Lebanon: Construction stoppages point to dip in tourism industry

Published January 21st, 2013 - 11:56 GMT
The number of tourists that visited Lebanon in 2012 fell more than 17 percent from 2011 and 37 percent below the levels recorded in 2010
The number of tourists that visited Lebanon in 2012 fell more than 17 percent from 2011 and 37 percent below the levels recorded in 2010

Though no major foreign investors have definitively pulled out of Lebanon’s embattled hospitality sector in 2013, at least two hotel chains have put construction on hold and others are shrinking existing operations in anticipation of the rocky period ahead.

The head of the Lebanese Hotel Owners Association, Pierre Ashkar, told The Daily Star that the Grand Hyatt has stopped construction of a project near the Starco Center and the Rotana Group has put plans for a hotel in Solidere on hold.

The closures are just two of the dismal signs of the storm ravaging Lebanon’s tourism industry. The number of tourists that visited Lebanon in 2012 fell more than 17 percent from 2011 and 37 percent below the levels recorded in 2010, according to the most recent figures. The number of visitors from Jordan, Kuwait, the UAE, and Turkey fell between 19 to 44 percent each.

The drop is reflected in plummeting hotel occupancy and rising layoffs at hotels across the country, Achkar said. The Lebanese Hotel Owners Association Friday joined the rising chorus of local and international hotel investors demanding exemptions from the government to offset losses.

“The situation is getting worse one day after another and the hotel sector is in a very dangerous situation that requires urgent action,” Achkar said.

In light of the impending bankruptcy many hotels are facing, the association asked the government to allow hotels to pay municipal and National Social Security fees, in addition to value added tax, in installments, and to extend fuel subsidies and flexible loans to hotels in order to preserve jobs.

The association also urged the government to seek a “political compromise” to convince Gulf states to lift the travel bans many imposed last summer.

The most recent indicator of the dire situation facing so many Lebanese hotels, Achkar said, are plans to shut down most of the 118 hotel rooms at the Grand Hills Resort complex in Broumanna.

No one at Grand Hills was available to officially confirm the report, but the receptionist said that all rooms were currently operating though a portion of the hotel would shut down for renovations in the coming months.

Commenting on rumors that have been circulating for months in the Arabic press about Kindgom Holdings’ sale of the Movenpick hotel to the Achour Group for $134 million, Achkar confirmed that the deal had not yet closed.

A source with knowledge of Kingdom Holdings’ investments in Beirut who refused to comment for the record said the Achour group had withdrawn its bid for the Raouche resort because it could not come up with the necessary financing.

Kingdom Holdings and the Achour Group both refused to comment on any details of the Movenpick sale, but Najib Itani, the president of the Investment Development Authority of Lebanon, confirmed that both parties had signed a memorandum of understanding giving Achour Group two weeks to come up with the financing to close the $134 million purchase. Itani said $134 million was a fair price tag for the Movenpick.

In a further sign that international investors are skittish, Itani said that a handful of hotel investors that received tax breaks and financial incentives from IDAL to develop hotels that fulfill certain economic criteria had approached him about reducing the number of jobs they are required to create.

In response to requests from IDAL recipients such as the Rotana Group, which received an IDAL incentive package for the 176-unit Arjaan complex in Raouche, and the 7,000-square-meter Golden Tulip Jiyeh Marina and Resort, Itani said he submitted a proposal to the government about a month ago to reduce the required employment levels for IDAL’s hotel clients from 200 jobs to 150 or 160.

The proposal, which is still under review, contains a similar request for agricultural projects that have benefited from IDAL incentives.

Despite the Habtoor Group’s announcement earlier this month that it had been approached by a group of Middle Eastern investors who were interested in buying its two hotels in Lebanon, Itani said he believed the Kuwaiti investment group had no plans to withdraw from the country.

He pointed to the contract Habtoor had recently signed with the Hilton Hotel Group to manage and operate the Habtoor Grand Hotel as evidence.

Itani believes the Habtoor Group’s announcement that it is considering selling its hotel assets in Lebanon is intended to pressure the government to approve additional exemptions Habtoor recently requested from IDAL, including a 24-hour-supply of electricity from Electricity du Liban.

Though rumors about Kingdom Holdings and the Habtoor Group’s intentions have come to symbolize Gulf investors’ declining interest in country’s hospitality sector in the national press, Itani said both deals demonstrateed that Lebanese tourism remained an attractive sector to foreign investors.

In the past few months five different hotel projects have applied for IDAL incentives, he added, including the $208 million Madarian Oriental hotel construction project, which was recently approved.

“If the Movenpick announced that it was closing in 2012 because it was not feasible to invest in Lebanon, that would be a bad sign,” Itani said at IDAL’s offices in Solidere. “But if one investor thinks of buying a hotel from another investor as an opportunity, what is the problem? Some of the restaurants are closing Downtown,” Itani said, gesturing out his window.

“This is a problem and we should investigate the causes. But no hotels have closed yet. These [deals] are not a problem.”

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