The 'haunted' sector? Half of Lebanon's hotels have partially closed down
Iraqi or Jordanian tourists are no substitute for Gulf tourists
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Lebanon’s hotels are slowly dying. Observers say the hotel sector has never experienced conditions as tough as the ones they are going through today. If things continue like this, we could soon hear about the closure of some of the biggest and most prestigious hotels in Lebanon.
The Metropolitan, the Acropolis, the Habtoor, the Century Plus, the Royal Park, and the Grand Hills hotels; the list goes on and on: In short, Lebanon’s hotels are in danger, from Beirut and Mount Lebanon, to the North and the South. The owners of these tourist enterprises have incurred huge losses in the last three years. With tourism in the country nearly grinding to a halt amid a great decline in the number of tourists travelling to Lebanon, hotels have accumulated debts that have denied them the ability to take initiatives and develop. The owners of many of these enterprises have since taken their investments to other Arab and foreign countries.
Pierre Ashkar, president of the Federation of Tourism Syndicates in Lebanon, reveals some shocking numbers. He said that up to 50 percent of hotels are closing either partially or completely, a figure he explained was extremely alarming and proof of the extent of decline in this sector. Nevertheless, Ashkar said that partial closures in the hotel sector, in parallel with a limited number of job cuts, are the best way to curb the steady rise in room rates, but stressed that this policy cannot be sustained for too long, saying it was an emergency measure pending the recovery of tourism. The head of the Syndicate of Hotel Owners in Lebanon estimates that turnover in the hotel sector has declined by 60 percent this year compared to 2010.
150 new licenses
Oddly, in parallel with these figures, 150 new licenses were granted to tourist enterprises and hotels. This, according to well-informed economic sources, restores some of the lost balance in the hotel sector. Despite tough economic conditions and security risks, Lebanese expatriates and investors are playing an important role in alleviating this crisis. Today, tourism in Lebanon relies primarily on Lebanese expatriates visiting Lebanon as well as local tourists.
According to Ministry of Tourism estimates, the number of tourists until February 2014 dropped by 13.4 percent, or 145,000 tourists, in the first two months of the year. Tourists coming to Lebanon are predominantly Jordanian, Iraqi, and Egyptian. Furthermore, stricter measures along the Lebanese-Syrian border have adversely affected tourism, real estate activity, and foreign direct investments.
Downturn and stagnation
Ashkar expressed regret for the state of the hotel sector in the country. He said, “Tourism is in a dismal shape. There is stagnation in new projects, amid security tension in a number of Lebanese regions including Tripoli, Saida, and the Bekaa. Beirut is the only viable tourist destination left for us.”
Beirut now has the third lowest hotel occupancy rate for four and five star enterprises among the capitals of the region, bearing in mind that Beirut alone has 118 hotels equipped with high-quality amenities and services. In addition to difficult conditions in the country, the Lebanese hotel sector was already suffering from serious structural problems, requiring them to pursue policies for integration, merger, and expansion, and at the same time, prove their worth and flexibility, improve their cost-effectiveness, and upgrade the quality of their services to be able to cope with Arab and international competitors.
The value of hotels as investments
Ashkar argued that hotels are real estate developments first and business ventures second, and thus have a great investment value. From this standpoint, Ashkar says that hotels are not likely to go completely bankrupt because of temporary unrest, stressing that most hotels in Lebanon are only partially closing down. He said, “For example, the value of the Hilton hotel exceeds $500 million, so if its losses amount to $5 or $6 million, which is a reasonable limit, this does not mean it will go bankrupt.”
On the other hand, the revenues of Lebanese hotels calculated on a per-room basis declined by 24.9 percent.
Arab tourists are the backbone of Lebanese tourism
Ashkar explained that the state of the hotel sector is a reflection of the state of the tourist and other sectors. Further complicating the situation, Ashkar continued, is the fact that the losses incurred by hotels and their debts have meant that many restaurants and investors have not been able to collect their dues. Ashkar said the problem essentially was the boycott by Gulf tourists, who are indispensable to the tourist sector, saying that the average tourist from the Gulf spends more than $600 per day.
However, the numbers improved somewhat in past three months. According to statistics by the Ministry of Tourism, the number of Arab tourists in June of this year rose by 29.3 percent compared to the same period of the previous year, with Arabs accounting for 33.2 percent of total foreign arrivals to Lebanon.
Saudi tourists are returning
Iraqi or Jordanian tourists are no substitute for Gulf tourists. With more and more competitors springing up in the region’s hotel sector, it has become imperative for Lebanese hotels to pursue a new philosophy and approach to human resources and techniques to keep up with global trends.
However, it seems that Lebanon is not equipped at present to attract tourists from Europe and North America, because it lacks the basic requirements in infrastructure, transportation, electricity, and water. This is why tourist enterprises in Lebanon continue to count on Gulf tourists, especially Saudi tourists, for the kind of business they bring with them. In this regard, the Ministry of Tourism’s latest figures show a 80.5 percent rise in the number of Saudi tourists visiting Lebanon compared to the same period in 2013.
Tourism data has shown some improvement in 2014. According to the Ministry of Tourism’s Department of Research, Studies, and Documentation, the number of arrivals from most Arab and foreign countries had seen a rise in June.
The summer months saw the largest number of arrivals since the beginning of the year, with the figure reaching 142,163 tourists, a 4.3 percent rise compared to June 2013. Although some of this data is positive, the challenges facing the hotel sector in Lebanon are tough. Will they succeed in adapting to and overcoming this rough patch? And when will the rough patch end? Only time will tell.
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