The fortunes of the Lebanese hotel industry and of enterprises in the hospitality sector have been entwined not only with the economic problems that erupted in late 2019 and coincided with the people’s outcry for systemic change when the Lebanese community took to the streets protesting yet another increase of taxes and demanding a change to their fragile status quo way of living. Losses of purchase power of the disenfranchised population and the demand for ousting corrupt decision makers in political class came together with the pandemic of COVID-19 and the physical destruction wreaked by the August 4, 2020, explosion at Beirut Port in a ruinous deluge that shook the hospitality sector of Lebanon from the bottom to the top.
The food & beverage and hospitality industry
The food & beverage business has always relied on tourism with its backbone being the internal Lebanese community purchasing power. Figures from the Ministry of Tourism show that 1,592,301 visitors entered Lebanon so far in 2017 (until October 2017) which energized the industry following a stagnant period.
Since 2017, the F&B industry has been on a slow decline, reaching its tipping point and rapid fall with the revolution in 2019, and then a bigger decline due to the COVID-19 pandemic in 2020. According to Yasser Akkaoui, Executive Magazine’s editor in chief, the F&B and hospitality industry “is reliant on physical contact, is reliant on physical movement, which puts you (the industry) at a specific risk that is beyond other industries. And of course the attractiveness of Lebanon to tourism has been diminishing in the last few years, not only because of COVID-19, pre-COVID, it has been impacted due to certain political and geopolitical lines that Lebanon has adopted, and of course because of the purchasing power and the economic situation which diminished the propensity of consumers to spend on restaurants.”
Maya Bekhazi Noun from the syndicate restaurant owners in Lebanon says that “It’s very important to note that the F&B business in Lebanon was at one point mainly sustaining on tourism, on tourists or, on Lebanese expats who would come to Lebanon to spend in Lebanon money; and people in Lebanon also, a lot of people used to. The spending power came also from families who used to send to their families money from the outside in order to spend.”
The main challenge the sector is facing, she explains, is one being faced across the Lebanese economy: the dollar liquidity crisis and increased price of the dollar in the unofficial foreign exchange market, which is impacting both the ability of businesses to secure necessary funds to pay importers and their bottom lines. “Today, as restaurant owners, we spend most of our day identifying which suppliers take Lebanese lira versus dollar or checks versus cash,” Bekhazi says. “Most of them are now asking for cash in dollars while very few of our customers are paying their restaurant bills in dollars anymore—and when they do it is by credit card, not cash. So, we are having to buy dollars at the market exchange rate, which can reach 2,400 Lebanese pounds to the dollar on some days, while as restaurants we follow the official rates of 1,515 Lebanese pounds on our POS.” She explains that restaurants cannot increase their prices by much for fear that consumers will no longer dine out, and so this is a losing situation for the sector (see Executive’s previous story Lebanon’s economic crisis weighs heavy on F&B outlets and hotels).
It takes a drastic approach and steps to revive an industry relying on physical and social contact. The political instability severely keeps impacting the internal Lebanese market and the purchasing capacity of the Lebanese community. Also, the tourism sector is struggling mostly in terms of safety in Lebanon due to political unrest; while travel restrictions due to the pandemic came in as the cherry on top of the downfall.
Diving a bit deeper on the political side, the fluctuation of the Lebanese Lira is also seriously crippling the F&B industry and not helping the stability of the products and services offered to the public. While the official rate in the banks is still fixed, the market and organizations face a different reality buying much needed material and products with rates up to 15,000 Lebanese pounds per dollar. This instability continuously affects product and service prices which is showing a gradual increase in monetary value, and unfortunately a decline in the overall quality. Several brands and products have become scarce such as baby milk formula, medicines …etc.
“According to data tallied by the Chamber of Commerce, Industry and Agriculture of Beirut and Mount Lebanon (CCIA-BML), 280 food and beverages producers are presently registered as members of the CCIA-BML and employ a total of 17,149 employees according to an estimate based on the classification of companies in each category. Total registered capital, at incorporation, of these firms stands at around $290 million. The majority of producers, nearly 79 percent, are small and medium enterprises.”
Joumana Dammous, chief executive officer of Hospitality Services, voices her concern and optimism emphasizing that “it’s quite breathtaking, I mean it’s really, how can I say, it’s really very heartbreaking to see how difficult and how many challenges we all have to face, but as just said, we are, I think there’s something about us as people that makes the whole situation different, we react, we are proactive people, and if you will go through all of us, through each and every one of us, you’ll see we’re all creating new solutions, inaudible] events honestly, events have been totally devastated, have been totally disappeared from the equation at this time, we’ve been suffering as event organizers for the last year and we had to reinvent ourselves totally.”
To move forward, industry stakeholders have to collaborate on finding new and better ways to get the industry out of the slump. As Georges Ojeil, general manager of Four Seasons hotel in Beirut, puts it: “We are so proud of Lebanon, we are so proud of the people of Lebanon, and we will never be cheap. We are full of heritage, we are, you know, full of history, and then full of knowledge, and then even promoting Beirut as an accessible destination, this would bounce back eventually with time because we’re going through economic collapse that would eventually balance in some time when the demand would be here.”
The optimism is here, the Lebanese resilience is rooted in its culture and history. Our cuisine made it around the world with an astounding reputation mainly thanks to our large diaspora and to the attractive Lebanese tourism, culture and history.
Akkaoui’s approach to moving forward was in line with many of the participants at the roundtable. Looking forward to reviving and helping both the industry and the job market need a new and upgraded approach. “We need to look at how this disruption has impacted us. Lebanon has always been the country where we validate ourselves. Where young people or maybe less young people would also as entrepreneurs always venture into new concepts, and there was quite a turnover on these concepts, a lot of them succeeded, a lot of them grew in Lebanon and outside of Lebanon and we can name many.
And this is the biggest disruption, first Lebanon being this entrepreneurial hub where young people or concept developers would have the courage to go and launch their concepts out of Lebanon, refine them through user experience or consumer experience, and once they reach a certain maturity within the local market, it was time, and a guarantee for success outside of Lebanon, because the Lebanese consumer is sophisticated enough for them to take, to crash-test if you will, these concepts, that’s why somehow, if you succeed in Lebanon you can succeed anywhere else in the region, and so this is the first disruption.
So how do we make sure that these young entrepreneurs have, can still be incentivized to launch these concepts out of Lebanon? Does the consumer have the purchasing power to take these concepts for a test drive, if you want? So this is the second question we want to ask. Innovation, because also the Lebanese restaurateur has also been innovative, not only in the recipes, but also in the systems that they are using, and they are even innovative in the legal frameworks they use to export these concepts, so franchising.
First, we need to get the ball rolling, to find and act on initiatives that revive the Lebanese Industries. Following that step, there are many maneuvers and funding opportunities from the Lebanese diaspora and from NGOs such as the United States Agency for International Development (USAID).
“USAID has the partnership opportunity open for the actors of this sector and the associations including the restaurants association so we can invite you to propose your ideas for partnerships where we can put our resources together and bring some donor funding to support initiatives on the short term on the medium term and maybe later also on the longer term … we’ve mapped the stakeholders, we’ve mapped the chains, we’ve mapped the systems and we’ve put all the numbers that we had knowing that a lot of the statistics can be missing particularly the last 2 years but with the help of all the stakeholders I think we can help rebuild this together, put the baseline but especially put the plans for the future to regain the maximum share and the maximum growth that will support the economy of the country,” says Georges Frenn from USAID.
Involving the private sector to take part in the reforms of the F&B and hospitality sector is a must nowadays as Bekhazi mentions: “We can’t even prepare our own profit and loss statement with this current situation. However, all this is still a survival mode; what would make it a long-term recommendation would be definitely to have the private sector take some, a share in reforms, without reforms the whole sector would not be able to survive on the long term.”
“There’s always hope. There’s always hope, and as Lebanese we hope, hope is something that pulls us and drags us. So yes, there is hope but as everybody said, as we are all in this together we need to pass this moment, this very tough moment we are all facing in order to rebuild ourselves, and while we are doing that use this time to train our teams, to organize ourselves, to take this moment at the moment to be ready when things are better,” says Joumana Dammous emphasizing on the need to keep moving even in tough times like these. While the funding is scarce, we can focus our efforts on planning and strategizing, and when the opportunity knocks on our Lebanese doors, we will be ready to get into action.
Akkaoui’ vision falls in line with most of the participants in spreading hope and the call for action. His perspective is that “COVID-19 will release its grip on us most probably within the coming few months or early 2022 and this will be the right time to go out there maybe and seek investors or present to investors in order to invest in these concepts’ expansion outside of Lebanon. So I see these synergies and I see this is the perfect time to launch initiatives that allow entrepreneurs that have really invested a lot in the last few years in making sure and validate during which they validated their concepts, this is the right time to accompany them to help them creating a platform that we can share experiences that will allow them to capture a lot of these concepts.”