Industry & AgricultureWine Industry

Wine producers discuss domestic consumption

by Nabila Rahhal
written by Nabila Rahhal

Sipping on a glass of Lebanese wine has value beyond the drinker’s enjoyment. As Edouard Kosremelli, general manager of Château Kefraya, puts it, drinking Lebanese wine supports the economy since thousands  of people are either directly or indirectly employed by the wine sector. Lebanese wine encompasses three industries (agriculture, industry, and hospitality and tourism), and is among the country’s most successful exports, distributed in more than 36 countries, according to the wineries with which Executive spoke.

When sipping on homegrown wine, you are also getting a taste of a long history dating all the way back to the Phoenicians, who were the first civilization to trade wine. Many also believe that Lebanon’s Qana, in the south, is the biblical town where Jesus Christ turned water into wine.

In export markets, Lebanese wine is gaining market share every year and is appreciated for its history and quality. Locally, however, those in the wine industry tell Executive that wine consumption is still relatively low, outlining why this is the case and what they are doing to change it. “Today there is a momentum for Lebanese wines around the world—the world is interested in the ‘old wine’ producing countries such as Turkey, Greece, Georgia, Croatia, and Lebanon,” says Aurélie Khoros, marketing manager at Ixsir.  “There is no reason why this should not be the case in our own country. Lebanon’s winemaking history is one of the oldest in the world, and we should take pride in that. The only way to get there is through joint efforts in educating customers.”

More wine please

Joe Assad Touma, winemaker at Château St. Thomas, places wine consumption in Lebanon at just one bottle per capita. “It should be more because winemaking is part of our ancient culture as is evident from research,” Touma says, adding that the good news is that this number is slowly but surely increasing.

According to Zafer Chaoui, current head of the Union Vinicole du Liban (UVL) and chairman and chief executive officer of Château Ksara, wine consumption among the Lebanese has increased only slightly due to the economic situation in the country. “Unfortunately, as was discussed during a conference at the Chamber of Commerce in mid-November 2018, the purchasing power of the Lebanese has gone down by 20 to 25 percent over the past five years,” Chaoui says. “This is very sad and affects not only the economy but people’s behavior as well. Since drinking wine is a luxury, and not a basic necessity, you would expect consumption to drop in such times. However, the consumption of wine in Lebanon has slightly increased—maybe people want to ease their minds in these stressful times.”

Kosremelli agrees that local consumption of wine is increasing in spite of tough economic times. “The local consumption is definitely increasing despite the economic crisis,” says Kosremelli. “If it were not for the economic environment, it [the increase] would have been more tangible. If you look around you, you see that the young generation is drinking more wine than their parents—you don’t need market research to prove that.”

Winemaker and co-owner at Domaine De Tourelles, Faouzi Issa, also believes that the younger generation, in their quest for authenticity, are driving up wine consumption. “Today ‘back to the roots’ is the motto of most of the young generation of Lebanese, who want to enjoy their country’s local traditions through its food, its villages, and its wine,” Issa says.

Ixsir’s Khoros agrees that wine consumption is on the rise and notes a change in consumption habits. “Wine was, for a long time, synonymous with special occasions or celebrations, but this has changed as it is now also being served more casually in homes and during nights out. Consumers no longer ask for a glass of wine, but most often specify, if not a brand, a style of wine they would like to have, which was not the case a few years back,” she explains.

It takes collective work

This slight increase in domestic wine consumption is the result of years of effort from wine industry stakeholders. However, they all believe there is still a long way to go before wine consumption in Lebanon is on par per capita with the rest of the wine drinking world. “Lebanese wine consumption [per capita] did increase, but today it is still one of the lowest for a wine producing country, hence we still have a long way to go,” Khoros says. “This is an opportunity that the entire sector should jump on, especially since the consumer is more receptive today than a few years back.”

Wine producers agree that the most important factor for increasing wine consumption among Lebanese is to raise awareness through various approaches, one of which is education. “We have to educate consumers,” Chaoui explains. “For example, Château Ksara has the exclusive Wine and Spirits Education Trust course, which is among the most well-known in the world. It is held in Lebanon three to four times a year for a reasonable fee, and people come to learn about wine and how to appreciate it. Although these courses are not limited to Lebanese wines, people who attend this course gain a greater understanding of how good the quality of Lebanese wine is.”

Touma also speaks about the importance of education, explaining that he gives a course on wine as part of the agriculture program at Holy Spirit University of Kaslik. Recently, he has noticed an increase in non-agriculture major students who just want to learn how to taste and serve wine.

Issa believes enotourism—tourism revolving around wine—is key to promoting Lebanese wine among consumers and says this form of tourism is on the rise as more people enjoy visiting and discovering the country’s wineries. He says the number of visitors to Domaine des Tourelles has increased over the past couple of years, and they now get an average of 30 per day.

Khoros also speaks of enotourism and its importance in encouraging wine consumption. “We host around 40,000 visitors yearly and offer guided tours, wine tastings, and the possibility of having lunch at Nicolas Audi à la Maison d’Ixsir,” she says. “Enotourism is an important factor in promoting Lebanese wines, as wine is a culture. When you visit a winery and get to know more about the process and the people behind the wine, it sparks curiosity and educates the consumer.” She added that they are currently working on a rooftop bar on their winery’s premises to be launched in spring 2019.

Having a restaurant or hospitality offering has proven to be a successful tool for attracting enotourism and many of the recently launched wineries either have a restaurant on their premises, plan to develop one within a year, or have opened an outlet in Beirut where one can taste their wine and enjoy some nibbles (an example of which is Vertical 33’stasting room in Gemmayze).

Besides restaurants, seasonal harvest-related activities are also a way to engage consumers with wine in an entertaining way. “We at Château St. Thomas invite all our visitors and clients to our harvest event so they feel involved in the wine making process and thus more attached to Lebanese wine—they feel they are enjoying their own personal wine since they helped in the harvest,” Touma says. “We have this event two weekends per year and welcome around 200 people [each day], which is our maximum capacity, and we have to turn away many others.”

Kosremelli feels that the success of Lebanese wine abroad has a positive impact on local consumption. “Whenever our wine is recognized in an international contest or rated by international critics, it gives us credibility in the eyes of the Lebanese customer,” he says. “Ours is a dynamic industry that has proven to be successful abroad, and the younger generation who travel and study outside of Lebanon can see that Lebanese wines are appreciated internationally, and so they are becoming prouder of their local wine.”

Foreign competition

Events like Vinifest—the annual wine fair organized by Eventions—and various other summer wine festivals also help to promote Lebanese wine, says Chaoui, but what still stands in the way is the Lebanese perception that foreign wine is better than local wine. “This patriotic feeling is missing in Lebanon,” he says. “Probably, with all respect to other industries, wine is the one product which is comparable to international level products. And yet despite this, people feel that if they offer Lebanese wines at a reception, it’s not sophisticated enough. This is something that we need to correct.” Chaoui adds that UVL wants to introduce a campaign to instill pride in local wine production—they are hoping for financial support from the Ministry of Agriculture for this project.

Kosremelli feels that competition from foreign wine is to be expected, since wine consumption is generally increasing. “It’s normal to see increases in the consumption of both local and foreign wine when overall wine consumption is increasing,” he says. “That is because wine lovers like to discover new wines—that’s why we export our wines to other markets, and that’s why we import wine as a country.” However, according to him, the problem lies with the unregulated import of alcohol in Lebanon, which makes for an uneven playing field between the local and foreign wines.

Touma elaborates further, giving the example of how some restaurant owners promote foreign wines over Lebanese ones since they make a larger profit from the imported variety. “A growing number of restaurant owners support Lebanese wine but unfortunately, because imported wine is cheaper, some prefer to sell imported wine over Lebanese wines because then their profit margins are bigger,” he says. “Also, there are a couple of restaurants and wine bars buying wine directly from abroad and selling them here so they can make even more profit from foreign wine. This is negatively affecting Lebanese wines.” These restaurants and bars keep prices down by avoiding purchasing wine through the local exclusive distributor.

Lebanon’s wineries have been lobbying with the Ministry of Economy and Trade to regulate alcohol imports. “We respect that Lebanon has a free economy, and we respect all deals with the European Union,” Chaoui explains. “All that we ask is that the import of wines be more organized, as is the case all over the world. Normally, you are registered as a wine importer and present permission for each individual lot you report—this is the case in the US and the UK while other countries, like China or Russia, are even more complicated. But here anyone can import wine. What we are asking for is a more regulated procedure and stronger control for the customs authorities.”

Clouds over the grapevine

Producing wine in Lebanon is no easy task. Lebanese producers often say that the only Lebanese item in their wine is the grape itself; everything, from the equipment to the bottle and cork, is imported. No company produces the needed materials in Lebanon, which drives the cost of production up. The cost and scarcity of land is another factor which increases production costs. As such, Chaoui explains that Lebanon only produces medium- or high-range wines, since production costs are too high to justify producing low-end wines.

While Lebanon’s wineries have the support of various ministries in promoting their wine in the international market, support to decrease the cost of production is still lacking. “It would help if we are supported by decreased taxes on the imported equipment we need to produce wine, be it the barrels, bottles, or corks,” Touma says. “We also pay an ‘alcohol grape tax’ to the Ministry of Finance of LL200 per kilogram—it’s a tax that has existed for years. The government could support us by either removing this tax or decreasing the amount.” He added that Lebanon’s other wineries are lobbying for this as well.

Lebanon’s winemakers work tirelessly to develop both local and international markets despite the challenges, and wine is one of the fastest growing agro-industry products in Lebanon, one that is building a positive reputation for the country. So the next time you fancy a glass of wine, pick a Lebanese label and enjoy it with pride—and in moderation, of course. 

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Industry & AgricultureOverview

Maintaining growth

by Nabila Rahhal
written by Nabila Rahhal

It was the famous Lebanese poet Gibran Khalil Gibran who said that a nation that does not produce—that does not eat bread from the wheat it harvests or wear the clothes it weaves—is a nation to be pitied. As Cristiano Pasini, representative and director of the United Nations Industrial Development Organization (UNIDO) for Lebanon, Jordan, and Syria, argues in his article for Executive, countries with a high standard of living also have strong productive economies with well-developed industrial sectors. 

Lebanon’s agricultural and industrial sectors are generally weak. However, there may still be hope for these sectors moving forward.

All in the same boat

Mounir Bissat, secretary of foreign affairs and head of the export promotion council at the Association of Lebanese Industrialists (ALI), tells Executive that the industry sector largely suffers from the same challenges as the Lebanese economy as a whole. He says subsidized loans for capital investments were harder to access in 2018 than in previous years, noting a slowdown in lending from commercial banks due to changes in the monetary policy.

The main market for Lebanese exports, the Gulf region, was economically strained in 2018, negatively impacting our industry sector. Meanwhile, the low purchasing power among local consumers—who are increasingly reluctant to spend beyond necessities—took its toll on industry in Lebanon as well.

An unregulated and chaotic market is affecting the industrial sector. Bissat says many factories in Lebanon are not officially registered, which means they do not pay taxes. This, in turn, allows them to sell their products at a lower price than companies that are registered, and do pay taxes, creating unfair competition.

Lebanese products face challenges due to the high cost of production, meaning they are not competitively priced in the local market—where they compete with imported goods—or in export markets. “To survive in an increasingly competitive market, we need to have the government subsidize the cost of energy (for energy-intensive industries) and of shipping, and to support Lebanese products in export markets,” Bissat says. He offers examples of potential government support, such as arranging business-to-business (B2B) visits or subsidizing the cost of attending international exhibitions, which he says are key in the industrial sector.

Some positive news

There were, however, a few positive developments to celebrate in the industrial sector this year, Bissat says. The May 2018 parliamentary elections saw 15 industrialists, or people with industrial backgrounds, enter Parliament. “We feel that we have an unofficial lobby in Parliament, or at least a significant body that understands the sector’s needs and can represent them. We are trying to benefit from this to pass laws that would support the industrial sector,” Bissat says.

ALI, in collaboration with the Ministry of Industry and the Ministry of Economy and Trade, lobbied against 26 imported products that were being dumped in the Lebanese market, Bissat says. (Dumping is the practice of exporting a product at a price lower than that in the exporter’s domestic market. This typically involves substantial export volumes and is problematic for the manufacturers or producers of the same products in the importing nation.) The association asked that Lebanese products be protected from the impact of these imported goods, which include detergents, aluminum, burghul, and wafers, through safeguard measures. Bissat says that the government issued a decision just prior to the May elections, which was then implemented in November 2018, to prevent Turkish wafers and detergents from entering the Lebanese market. This decision was not what the association had lobbied for, Bissat explains. “We are not in favor of prohibiting any imports because we are with a free economy and also because we don’t want our exports to be treated in the same manner. We were pushing for safeguard measures instead,” he says.

The October 15 reopening of the Nassib border crossing, between Syria and Jordan, is expected by some to boost the Lebanese industrial sector by allowing for land exports previously stymied due to the war. But Bissat believes it is too soon to tell if that will be the case. To his knowledge, no industrialists had made use of the route as of mid-November 2018, and so far he has heard of increased customs duties and restrictions imposed by Gulf countries (on which nationalities and vehicle types are able to enter their borders).

In 2018, there was an increase in the number of permits given to industrial entities as compared to 2017. These ranged from small workshops to large factories, and the increase in permits indicates that there is some dynamism in the sector. Kanj Hamadeh, assistant professor of agricultural economics at Lebanese University, says that 40 percent of these permits were given to the agro-industry sector. Hamadeh says agro-industry’s growth is fueled by the low cost of labor and the high demand for food in Lebanon, both of which have been affected by the Syrian refugee crisis. Another factor that contributes positively to the growth of agro-industry is the trend toward eating authentic, healthy, and local food—largely driven by mid- to high-income Lebanese.

Tech time

Bissat fully recognizes that e-commerce is the future, and the association is working toward developing a comprehensive industry B2B platform, despite the challenges. “The platform is not the problem—anyone can develop that for us—the problem is how to promote it in international markets and what the payment method should be, given that we don’t even have PayPal in Lebanon yet,” he says. “We also don’t have an e-signature [mechanism] if I want to virtually sign a pro forma. Basically, we lack the necessary infrastructure for e-commerce, witnessed by the slow internet. But it’s the trend and the future of commerce, and we have to be ready for it or fall behind.”

For the sake of Lebanon, we hope that the industry sector does not fall further behind, and instead maintains its growth as it celebrates its small successes on its way to making “Made in Lebanon” a badge of pride.

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Hospitality & TourismQ&A

Nicholas Chammas talks current Lebanese trade situation and the way out

by Nabila Rahhal
written by Nabila Rahhal

On a rainy day in mid-November 2018, Executive sat with the head of the Lebanese Traders Association, Nicholas Chammas, to hear his thoughts on the retail and trade sector in Lebanon. Given the amount of text messages Lebanese receive on a daily basis from stores announcing the latest promotion or the ever-increasing number of discount signs on storefronts, it was no surprise that Chammas told Executive that the retail sector is not doing well. His solution? The Lebanese should take advantage of those local promotions and shop more in Lebanon.

E   How would you describe 2018 for the retail sector?

It was another horrible year for the economy in general, and the trade sector in particular. Cumulatively, we have been going downward for the seventh year in a row. So it has been a terrible trajectory for the trade sector.

What we are witnessing today is all factors going in the wrong direction. As traders, we have five factors that influence our business. The first one is revenues; our turnover has been declining persistently since 2011. The second factor is trade margins, which have also been steadily eroding [in part] because of the competition from Syrians who have opened their own stores and wholesale operations. Add to this the fact that there is zero pricing power with the traders, whereby you have discounts all year long. Typically, these two factors [revenue and trade margins] should go up annually, but in Lebanon they are decreasing.

On the other hand, you have three factors that typically should go down [in a healthy business environment] but instead are going up. The first factor is the overhead and general operational expenses, such as rent, labor expenses, or utilities—these have been going up due to inflation. Second is the interest rate: Because of the tightening monetary policy in the United States and financial considerations in Lebanon, interest rates have been skyrocketing, and this has impacted our business. The third thing that has been going up is taxes. In 2017, 22 tariffs and taxes increased and have negatively affected our business.

So all in all, 2018 has been the perfect storm for the trade sector.

E  Is this across all sectors of retail?

In general, yes, it is the same scenario across all sectors. Consumables like food and everyday usage items have been affected less seriously than other sectors. Luxury and durables (such as cars and furniture) were heavily affected. Everything that can be postponed has been postponed for two reasons: [First,] the purchasing power is really not there anymore. [Second,] those who have money in the bank have negative expectations about the situation [in Lebanon], so the result is the same in that money is not being spent. Consumption is nose-diving, and this is a disaster for the retail sector, of course, but also for the economy at large.

E   What do you propose as the solution?

Statistics by Global Blue (the private company specialized in restituting VAT in numerous countries) show that in 2017, tourists spent $3.5 billion in Lebanese stores. During the same period, Lebanese tourists spent $5.5 billion abroad. This does not include the money that Lebanese spent abroad at restaurants and for other services, which would drive that figure up to almost $6 billion.

Because of the devaluation of the currency in Turkey, for example, Lebanese are traveling en masse and doing their shopping there because it is cheaper than Lebanon. The Turkish lira had lost a lot of ground as we know, but since mid-August 2017 until now, it has regained 30 percent of its value, thanks to tourists like the Lebanese. But by benefitting from the sales and opportunities there, the Lebanese have undermined the Lebanese economy.

We need a booster for the economy, and this is why we are happy with CEDRE, for example. If it happens, let us say you have investments to the tune of $1.5-2 billion a year, but as we well know, investments are slow to materialize and  impact the economy. Economically speaking, consumption is easier to awaken and faster to react.

What I am saying is that between today and the day CEDRE enters into force, we ought to spend more money in Lebanon. And the good news, as we showed, is that there is money that is being spent, but abroad. 

E   Although we said at the beginning that there is no purchasing power among Lebanese.

I said there are two factors. Part of it is that the purchasing power has definitely declined. The second one is that the purchasing power is being spent abroad. What I am saying is that for national emergency reasons, let’s say for the next two years, every Lebanese citizen should give Lebanon a second chance by collectively spending $1.5 billion in Lebanon instead of spending it elsewhere.

E   What is the incentive? Why would they do that?

It is the case of the chicken and the egg. Whenever the Lebanese spend abroad, they are contributing to making prices more expensive locally. When traders sell larger quantities, there are economies of scale that enter into play, and at the end of the day, they reduce their prices. So the more volume, the more price reductions. We need to find a way to break this curse.

I am addressing this appeal to two parties. First to the Lebanese, telling them that in the coming two years they should spend locally in order to save the Lebanese economy. My second appeal is to the traders’ community to the effect that they should be reducing their prices.

E   More than they are already reduced? We were just previously saying how there are already sales all year round.

They are already, but still, I want them to make a bigger effort because people always complain that it is cheaper [to buy things]elsewhere. We have to make a well-studied effort to have better prices, the best services, and create an atmosphere that is hospitable and conducive to good consumption activity by all Lebanese and foreigners.

E   Practically, how will this be done?

It’s still too early to talk about the practical details. It needs an awareness campaign at the national level, and I intend to undertake that whenever a government is formed. Because this is the only way when you have an amount of money that is available. It is there because it is being spent elsewhere—let’s put it to use in Lebanon, since we are in dire need for this.

E   But consumers are individualistic and tend to think of themselves before the collective good.

This is the whole substance of the campaign. Lebanese are now happy [with bargains abroad] and are benefitting at the individual level, but they are not aware that they are harming themselves at the collective level. We need to raise their awareness through the campaign.

E   Last question, now that the war in Syria seems to be nearing its end, how will that impact the Lebanese trade sector?

It will impact it a lot. Lebanon will be the platform for rebuilding Syria, so it will be a huge opportunity—you are talking at least $200 billion in reconstruction. So Lebanon can participate in many sectors including trade, industry, transport, finance, and so on.

What I care about is surviving the coming two years, because after that you have the reconstruction of Syria and you have the oil and gas. And this is what this plan will do.

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CommentHospitality & Tourism

Zomato’s journey in Lebanon

by Bechara Haddad
written by Bechara Haddad

When Deepinder Goyal and Pankaj Chaddah were just food-enthusiasts collecting delivery menus in Mumbai to post online, it is safe to say they did not expect their idea to grow into Zomato, the F&B behemoth we know today.

Ten years and 24 countries later, Zomato’s decisions remain guided by one simple mission: to provide better food for more people.

When Zomato launched in Beirut in 2014, it was just a discovery platform where people could make more informed decisions on where to eat. As the Beirut team later went on to give our 750,000 users (across the web and app) the ability to order online, book a table, and reap the benefits of our Gold memberships.

Even though today it has become virtually impossible to navigate Beirut’s incredibly rich and cosmopolitan food scene without the app in hand, our journey here has not been without hurdles.

Search and discover

Dining out involves an increasingly complex decision-making process. With so many questions to ponder—who to go with, how much to spend, and what type of cuisine to eat—we want to give our users all the information they could ever need to make the right choice.

This, of course, means that all our data has to be constantly updated to accurately reflect any change at the restaurant, be it as minor as a menu change, or as major as the restaurant relocating. In Lebanon, this is further complicated by the seasonal nature of certain areas when it comes to their F&B outlets, meaning we need to regularly track their operational status. The variability of restaurants aside, the use of our platform is inevitably dictated by the economic state of the country—specifically, people’s purchasing power.

Looking at our simple “cost for two” metric confirms that over the past two years, our users have been browsing for less expensive restaurants, and this trend does not look likely to slow down anytime soon.

To delivery and beyond

In the same spirit of taking the guesswork out of the equation, our online ordering service is now smoother than ever. Several algorithms are constantly hard at work to make sure that everything our users see is uniquely relevant to them. So if they are health-nuts on weekdays, and pizzaholics on weekends, the list of restaurants Zomato displays for them will reflect that very behavior. Not only that, it will introduce them to other great options to make sure they see the breadth of the choices available.

When it comes to paying for the order, however, the Lebanese market still suffers from an overwhelming lack of trust in online transactions and foreign payment gateways, as is clearly indicated by the difference in card payments between here and Dubai.

And even though our half-a-million app downloads indicate some degree of tech savviness in the market, many users simply do not trust that an app can automate their order, and that restaurant staff will receive it as intended.

The challenge does not end with user resistance, it is also inextricably linked to the city-planning—or lack thereof—in Lebanon. Users must input their address before placing the order, and in Lebanon, addresses tend to be—for lack of a better word—subjective. Due to the lack of consensus on street names and building numbers, deliveries will likely arrive late, or require an additional phone call to determine the exact location, resulting in an unpleasant user experience.

Navigating reviews

In an age where influencer marketing is at its peak, and where customers review everything from the jeans they shop for on AliExpress to hotel stays, it is only logical that at the core of Zomato is the customers. And customers will undoubtedly be vocal about their experiences—some more than others.

One of our main challenges has been getting restaurant owners in the mindset of seeing negative reviews as opportunities for growth, rather than as attacks on their businesses.

Our customers like to know the facts upfront, before visiting or ordering from a restaurant. Unfortunately, restaurant owners tend to underestimate the importance of having an up-to-date page on Zomato, and how critical that is for the user experience. So not only do we give owners and managers a unique log-in to have control over their page, but we also provide a nifty free app (Zomato for Business) that they can use to make changes on the go.

A further challenge is that when it comes to the laws related to running a restaurant, the government in Lebanon tends to be somewhat laissez-faire about standardizing and enforcing them. This means that certain establishments may be hesitant to be listed on our platform, let alone get on board with online ordering, since that would require them to submit a set of government-issued documents.

What’s next?

When we hit our 10-year milestone, we said to ourselves that we had only just begun. We are proud to say we still operate as a startup, in the sense that there is always an opportunity to grow with, and learn from, our partners.

This year has been an incredible ride for us. In 2018, we introduced some exciting new features: We now give restaurant owners the ability to tell their brand story directly on Zomato through Sneakpeeks, as well as allowing them to display their hygiene rating—issued by a restaurant hygiene inspection firm.

In 2019, we hope to bring Hyperpure, our new sourcing business, to Beirut, where we would effectively become the supply platform from which merchants can buy organic, fresh produce, as well as eco-friendly packaging. This way, we can keep on guaranteeing better food for more people.

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CommentHospitality & Tourism

Lebanon, expose those hidden gems

by Ralph Nader
written by Ralph Nader

In its 2018 “Lebanon Overview” report, the World Bank stated that “GDP growth in Lebanon in 2017 is estimated to have undergone a slight acceleration to reach an estimated 2 percent, compared to 1.7 percent in 2016. This has been mainly driven by the services and tourism sectors.”

This year, GDP growth slowed again, down to 1 percent, and while tourist arrivals rose by 3.3 percent year-on-year in the first half of 2018, this was a marked deceleration compared to the 14.2 percent growth in the first half of 2017. Lebanon, it seems, still has a long way to go to recover the numbers it saw at its tourism peak in 2010.

In light of the importance of the tourism sector, and the challenges it faces, it is about time Lebanon seriously considers developing a tourism vision and strategy.

A cohesive tourism plan

Developing a tourism plan is the first step toward sustainable and successful tourism. This plan should outline, for Lebanon as a whole and for each region, a clear mission, vision, and positioning, as well as a set of target markets. It should also define roles for all stakeholders, including the private sector, industry associations, and public agencies.

In creating such a plan, one could take Dubai as an example. The emirate’s tourism mission, set in 2013, was to “position Dubai as the ‘first choice’ for the international leisure and business traveler.” This was backed by a solid and quantitative objective: “Our Tourism Vision 2020 is a strategic roadmap with the key objective of attracting 20 million visitors per year by 2020, doubling the number we welcomed in 2012.”

In order to accomplish this goal, Dubai is harnessing the collective power of public and private stakeholders and focusing on different key objectives. Thus, Dubai’s Department of Tourism and Commerce Marketing established a stakeholder engagement committee that meets on a quarterly basis to discuss the status of the sector and its opportunities for growth.

Emphasize promising potential

Lebanon’s plan should focus on promoting and developing the country’s competitive advantages and its core tourism offerings by improving the existing offerings and developing new products that are adapted to each region’s positioning and target markets.

Travel and Leisure magazine ranked Beirut among the The World’s Top 15 Cities in 2018, and named it the Best International City for Food in 2016. The potential is already there and should be capitalized upon, and concrete action plans aimed at enhancing the country’s offerings should be put in place. These plans could include developing an iconic museum for arts, science, culture, and history, which could be designed by a renowned Lebanese architect and ranked amongst the largest museums in the region. They could also involve augmenting key tourist attractions—examples include Jeita Grotto, Our Lady of Harissa, Baalbek, and Byblos (Jbeil)—by developing add-on products such as hotels, restaurants, parks, and entertainment facilities.

To capitalize on achievements in the culinary department, Lebanon’s plan should include the development of fine dining options in Beirut, by attracting international chefs and restaurants, which would firmly position the city as a center of Mediterranean cuisine. Finally, organizing global mega events that would attract tourists from all over the world (for instance,  international music festivals, regional sports events, a women’s summit) would put Lebanon on the international tourism map.

The tourism plan could focus on the MICE (meetings, incentives, congress, and events) market by developing full-fledged MICE infrastructure, ensuring that top convention centers have easy access to shopping malls, transportation, and fine dining.

Smart tourism, which refers to the application of information and communication technology for developing innovative tools in tourism, is the future of tourism in the digital world we live in. In 2017, Singapore became the number one global smart city, beating London and New York, according to a study conducted by Juniper Research. Applied to tourism, collecting data from tourists allowed Singapore to better understand visitors’ needs and behaviors. This information was useful in adapting tourism products, offering tailored services, and communicating targeted messages.

So why not implement smart tourism in Lebanon, starting with Byblos? Byblos is currently facing challenges that are affecting its attractiveness to tourists. Due to recent urban growth and uncontrolled expansion, the old city is separated from the rest of the city by a highway, which limits the connectivity between both parts of the city, increases the traffic in the touristic part of Byblos, and decreases the integration of tourist attractions.

Also, the high pressure on infrastructure and unregulated construction has drastically polluted the air and the water. By implementing smart solutions such as traffic management, energy efficiency, intelligent lighting systems, home and building efficiency systems, and technology ecosystems, Byblos can recover its tourism assets and attract a larger number of tourists.

Infrastructure basics

Even the best laid tourism plans will remain ineffective if basic infrastructure reforms are not implemented in Lebanon, and soon. This includes road management as well as much needed upgrades to the airport.

The only operational civilian airport in Lebanon is designed to handle up to 6 million passengers a year, but each year, since 2013, it has exceeded its capacity. In order to avoid angry scenes at Beirut’s Rafic Hariri Airport, which were seen in summer 2018, effective systems should be put in place.

(There is a plan underway to expand the airport, boosting its capacity to 10 million through a $200 million investment. However, this project is not slated to start until 2020 and has been criticized by industry experts. Speaking to The National, Dr. Nadine Itani, an aviation expert and former member of the International Civil Aviation Organization delegation to Lebanon, critiqued the lack of planning or strategy, calling the proposal an “ad-hoc” fix when what is needed is “institutional reform”).

Aiming to create direct flights to cities with large Lebanese expatriate communities, such as São Paulo in Brazil, Montreal in Canada, and Sydney in Australia, will definitely encourage those with Lebanese heritage to visit the country more often, boosting the tourism and service sectors.

In addition, the creation of a low-cost airline—not outside the realms of possibility (just look at Malaysia-based Air Asia)—would assist in widening the target market and encourage visitors to travel more often. Travelers more frequently book with low-cost carriers, sacrificing the pampering services of regular airlines, such as the complimentary meals and loyalty programs. In fact, four of the top 10 fastest growing airlines, according to OAG Analyzer, are low cost carriers.

It’s all in the marketing

Developing a new brand for the country and promoting it through customized marketing messages will put Lebanon back on the global map. Malaysia’s “Malaysia: Truly Asia” is a famous and excellent example of a destination branding campaign.

Also, increasing the sector’s online innovative presence on social media is another important marketing tool, and is especially effective in attracting millennial customers. “When booking travel, 89 percent of millennials plan travel activities based on content posted by their peers online,” Entrepreneur Magazine reported in 2017.

Connecting with specialized and widely-read travel magazines such as National Geographic, Lonely Planet, and Travel Discovery to encourage them to feature Lebanon on their “hot lists” would be an effective marketing tool, as would leveraging Lebanese embassies in foreign countries to promote the country’s touristic revival.

Build a solid public-private partnership

Even though public-private partnerships (PPPs) may be difficult to execute, the reward is worth the extra effort. A number of mechanisms exist through which the public and private sector can collaborate to help reach these objectives, ranging from small to major projects, such as infrastructure and attraction development. The participation of the private sector in sustainable tourism can be varied, such as marketing and promotion, product development, infrastructure development or renewal, attraction development or renewal, and enhanced productivity and other services.

On the other hand, it is squarely the government’s responsibility to determine and approve a tourism strategy, designate major infrastructure projects, grant project approvals and ease the permits, and in some cases act as a regulator.

Chumbe Island in Tanzania—which once was experiencing the destruction of its native ecosystem, putting the health of its coral reefs at risk—is today globally known for its ecological innovation and exceptional reefs. This success story is thanks to a PPP arrangement, in which the government granted an environmental NGO long-term control over the island and reef. The NGO restored the ecosystem by building eco-friendly bungalows, and a visitor and education center. Today, the tourism revenue from visitors to the island covers all the costs of both the destination operation and maintenance, and the environmental improvement effort.

Enable financial support

Continuous financial support and incentives will enable tourism entrepreneurs to take more risks and develop innovative solutions. Thus, it is important to ensure that funds are easily accessible to newly created companies, as well as existing companies. For example, the Development Authority of Lebanon (IDAL) provides projects in the tourism sector—from hotels, to leisure parks and medical centers—with exemptions from corporate income tax that can run up to 100 percent for a period of 10 years, if certain employment or investment requirements are met.

However, those employment and investment requirements—such as an investment above $15 million and a minimum of 200 employees registered with the NSSF—are only met by large hotels and enterprises, making the tax break a “mission impossible” for small- and medium-enterprises.

In addition, it is true that Banque du Liban (BDL), Lebanon’s central bank, is supporting new projects by providing subsidized loans, but these loans are not well-suited to all types of project, for two main reasons. First, when private banks increased their loan interest rates from 7 percent or 8 percent to reach 10 percent, BDL kept its interest at a 4.5 percent subsidy. Moreover, these subsidized loans are allocated only to new projects, leaving existing projects in need of renovation and refurbishment behind.

Invigorating and rejuvenating the tourism sector in Lebanon cannot continue in a piecemeal fashion. The new government must create a solid and calculated plan, one that acknowledges the role of both the public and the private sectors, and their opportunities to work together.  Lebanon must take back its place as one of the top tourism destinations in the region—2019 is the year to shine bright.

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Company strategyHospitality & Tourism

Venture Group talks expansion of their hospitality cluster model in Lebanon and beyond

by Nabila Rahhal & Thomas Schellen
written by Nabila Rahhal & Thomas Schellen

Marwan Ayoub and Rabih Saba—and their hospitality company Venture Group, specialized in developing and operating purpose-built restaurant clusters—have covered a lot of ground in the past seven years. Today, their team is playing in the premier league of regional hospitality.

Geographically and financially, Venture Group’s cluster business started small. In 2011, Ayoub and Saba began operating a traditional cluster in Beirut’s downtown, meaning they developed a master concept plan for a string of pubs on Uruguay Street. Calculating this project to be worth a few million dollars, they took a gamble on the immediate future. They only had sufficient funds for their first contractual payment when they signed their agreement with Solidere, the Lebanese company for the development and reconstruction of Beirut Central District.

Luckily for hospitality culture in Lebanon, and despite the fact that the Uruguay Street pub cluster did not survive, Venture Group was able to spread its wings financially, geographically, and operationally. Today, the group has three operational hospitality clusters in metropolitan Beirut under its belt (The Village Dbayeh, The Backyard Hazmieh, and Restos Saint Nicolas in Ashrafieh) and another five cluster projects under development from Beit Mery to Saida.

Each of their projects costs $5-10 million in direct investment and can accommodate between 12 and 20 tenants, each of whom is expected to invest between $300,000-700,000 to outfit a hospitality outlet in the cluster, with the investment dependant on the size of the outlet.

Venture Group’s ascent from downtown operator of a pub environment to sought-after developer of clusters in Lebanon with a pipeline of million-dollar projects is notable, particularly in a not uncomplicated economic period. However, the real validation of Venture Group’s concepts will emerge in the next expansion stage, which looks to the Arab world. The group has signed agreements for three $50 million plus (in total value) multipurpose entertainment clusters in Egypt—with the first opening in February 2019—and is currently proactively scouting projects in the Gulf. “We are only looking at countries where we can have more than two to three projects and this is why we are not considering Qatar or Bahrain. We were approached to open in Romania, and we will, because it will serve as a base for Eastern Europe,” Ayoub says. Beyond such limitations, however, the entrepreneurs are intensifying their consulting activities.

Ayoub says that each project in Lebanon adds incrementally to the total value of Venture Group. The first two to three projects provided a basis to break even, in terms of covering overheads and staff costs of the group. Each additional project, in his assessment, will generate  $500,000 to $1 million in profit contribution to the group.

It seems the duo has struck gold—even before one accounts for the group’s core intangible asset, which is learning from successes and failures in developing hospitality clusters in Lebanon, where managing successful F&B outlets can be a real challenge for even the most seasoned operators (for more on that see F&B overview).

A cluster monopoly?

Uruguay Street was arguably the first model in Lebanon of a single operating entity running a common space that accommodates several F&B outlets. While it was not the perfect example of a hospitality cluster (Venture Group only operated and controlled one portion of the street, while the remaining portions were owned by other investors who were not obliged to abide by the group’s rules), it opened Ayoub and Saba’s eyes—and the eyes of other hospitality operators—to the potential of such a formula in a country like Lebanon, where social life is key.

Following Uruguay Street, Venture Group opened their next three clusters within a period of three years. Other operators also tried their hands at the cluster model, with around a dozen similar hospitality projects opening in Greater Beirut and various mountainous areas in the last three years—some only minutes away from Venture Group projects or from each other (for more on the unhealthy competition this creates, see F&B overview, page 98). However, few of these projects have enjoyed the same success as Venture Group-operated clusters.

As Saba explains, the group created an unintentional monopoly of the cluster model. “We didn’t intend to fully monopolize the market—we were just starting and didn’t know what would happen. What we were sure of was that we wanted to be fast in developing these clusters while learning from our mistakes and avoiding them in the next project,” he says. He goes on to explain that leveraging economies of scale and collective experience to service all of their other clusters is a key advantage they have over other developers, who typically operate only one cluster project.

Lessons learned

Indeed, Venture Group utilized their experience in each cluster to optimize their model, with the result that each project cost less and profit ratios looked healthier, according to Ayoub. The most important of these lessons is being cost conscious, according to the two partners. “You have to do a proper financial engineering exercise because having the right equity leverage in the right structure can make the entire difference between losing money and making money and advancing investors’ ratios,” Ayoub says. He offers the example that investors might say they do not want subsidized loans since they have the necessary money, yet the savings from a subsidized loan can reach 30 to 40 percent of the net ratio.

Maintaining a good reputation with tenants, even at the group’s own expense, is another learning curve on which Saba elaborates. He recounts how the canopies they had initially constructed in The Backyard Hazmieh could not adequately withstand the winter rain and were a source of nuisance for tenants and customers alike. The partners decided to construct all new canopies on their own dime.

Designing the project right is also an important factor in a successful cluster; the ratio between indoor and outdoor spaces, and the number of outlets per project, should be taken into consideration. “After the Ashrafieh experience [with six outlets in Restos Saint Nicolas], we wouldn’t do anything with less than 20 ‘keys’ (the term Venture uses for outlets in its clusters),” Ayoub says. “However, we have devised a clever model in seasonal locations, where the project expands during the high season then goes down to the minimum number of units needed to serve the community in the low season, thus offering more value per customer.” He explains that this is achieved through the use of rooftops and gardens in the summer as fully operational outlets, whereas in the winter the same areas are used as landscaping spaces.

Being able to reinforce rules and regulations, especially when it comes to music volume, is another important factor and a lesson the partners learned from Uruguay Street. Keeping the project alive with ongoing animations—such as weekly live performances or seasonal popup markets—is also important for the success of a cluster, as is having the right client mix.     

Fueling expansions

These learning curves born of experience do not come cheap, and the two men admit that it continues to cost them, even if they have made lemonade out of past lemons. As Ayoub explains, they have utilized lessons learned to design a business model whereby they sell their services to people who have idle assets and want to turn them into income-producing ones, or those who have cash and want to invest in the hospitality industry.

In what Ayoub describes as a turning point in their company’s short history, they decided to become an asset-light company. “The first drive of expansion was that we need to let go of the idea of owning the project and begin servicing other investors,” he says. “So we became an asset-light company that owns the concept in the sense of developing the concept, which includes concept design, architecture, leasing it on behalf of owners, and running it for 10 years—typically like hotel chains would do with hotel owners.” Since their investment in each project is now lower than before, they are able to see faster ROI and thus maintain momentum in launching projects, with five projects currently in the pipeline.

This idea of selling their service and expertise resonated well with would-be investors across all of Lebanon, but Venture Group decided to focus its energies on areas outside of Greater Beirut. “We are being offered new projects by the minute in Greater Beirut, some of which are in proximity to our existing clusters,” Saba says. “But we took the decision that if we use our efforts, while making the same money, to upgrade other communities, we will bring more value in the sense of job creation in the outskirts of Beirut and would not cannibalize [our existing projects].”

The partners estimate that every project they open in areas outside of Beirut (such as Saida or Zahle) directly creates 500 jobs along with another 500 jobs. Venture Group also directly invests $10-15 million, which (by their own assessment) makes the company the biggest driver of investment in the Lebanese tourism industry for the last four to five years.

Hospitality clusters for all

When they are approached with a new project in an area outside of Beirut, Ayoub and Saba consult the usual suspects—otherwise known as their regular tenants—in an initial phase they call concept testing. “When developing clusters, there’s a phase we go through, which is testing whether renowned brands are willing to go into such an area, to start with, and second of all, in such a cluster,” Saba explains. “This phase gives us a lot of insight because these brands are in better touch with the end users. This is because these operators know where their delivery market is and the profiles and spending power of their customers vis-a-vis the project that we’re developing.” He explains that this exercise gives them confidence regarding the project’s potential success, and this is backed by a letter of intent from the operators.

Venture Group then approaches the community’s local authorities to ensure their cooperation. Ayoub and Saba say they are usually welcomed and supported by the local authorities because of the added revenues they will inject into the local economies through their ventures. They then meet with the local business community to assure them that they are not there to compete with them, but rather to offer them a better deal than all other tenants—including subsidizing their inclusion in the project—should they choose to join the cluster. Having well-known local outlets join the cluster is strategic, given the traffic their names would bring into the project, Ayoub explains.

While being in a cluster would benefit a tenant through the brand exposure to around 900,000 visitors a year, some operators choose to remain outside of a cluster due to considerations such as rent, Saba says. Those who remain outside the cluster still benefit from increased footfall in the community as a result of the cluster, which may offset decreased footfall due to competition.

As with all Venture Group projects, these clusters are designed for the local population primarily, but stand to benefit from both local and foreign tourism. “We are very keen on introducing elements which would make the project a one-stop destination for tourism,” Ayoub says. “For example, in Saida, we will go to the producers of local crafts and give them small points of sale, which would allow tourists to make just one stop and buy everything the area is known for. In Zahle we are doing the same thing with the wineries and dairy producers. We will also have one landscaping element which makes the project very visible and so somehow a tourist destination.” He notes that their projects would provide a safe environment for school trip lunches and local tourists looking for a clean meal.

Umm El Dunya

Venture Group has taken its asset-light business model and its expertise to Egypt and is benefiting from the lack of lifestyle service providers there. Ayoub explains that those who have the know-how develop their own projects rather than sell their expertise as Venture Group does, thus their first project in Egypt has a retail element. “The market there allows for ambitions in taking on larger projects because there aren’t any service providers there yet, so we’re taking on supermarkets, retail, cinemas, and we are operating a restaurant park with 50 restaurants and a mall behind it,” Ayoub says. He notes the difference in scale between Egypt and Lebanon, with one project in Egypt comprising the same number of outlets as all of their projects in Lebanon to date.   

Indeed, they seem to have penetrated the Egyptian market at the right time. “If you went to Cairo 10 years ago it was totally different from what you see now in terms of the taste, the exposure, the lifestyle … and they are developing by the minute, so maybe in a few years we will not be competitive anymore because they have more money than us, and they are fast learners,” Ayoub says. “We need to be positioned among the first service providers in a very short period of time, otherwise they will catch up with us.”

Venture Group is not worried that Egypt will fall from grace in the same manner as Iraq’s Erbil, but even if that did happen, Ayoub says that since they are an asset-light company they would not lose much in terms of investment.

Saba sums it all up by saying: “The idea of grouping a number of lifestyle facilities including restaurants and bars within the same address has been successful. We managed to master the learning curve of the details in our investment model, the structuring of finances, servicing the clients, renting the shops … you name it. But at the end of the day, four years ago, we were all wondering if this model would work and survive in the Lebanese market. And it did.”

It did, indeed. And with the velocity that Venture Group is moving at, this Lebanese-grown hospitality model could prove a success in multiple markets soon.

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F&B OverviewHospitality & Tourism

Lebanon’s seasoned F&B operators talk challenges and secrets to success

by Nabila Rahhal
written by Nabila Rahhal

When it comes to the food and beverage (F&B) industry, Lebanon is a country of contradictions.

Although no exact figures are available, those in the industry largely believe that almost the same number of restuarants that closed have also opened. In certain areas, such as the summer hotspot Broummana or in Gemmayze with its restaurants, footfall and the number of new venues is increasing, while in other areas, such as Jounieh and Antelias, customer traffic is slowly dying down. The country is facing an economic crisis, and yet many of the city’s restaurants and bars are abuzz with people having a good time.

Operating a restaurant or club in such a mercurial economic climate is not an easy task, and indeed many have failed. Today, only the fittest in the industry are surviving and growing their businesses, despite decreasing purchasing power among locals and tourist levels still down from their height in 2010. These F&B operators share their frustrations, but also their triumphs and the secrets of their success with Executive.

First, the good news

Although local economic experts speak of the low purchasing power among Lebanese, it seems this has not significantly affected their habit of going out. Those who operate medium- to high-end nightlife concepts tell Executive that clients continue to frequent their outlets. Toni Rizk, CEO of TRI Concepts, which operates The Bohemian and Trumpet, says The Bohemian in Mar Mikhael has witnessed a 30 percent growth in revenues as compared to 2017, and that his seasonal outlet Trumpet, in Broummana, also grew 20 percent.

Meanwhile, a lunchtime drive by the upscale restaurants in Minet el-Hosn, in Beirut’s Downtown—known for attracting bank executives and company CEOs working in the area—or a nighttime stroll through Mar Mikhael, or a trip to the seaside arena street in Downtown—where several of the city’s nightclubs are located—confirms that the cultural desire to socialize is still thriving, among a segment of society at least.

This attitude, along with Lebanon’s rising reputation as a foodie destination, has encouraged new operators to invest in F&B concepts in Lebanon, despite the risks. “In terms of the economic climate in the country, there is nothing very encouraging for opening a new business. But knowing the culture here—how we want to have a good time no matter what—and also knowing how Lebanon is becoming a destination for the food and beverage industry, we were motivated to go ahead with Zimi,” says Ali Daoud, one of the three partners (along with Rami Demirdjian, the main investor, and Barbara Massaad, food consultant and chef) behind the Mediterranean restaurant, which recently opened in Gemmayze. 

When the going gets tough

Although things seem rosy on the surface for some F&B outlets, digging a little deeper reveals that the regional and local economic situation has taken its toll on even the most resilient F&B operators.

Tourist numbers in Lebanon have been increasing year-on-year since 2014. However, these increases have not yet made up for the plummet in tourism numbers between 2011-2013—and so far in 2018, the numbers are trailing close behind 2017 figures. Amid these challenges, F&B operators have been relying more on Lebanese expats enjoying a vacation at home than foreign tourists—but even the expats have their share of economic problems. “Lebanese expats are suffering because of the regional economic crisis, and this is affecting the money that comes into Lebanon,” says Dany Aprat, managing partner at Tavolina, an Italian restaurant in Mar Mikhael, and more recently at Slate, a casual chic international restaurant, also in Mar Mikhael.

Samer Rizk, co-owner of Downtown’s rooftop bar Capitole, and wine bar and restaurant Stem in Monot, also speaks of expats in the region not making as much money as before, noting that they have been visiting Lebanon less and staying for much shorter periods than they did in previous years. Instead, he explains, they are traveling elsewhere to have new experiences and enjoy a proper vacation away from what he describes as the somewhat “unhappy feel” that has fallen over Beirut since November 2017 (the time of then-Prime Minister Saad Hariri’s since-rescinded resignation).

More players in the game

Despite the bleak scenario, the F&B industry continues to attract investors, be it ones who are new to the market or seasoned operators expanding their businesses.

Operators of seasonal summer venues are continuing to open winter-only venues as a way of retaining their staff—whom they have invested time training and would not want to replace every year—and their clients’ patronage. The latest such model is McQueen, a winter-only bar-restaurant opening December 2018 in Saifi, which its owner, Samer Rizk, says will have the same spirit and clientele as Capitole as the natural extension of its summer counterpart.

Events manager Alain Hadife’s Zero 4 cluster in Naccache finally opened its doors in early 2018 and once again brought forward the debate regarding clusters versus standalone venues. Aprat, who opened Tavolina’s second branch in Zero 4, says it all depends on the synergy between the cluster operators and the tenants. “I tend to prefer being a standalone [venue], but I don’t mind being in a cluster if we are aligned [with other operators] on the same vision. But when you are alone, you definitely are freer to make any decision you want, whereas in a cluster you have to abide by certain guidelines.”

Samer Rizk, who experienced being in a cluster with Trumpet in The Village Dbayeh, also says that being a standalone venue allows for more freedom, for example, in which type of music one wants to play or what events to host.

Gemmayze is once again returning to the spotlight, but this time as a creative culinary destination rather than as a bar-hopping strip. “The rents went down after the demand decreased around three to four years ago when Mar Mikhael began,” says Zimi’s Daoud. “This encouraged some investors to open new F&B concepts here and they did well. Their success got people used to the idea of going out in Gemmayze again, which in turn encouraged other restaurants to open. So gradually it’s becoming an F&B street. We are complementing each other and catering to all ages without competing with each other.”

The upper part of Monot Street in Ashrafieh is emerging as a destination for medium- to high-end eateries. Samer Rizk says he chose this area for Stem because of its authenticity and charm—a residential street with a mix of old buildings and high rise towers. He says the neighbors often stroll down for a bite, which adds to his footfall. Toni Rizk also chose to open his newest concept, an Andalusian bar-restaurant called Almodovar, in this corner of Monot. “We liked the area because the venues are big, well-designed, and run by established operators. We feel that the area can live for 10 years and more,” he says. He notes that the limited spaces available for new venues to enter makes the area even more attractive to him because of the certainty of no overcrowding.     

Seasonal outlets in mountainous areas outside of Beirut are still a preferred way of escaping the summer heat, and F&B operators have continued to invest in such projects. This year, Broummana was the destination of choice, with about a dozen new concepts opening there in summer 2017, causing traffic problems and increased competition.

The effects of oversaturation are also being felt in Mar Mikhael, which often feels like a long parking lot. The congestion has the area’s residents, the outlets’ clients, and even the operators themselves complaining. This bedlam, says Toni Rizk, could be resolved by regulating the sector. “When we first opened four years ago, Mar Mikhael was a lot calmer,” he recalls. “Today, it has become overcrowded, and this is negatively impacting business as there are more complaints from residents and thus more inspections from the concerned ministries. This is because there is no regulation in this industry—they give licenses to everyone on the same street, and when it gets oversaturated and people complain, they start fining the business owners who have already invested in their business. They should limit the number of venues per street from the beginning.”

Secrets to success

Given such a competitive environment, it is no wonder that only experienced operators have managed to keep their outlets full. For Aprat, who has successfully been running Tavolina for seven years now, it all lies with the four Ps of marketing: price, product, promotion, and place. “In university, they teach you about the four Ps, and you can apply them to running a restaurant business as well,” he says. “It’s that simple, but it’s not easy because you have to be able to combine these four principles well, or else it won’t last.”

Toni Rizk also believes that consistent good management—which manifests itself in good service, food and drinks, and ambiance—is key, and cites it as the reason why The Bohemian has remained popular for four years now, while other venues in Mar Mikhael have opened up and shut down within a year. 

Barbara Massaad, chef at Zimi, believes restaurants succeed when they have a soul. “People are realizing that restaurants need to have people behind them,” she says. “Typically, restaurant operation is more of a business, or copy paste, or impersonal, but I am happy to see now in Lebanon that more and more restaurants are opening where you have the personification of the owner, or the chef, or the person working in that restaurant, and this is what is needed. Because of the tough economic times we’re passing through, it’s a survival of the fittest environment, and this is where you are going to see authentic concepts with heart surviving.”

Christine Hauser also believes that the Lebanese are looking for a food experience these days. “People in Lebanon don’t want to feel like they are being ripped off anymore, so we want people to feel that they got their money’s worth in terms of food quality and variety when they come to our restaurant, especially since everyone is cost conscious these days,” she says, speaking of her new restaurant  Alma located in Bosa Nova hotel, also for Hauser, in Sin el-Fil.

As another year wraps up, those in the F&B industry are already energetically working on realizing their 2019 goals and expansion plans, despite the challenges they continue to face. This is because they recognize that they operate in a sector that never sleeps, and through which the Lebanese will continue to enjoy their days and nights, come what may.   

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CommentHospitality & Tourism

Tech opportunities for the Lebanese hospitality industry

by Mohammad El Hoss
written by Mohammad El Hoss

It is the end of 2018, and the tech-enabled generations are finally becoming the decision makers in their workplaces. We live in an era where technology is no longer an industry, but rather a layer that transforms all industries, making them more connected and efficient.

There are more creative and brilliant minds in Lebanon than ever before, constantly solving problems and shaping new value chains that will simplify how we do business for decades to come.

Barriers to innovation

Nevertheless, as any entrepreneur in Lebanon knows, there are many barriers that currently slow down the innovation and adoption of new business models and technologies. Such barriers include complicated regulations on e-commerce as a business, as well as the infamous electronic signature law, which state that electronic signatures, even if verified, are not legally binding. The process of establishing and registering a sal company is in itself tedious, requiring entrepreneurs to navigate all kinds of legal obstacles.

The HORECA industry backbone, which provides services and supplies for hotels, restaurants, and cafes, is ready to adopt innovation and expand, in spite of the various industrial barriers. In fact, the HORECA market is already one of the largest in Lebanon, according to BankMed research and a report published by the World Travel and Tourism Council in 2016. That year, the HORECA market accounted for at least 20 percent of the Lebanese workforce, the report shows.

As it stands, 66 percent of buyers in the hospitality industry are already looking for online alternatives to spare them the hassle of managing the currently offline supply chain, according to CloudSale’s HORECA market survey conducted in May-June 2018, which gathered feedback from more than 50 HORECA outlets in Lebanon. The solutions the buyers  are looking for are not re-inventions of the wheel, but rather tools that digitize the workflow they are already familiar with. The biggest problem holding back the shift to digital is industry standard, unregulated, deferred payments. A lot of startups have made it their mission to come up with innovative solutions with banks to deal with deferred payments digitally. However, convincing banks and financial institutions that there needs to be a product before proven traction and sales is a difficult task.

Moving markets online

On the other side, the suppliers of the HORECA industry are ready and eager to list their products online. Even for the most traditional sellers, there is little downside to opening themselves to additional sales channels, especially if these channels are efficient and scalable. However, most of these suppliers do not have their data readily available to transfer online, necessitating an initial investment of time. They need to shoot photos of the inventory and hire further support to organize the companies’ inputs. All this can be difficult to carry out without having seen actual sales growth and cash invoice settlements first.

The path forward is clear: There needs to be a mutual effort between regulators to create predefined frameworks for exchanging products and payments online. Once this happens, financial institutions and banks will be ready for mass adoption, and hospitality businesses will be the first to benefit.

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CommentHospitality & Tourism

Give Lebanon’s tourism industry a chance

by Dagmar Symes
written by Dagmar Symes

After five years, my assignment has come to an end, and here I am reflecting on the country I fell deeply in love with. I was blessed to be entrusted with a luxury hotel opening under very difficult and challenging circumstances, and I have enjoyed my time at the helm of the InterContinental Phoenicia, La Grande Dame du Moyen Orient. Beirut was always known as the Paris of the Middle East, and it certainly has the potential to reclaim this title with its present attributes. I have experienced Lebanon as one of the most modern, stimulating, breathtaking yet nostalgic, disruptive places—the contradictory land of the cedars.

Geopolitical challenges and negative perceptions abroad have made Lebanon’s future dependent on the region’s political playground. To return Lebanon to its rightful place as a tourist destination, the country has to be promoted in a purely positive light based on its strengths and unique features—particularly its diversity. It is renowned for its abundance in nature, rich history, vibrant art, music, and fashion scene, culture, architecture, culinary excellence, and, foremost, its friendly, hospitable, and generous people. Should the new government come up with a holistic approach to drive the country’s touristic development in the right direction, Lebanon will fly. This includes the redevelopment of the country’s infrastructure, such as broadening public transportation, the further extension of the Rafic Hariri International Airport, and improvements to the road network.

Although I understand the environmental, economic, and political challenges, Lebanon deserves to be promoted as the Middle Eastern go-to destination. Only then will the hospitality sector have a true chance at healthy development and prove its legitimate position in the international community. Who would have ever thought that you could ski in the heart of the Middle East?

Lebanon boasts the most reputable academic institutions in the region and is a true talent provider in all aspects. Conversing in three languages, as well as having an excellent education provides a huge competitive advantage within the international professional community. I feel, however, that the country’s privately financed education, to some extent, undermines the need for basic expertise within the tourism industry. While education is key to success in life, hospitality is a service industry in which attitude, humbleness, and the right skillset are the basic pillars. Society still stigmatizes certain professions and views certain operational positions in the hospitality industry as somewhat degrading and non-reputable. Yet, the hotel industry relies on its hardworking operational team members, who form the core and the heart of the industry. In other words, the norms set by society are somewhat contradictory to our business. Furthermore, financial investments in the education system are highly unlikely to give good returns at short term.

Technical and vocational institutes need to be elevated in the public esteem to the level of a prime talent hub for our industry and must increase in number. Meanwhile, private institutions’ teaching should adopt the humbleness and service-oriented approach that is the base of our industry. Society has to mature and develop an honest open-mindedness to  educational diversity, gender equality, religious co-existence, and multinational cultures.

One of Lebanon’s main challenges is that even the younger generation live in a world of “what could have been” instead of “what could be.” Past-related thinking prevails against future oriented progression—passive versus proactive. Change is necessary for extraordinary results, thus actions speak louder than words. The habit of blaming the establishment and complaining rather than envisioning and creating the future has to be addressed. The Lebanese people have proven to be resilient and to fight against all odds, while bearing in mind that government institutions will likely remain an issue. Society can have a huge impact on the positive development of the country—whereas a negative mindset will never give you a positive life.

Lebanon’s hospitality has it all, if society anticipates a future-oriented growth mindset and positive thinking, despite ongoing internal and external hurdles. As a German, I dare to draw a parallel. If the Germans tore down the wall, why can the Lebanese not tear down their virtual wall? “Wir sind das Volk!” I have never been intimidated by how it is done in Lebanon—“wasta and habibi”—but have focused instead on achieving what needs to be done, in the right way. Lebanon is so close to my heart that, as an adopted citizen, I see the beauty and opportunities lying ahead for a prosperous future.

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