically we are working on the TELEPHERIQUE project that aims to link all ski resorts. This will benefit a lot of derivative activities and companies such as MEA, car rental firms and tourism fairs. We will increase the number of tourism police; work closely with the private sector and others in the tourism community to improve the environment – an important factor for the modern tourist.
 

January 1, 2004 0 comments
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Real Estate

Dirty deals

by Anthony Mills January 1, 2004
written by Anthony Mills

Despite cautious optimism in some areas of the residential market, development anywhere in Lebanon is and will continue to be fraught with problems, especially corruption and suffocating and over complicated bureaucracy. Developers are at their wits end

“You try to be very legal but they always find a way to tell you it’s not legal so that they get what they want. They want money,” said Karim Bassil of La Constructa, who said that bribery was costing him 1% on every project.

This was a sentiment echoed by Karim Ibrahim, managing partner of Contract s.a.r.l. “We want less corruption,” he said. “When we do a budget for a new project, we must allocate at least three percent for bribes. I’m talking about projects of $50 million, of $40 million. If not, you will never get a permit.” Ibrahim has three projects on hold because he is missing one, seemingly unobtainable signature. “I think we may have to wait for two years, because one guy is not good friends with another. Meanwhile, we are paying 10% interest at the bank, and they don’t give a sh*t.” The situation is unlikely to change soon, predicted Ibrahim. “It has to be changed from top to bottom. I don’t feel that’s going to be the case soon … when you bribe in Lebanon today, it’s like paying tax. There is an unwritten quota: this guy has to get $20, and this guy has to get $1,000 and this guy has to get some gold pieces.” Unchecked, corruption will continue to exact a heavy toll on foreign investment: “We’ve noticed that many foreign investors either let go or are not interested because of corruption and the bureaucratic procedures they have to go through,” he said.

And it goes on – Chahe Yerevanian, managing director of real estate firm SAYFCO finds himself allocating bribes under “miscellaneous costs.” “The developer has to give left and right, even though he is getting his permit on the dot legally, according to every single law. It’s not called corruption. It’s a way of life,” he said. Elsewhere, a sluggish market will have to be aided by lower interest rates. Ibrahim branded the 12% rate developers must pay on construction loans “humongous.” The financial burden is rendered all the heavier by the government corruption-induced delays. Meanwhile, “the banks are just making money, more profits,” he noted wryly. For his part, Yerevanian believes the government should, over the next two years, lower the apartment registration tax from 6% to 2%, or even a symbolic 1%. For other real estate areas in Lebanon, the news is not much brighter. Office space is in slow demand and prices have tumbled by as much as 60% in the last eight years. Demand will continue to lag behind supply “for some time to come,” industry insiders agree. According to Raja Makarem, managing partner of RAMCO Real Estate Advisers, only new buildings in the BCD will fare better because they boast modern facilities, parking, and plenty of open plan floor space. Thus, the new downtown Atrium building is fully occupied, he said, and the An Nahar building is 50% to 60% full. “In the short- and mid-term, there are big question marks,” conceded Yerevanian. Demand in the BCD, say many professionals, is being created primarily by domestic companies that want to open offices there to bolster their image, not by international newcomers. “There is now quite a bit of stock that can be obtained for between $80 and $250 per square meter, depending on the quality, amenities and location,” observed Makarem.

Despite the take up of new stock, older offices in the BCD continue to perform poorly and the excessive supply phenomenon has hampered Solidere’s efforts to fill the space available. “If you look up at the offices [in the Solidere area], the majority are empty,” said Ibrahim. He said clients are opting to rent elsewhere – for example in the Sodeco Square building, which he manages and where 150 offices are all full. “Why? Because I rent for at least 25% less than downtown, I am only two minutes away from the area and I have secure parking,” said Ibrahim, adding that the paucity of parking space downtown is one of Solidere’s biggest problems. According to Yerevanian, the retail market has proved far more vigorous over the last two years, advancing at a tremendous pace. Noticeably, the mall is in. Testimony to this is borne by the numerous shopping center projects recently completed, on the verge of completion, underway, or in the pipeline. “They all seem to be attractive for major retailers,” said Makarem, “but the traditional retail market is going to suffer.” Yerevanian agreed, saying, “The future is for these kinds of malls to flourish.” “This is going to change the way retailing happens in this country. We’re going to have enormous, acclimatized centers with lots and lots of parking,” said Michael Dunn of Michael Dunn & Co. “Where you go shopping today isn’t where you’re going to go shopping in five years.” Although prices at the ABC Achrafieh mall can exceed the $1,500 per square meter mark, demand for retail space has been high. The center is reportedly fully booked, but its hoped-for success may be offset by potential traffic problems – it is slap bang in the middle of a somewhat constrictive residential neighborhood. “I think they got the position wrong,” remarked Dunn. “I think they’re going to struggle.”

As a retail project, Solidere is flourishing relative to other retail areas and will do very well in the long-term, industry executives said. Most available retail space in the area has been taken, with Maarad Street forming a principal artery. And the downtown “Souks” project is eagerly awaited. “The downtown city center may possibly take over from Dubai in terms of quality shopping,” Dunn remarked. “Architecturally, Solidere is gorgeous … and big names are going down there like Virgin, Nike and so on,” noted Ibrahim. “It has become an attraction. Today, if you do not have a branch – whether you are a bank or a shop – in Solidere, you’re out, you’re not among the top players.”

Consequently, since Solidere’s inception, retail prices have risen from about $400 a square meter in 1998 to, in some instances, over $1,000. “It has become a fact that Solidere’s commercial stock is a success. It’s become irreversible,” Makarem stated. In fact, according to a survey executed by real estate consultants Cushman & Wakefield, the BCD ranks 34th on a list of the most expensive retail locations, behind areas in Turkey, Israel and Kuwait. Solidere’s commercial triumph has not, however, affected the trendy Verdun shopping area much because the latter has proven a strong, up-market retail street, with retail costs surpassing $1,000 per square meter in some areas. “In the future, though, Solidere will affect everyone with its shopping,” predicted Dunn. As for Hamra Street, although it is no longer as resplendent as before the war, it remains an established market. “It’s still the most successful retail street in Beirut because it offers what a real retail street requires – a straight line continuity of shops,” he said, adding that the face-lift Hamra is undergoing should further buttress its evolved position as a caterer to the mid- and low-end market. Real estate prices dropped in Hamra during the war but have since regained the $500 to $700 per square meter range. However, east of Beirut, Kaslik has been squeezed by the emergence of Solidere and the migration back to town, with the architecturally ailing main shopping street of Furn al-Chubbak likely to be hit hard. “But the Jal al-Dib, Las Vegas-style strip, complete with its MacDonald’s, Burger King, Roadster Diner and B-to-B will prove resilient,” predicted Yerevanian. “It’s got a niche, as it has its own market. It will never suffer because of the success of Solidere.” Finally, a tip: Gemaizeh is the buzzword in the real estate sector. Industry insiders are tipping the area as an up-and-coming residential neighborhood that will mix modern with relatively untarnished traditional Lebanese architecture. The area’s assets are self-evident: it is close to the commercially thriving BCD, but has retained an almost bohemian identity – setting it apart from the artificiality that critics say typifies much of the reconstructed, post-war capital. “Gemaizeh is my tip for the future,” said Dunn. “It’s adjacent to the BCD, it’s dirt cheap, it’s got some beautiful architecture. What an investment for the future.”

January 1, 2004 0 comments
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Business

Olympian spending

by Anthony Mills January 1, 2004
written by Anthony Mills

Three years ago, when it semed the world was his for the taking, businessman tycoon Taha Koleilat bought a second-division Lebanese football team, pumped several million dollars into it, bought top Lebanese players, and set his sights on the number-one berth in the First Division.

Today, even though his business interests are under intense legal scrutiny, he has accomplished that goal with his Olympic Beirut team

January 1, 2004 0 comments
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Business

Regional expansion on their mind

by Thomas Schellen January 1, 2004
written by Thomas Schellen

Lebanese cement manufacturer Holcim Liban has acquired 100% of Bogaz Endustri Madencilik (BEM), a cement company in Northern Cyprus.

January 1, 2004 0 comments
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Business

A reason to wine

by Michael Karam January 1, 2004
written by Michael Karam

The Union Vinicole du Liban (UVL) and the Association of Lebanese Industrialists (ALI) are exploring the possibility of setting up what is tentatively being referred to as a marketing board to promote Lebanon

January 1, 2004 0 comments
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Business

A seasonal ‘flop’?

by Thomas Schellen January 1, 2004
written by Thomas Schellen

Despite the usual upbeat suggestions that tourism is on the up and up in Lebanon, the Arab World Trade and Tourism Exchange (AWTTE), held at the BIEL exhibition center from 16 to 19 September, was, in the words of one hotel marketing director who participated,

January 1, 2004 0 comments
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Business

Slippery success

by Peter Speetjens January 1, 2004
written by Peter Speetjens

Tripoli

January 1, 2004 0 comments
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Business

Microsoft takes hard approach

by Anthony Mills January 1, 2004
written by Anthony Mills

Microsoft chat rooms in Lebanon have been shut down. The move comes after the world

January 1, 2004 0 comments
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Business

Nabatieh’s lost crusade

by Anthony Mills January 1, 2004
written by Anthony Mills

There is anger and disappointment in south Lebanon that a $62 million World Bank cultural heritage and urban development loan will not cover Beaufort Castle. The castle, a 12th century monument built during the Crusades, was used both by the PLO and Israel and its Lebanese allies as a strategic outpost during the war years and up to May 2000.

Mustafa Badreddine, a former president of the municipality of Nabatieh, under whose jurisdiction Beaufort Castle falls, said he was at a loss to explain why the

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Since its first edition emerged on the newsstands in 1999, Executive Magazine has been dedicated to providing its readers with the most up-to-date local and regional business news. Executive is a monthly business magazine that offers readers in-depth analyses on the Lebanese world of commerce, covering all the major sectors – from banking, finance, and insurance to technology, tourism, hospitality, media, and retail.

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    Executive Magazine
    • ISSUES
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    • BUSINESS
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    • SPECIAL REPORTS
    • EXECUTIVE TALKS
    • MOVEMENTS
      • Change the image
      • Cannes lions
      • Transparency & accountability
      • ECONOMIC ROADMAP
      • Say No to Corruption
      • The Lebanon media development initiative
      • LPSN Policy Asks
      • Advocating the preservation of deposits
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