Lebanon's once-beaming hospitality sector on its knees

"The funeral of the sector is underway," the syndicate of restaurant, cafe, nightclub and patisserie owners in Lebanon declared in a statement last week.
by Georgi Azar

21 May 2020 | 18:34

Source: by Annahar

  • by Georgi Azar
  • Source: Annahar
  • Last update: 21 May 2020 | 18:34

In this Sunday, May 3, 2020 photo, balconies of an old building are reflected in the glass door of a closed bar during the coronavirus pandemic, in central Beirut, Lebanon. (AP)

BEIRUT: Lebanon's hospitality sector, once heralded as a staple of Lebanon's economic model, is teetering on the brink of collapse owing to the country's worst financial crisis in decades. 

"The funeral of the sector is underway," the syndicate of restaurant, cafe, nightclub and patisserie owners in Lebanon declared in a statement last week. 

Hundreds of restaurants, cafes and bars had closed with some 25,000 employees losing their jobs even before the coronavirus pandemic screeched Lebanon's already fledgling economy to a halt. 

From 2009 until 2019, sales from Lebanon's hospitality sector topped $80 billion, head of the Syndicate Tony Ramy told Annahar, eclipsing the inflows of expatriates' remittances to Lebanon. 

As a result of taxes and tariffs on these sales, Lebanon's coffers collected some $3 billion annually, Ramy said. It also created 160,000 jobs over the 10 year period, with tourists and expatriates alike flocking to the small Mediterranean country during the summer. 

In 2010, considered one of the golden years of Lebanese tourism, 964,067 visitors made their way the small touristic hub to the excitement of those in the hospitality sector.

Despite regional instability and political unrest, which has plagued the country in recent years, it managed to bounce back last year after 550,000 tourists vacationed in Lebanon during the second half of 2019, a 12 percent increase compared to the same period a year earlier.

In the midst of a global pandemic and nationwide economic and political unease, Lebanon is now set for its worst year on record. 

"The upcoming months will be very difficult," Ramy said, highlighting the struggles faced by most establishments as they attempt to cope with the government's restrictions. 

Over 700 establishment have shuttered leading to 25,000 employees being laid off, while hundreds of others have halved salaries or shifting full-time workers to a part-time basis. 

With Lebanese' purchasing power taking a massive hit as a result of inflation and the local currency losing more than 60 percent of its value, sales had also decreased by more than 75 percent.

"Before the coronavirus outbreak, most suppliers used to increase prices bi-weekly or monthly while very few were still even operating at the 1515-1520 rates, so stability was still somehow available," Antranik Balabanian, who along with his two brothers owns the popular burger joint The Bros in Mar Mkhael, told Annahar.

Faced with the volatility of the market and a 50 percent capacity restriction, he, alongside many other food and beverage establishments, has decided to remain closed. 

"Suppliers are pricing daily, eliminating that small fraction of stability that was left in the market. In addition to that, we noticed that many suppliers started abusing the current situation by artificially increasing their prices or using their own lira rate and blaming it on the dollar shortage," he says.

The Lebanese pound is currently trading at LBP 4,075 to the dollar on the black market, with prices of basic goods skyrocketing as a weaker Lebanese pound makes both imported and locally manufactured products more expensive. 

Last month, Economy Minister Raoul Nehme said that prices of imported products had surged by 50 to 55 percent, while locally produced items requiring imported raw materials also increased. 

"Given the current situation, we cannot operate with the same standards and quality without increasing prices. We decided to keep our doors shut since we know that we will not be able to maintain fair prices for our customers," Antranik added. 

This was echoed by Ramy, who alluded to an increase in prices as potentially turning off customers. 

"People's purchasing power has already taken a massive hit," Ramy said, signaling the difficulty of operating using two different exchange rates.

"Our biggest struggle is buying ingredients at the exchange rate of LBP 4,000 while selling at LBP 1,500," he said. Raising prices is also out of the question "because people can't afford to pay so much given the economic crisis." 

Establishments like bars and clubs, the pillars of Lebanon's once-beaming nightlife, have been hit particularly hard by the government-mandated closures and the currency crisis. 

Nadim Mantoura, owner of the favored bar Orient Express in Badaro, painted to Annahar a grim picture as a result of his cash flow being generated solely in Lebanese pounds.

"Pretty much everything we sell is imported, from alcohol to vinyls," Mantoura told Annahar. 

"As the Lira continued dropping, suppliers decided to increase prices gradually as they couldn't sustain the losses anymore and we've paid the price," he said. 

Mantoura, like many others, is now stuck between a rock and a hard place. 

"We have no choice but to buy the products we need and it's almost impossible to raise prices while people struggle financially," he added. 

In an attempt to safeguard the sector, the syndicate presented an extensive proposal to the government which fell on deaf ears. 

“We presented a 14-point plan which we worked on with the tourism industry," Ramy said. It included proposals for tax breaks, a reduction in tariffs on certain products, a decrease in rent and a secure credit line to sustain the import of products. 

Rent seems to be a contentious topic among business owners, who have seen their revenues drop to zero during the lockdown. 

"The question is if my landlord, who I haven't spoken to since the start of the lockdown, makes me pay the rent " Mantoura told Annahar. 

As Lebanon began easing restrictions, a spike in coronavirus cases prompted the government to turn the course and extend the partial lockdown. 

Restaurants can open at 50% capacity during the day until 7 pm, but many business owners, like Mantoura and Balabanian, will remain closed as they would be losing more money if they operate under such restrictions under a faltering economy.

"No one can sustain with a 50 percent occupancy, let alone a 7 pm curfew. We're a bar that usually operates during the night," Mantoura said. 

For Balabanian, both the "instability and depreciation of the lira are throwing the F&B industry into the unknown."

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