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Delays in Government Formation Damaging Lebanon's Hospitality Industry:
Construction of a Grand Hyatt, a Four Seasons Hotel and a Kempinski Hotel
 and Resort Have Questionable Opening Dates

By Dana Halawi, The Daily Star, Beirut, LebanonMcClatchy-Tribune Regional News

August 27, 2009 - -BEIRUT -- The delay in the formation of the government is putting on hold $2 billion worth of investments and 6,000 new job opportunities in the hotel industry in Lebanon, said Pierre Ashkar, head of Lebanon's Hoteliers' Association. "The total number of rooms offered by this investment is 3,000. Some of them are still under construction, while others are still under project, meaning that the lands were acquired but the construction work has not started yet," Ashkar told The Daily Star.

Ashkar explained that acquiring the land in any hotel project accounts for 50 percent of the investment which is the first phase. "The second phase, which accounts for the other 50 percent, starts with the beginning of the construction work," he said.

Ashkar named the Grand Hyatt hotel in Beirut, which offers 500 new rooms, saying that they have already started excavation but they still need two more years to start operating. As for the Four Seasons Hotel, it will probably be ready to start operating before the end of 2009, he added.

"The Summerland Kempinski hotel and resort is also under construction at the location of the old Summerland Hotel and it is going to cost $200 million," Ashkar said.

However, he expressed his deep concerns about the delay of many of these projects because some of the investors are waiting for the government to be formed so that they can start with the second phase of the investment.

The delay in the formation of the government does not affect the number of tourists coming to Lebanon but it surely has negative repercussions on the flow of investments to the country, believes Ashkar.

A study by Bank Audi indicats that the foreign direct investments did not report a contraction, as mirrored by a number of real-sector indicators, especially imports of investment goods, which have posted a 22.7 percent rise in the first six months of 2009 relative to the corresponding period of the previous year.

However, Ashkar said that investors will definitely avoid getting involved in new projects with the absence of political stability. On the other hand, he added, tourists are used to the small problems that happen in the country from time to time and the delay in the cabinet formation will not affect their plans to visit Lebanon.

The number of tourists coming to Lebanon this year reached a record number of 1,100,000 during the first seven months of 2009 compared to a total of 1,300,000 for the entire year of 2008, according to statistics provided by the Tourism Ministry.

"At the beginning of 2009 we expected to end the year with a record number of 2,000,000 tourists which appears to be very possible because until now, we were able to reach the total number we have achieved in all of 2008," said Tourism Ministry General Director Nada Sardouk.

The number of incoming tourists to Lebanon totaled 1,085,778 in the first seven months of 2009, constituting an increase of some 57.3 percent from 690,180 tourists in the same period last year, as reported by Byblos bank's Lebanon weekly report.

Sardouk added that a very small percentage of Lebanese people left the country this summer, with a huge number of them preferring to spend their summer vacations by visiting various touristic areas around the country.

"One of the most important indicators for the success of the tourism season this year in Lebanon is the high demand for tours inside the country, in addition to the great number of Lebanese attending festivals in various areas such as Beiteddine and Byblos," she said.

Hala Chahine, member of the committee of Beiteddine Festival, said that festivals in Beiteddine have been booked this year at a rate of 90 percent compared to only 70 percent last summer.

She added that 70 percent of people attending the Beiteddine festivals are Lebanese expatriates while 25 percent are Arabs and only 5 percent are Europeans.

Chahine said that the festival generated around $2.3 million with expenses constituting 30 percent of this figure.

Head of the Byblos Festival committee Latifa Lakis said that attendants to Byblos festival this year increased by 25 percent compared to the last year. "The highest percentage of attendants was Lebanese expatriates followed by Arabs and finally a small number of Europeans," she said.

Tourism Minister Elie Marouni stressed the great importance of the tourism sector in Lebanon which attracts $7 billion of yearly investments capable of creating thousands of new job opportunities in the country.

The World Travel & Tourism Council (WTTC) estimated that the travel and tourism industry would contribute directly $2.59 billion to the Lebanese economy in 2009, equivalent to 9.3 percent of GDP, and direct industry employment will reach 149,800, representing 9.6 percent of total employment in Lebanon this year, as reported by Byblos bank's Lebanon this week.

It added that, since travel & tourism (T&T) touches all sectors of the economy, its real direct and indirect impact is even greater, and forecast it will generate $7.78 billion, or 28.1 percent, of overall economic activity in Lebanon in 2009, including 439,600 jobs, or one in every 3.6 jobs, representing 28.1 percent of total employment in 2009.

The Bank Audi report said that the boom in the tourism sector this year, along with the prevailing political stability and appeasing global conditions, raised recent real GDP growth forecasts to around 6 percent for the year 2009, by far outpacing regional growth expected at 2.5 percent by the international Monetary Fund and global growth expected at -1.3 percent according to the same IMF forecasts.

However, Marouni showed great concern about the lack of appropriate infrastructure in Lebanon, including the lack of sufficient electricity supplies capable of meeting the consumption demands of the increasing number of tourists in all Lebanese areas.

"Problems facing the tourism sector in Lebanon also include the lack of broad highways and sufficient water in addition to tourist facilities which is likely to affect this industry in the future," he added.

Marouni said that Israeli threats of a new war on Lebanon did not have any negative effects on reservations this summer. "The absence of a new government did not affect the season either and the reservation rate is still high but the formation of the new cabinet will boost tourists' confidence in our country," he added.

The record number of tourists reflected positively on the occupancy rates at Le-banon's hotels which reached an average of 90 percent during the six months of 2009, according to Ashkar.

"We have excellent reservation rates for Eid al-Fitr and the francophone games which are going to take place in September, and we are sure that hotels during Eid al-Adha are going to be fully booked as well," he said.

However, he added, hotel occupancy is expected to slow down by 40 to 50 percent during the second half of August and in September as Gulf visitors return to their home countries to celebrate the holy month of Ramadan.

Ashkar said that the hotel industry in Lebanon is very profitable and considers this year to be the best season for 15-20 years.

"The first six months of 2009 recorded an average occupancy of 65 percent in Beirut. When we are above 65 percent at the beginning of the year with a high season of above 100 percent in the summer in addition to new holidays coming such as Christmas, New Year and Adha, we will definitely make good profit," he said.

"However, if any major incident takes place in the country, we will lose the first nine months," he added.

According to the global consulting firm Deloitte & Touche, Beirut achieved the strongest revenues per available room, or revPAR growth, not only in the Middle East, but also worldwide, up a staggering 124.4 percent to $117. It added that "increased political stability helped the city's hoteliers increase occupancy by 72.1 percent to reach 66.9 percent, while average room rates grew 30.3 percent to $175.

Elie Ibrahim, front office manager of 5 star Crown Plaza Hotel in Beirut, said that despite the high average room rate ($265) they are offering this year compared to the relatively low average rate they were offering last year ($190), occupancy in July 2009 reached 84 percent compared to only 72 percent in July 2008.

On the other hand, 3-star Marble Tower hotel located in Hamra recorded an occupancy rate of 100 percent in July 2009 compared to only 60 percent in July 2008, said the front office manager Samir Abdel-Nour. "The average rate of occupancy during this summer in general is much higher than the average occupancy rate of summer 2008," he said.

Ashkar noted that the higher demand on hotel room vis-...-vis the supply this summer does not necessarily indicate that Lebanon does not have enough hotels to accommodate all tourists.

"If in the low season, we have an occupancy rate of 65 percent in Beirut and 40 percent in other areas, this means that we are not in need of additional hotels for the time being. You always have to look at low season occupancy rates to be able to judge on the availability of sufficient rooms during high seasons," he added.

The demand in Lebanon is on 4- and 5-star hotels mostly, said Ashkar, because the quality of people coming are looking for quality of services and that's what characterizes this country.

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To see more of the Daily Star, or to subscribe to the newspaper, go to http://www.dailystar.com.lb.

Copyright (c) 2009, The Daily Star, Beirut, Lebanon

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