Complex Made Simple

“It’s a catastrophe”: Lebanon’s travel and tourism sector is on its last legs

With Lebanon currently undergoing its worst economic crisis since the 1975 civil war due to corruption and political bickering, in addition to the ongoing COVID-19 pandemic, the country's travel and tourism sector has been absolutely devastated.

Local media has reported that upwards of 17,000 hotel employees have lost their jobs in recent months Airlines are grounded, travel agencies suffer from the currency crisis, and the F&B sector's 125,000 employees are all at risk IATA's Director General and CEO has emphasized that government action is vital if Middle Eastern airlines are to survive the COVID-19 crisis

With Lebanon currently undergoing its worst economic crisis since the 1975 civil war, its travel and tourism sector has been absolutely devastated. Add to this the fact that an open revolution was declared on October 17 last year, the country has defaulted on a $1.2 billion Eurobond, the national currency has nearly lost 3 times its value in light of a US dollar shortage, and the final topper has been none other than the coronavirus pandemic ravaging the world right now.

But that’s not all. 

“Prior to the COVID-19 outbreak, the World Bank projected that 45% of people in Lebanon would be below the poverty line in 2020,” CNN reported. “Now, the government believes that up to 75% of people are in need of aid, Social Affairs Minister Ramzi Musharrafieh told CNN.”

To make matters worse, “the unemployment rate [has] touched 70 percent,” according to the Ministry of Social Affairs as quoted by Arab News.

Silver linings are quite rare to find at the moment, most certainly. 

Travel agencies face a harsh reality

Looking at the travel and tourism sector, which has suffered for all the reasons above, including the fact that political unrest has scared away tourists, businesses see no end in sight. 

“It’s a catastrophe for everyone,” Élie Nakhal, the owner of Nakhal, one of Lebanon’s oldest travel agencies founded in 1959, told AMEinfo. “Imagine thousands of people working in this field – whether in hotels or in travel agencies or in airlines – all stuck at home while their businesses are [closed]. It’s a catastrophe, first of all for the companies, but also for employees. Many companies have been obliged to reduce the number of their employees or pay them half salaries.”

The direct contribution of travel and tourism was valued at $3.8 billion in 2018, accounting for 7% of Lebanon’s GDP, according to The Investment Development Authority of Lebanon (IDAL). In April, the International Monetary Fund (IMF) said it expected Lebanon’s GDP would shrink 12% in 2020.

Travel agencies in Lebanon were especially impacted given the informal capital controls put in place by the country’s banks which restricted debit and credit card use abroad or in transactions with non-Lebanese entities, to prevent funds, particularly US dollars, from leaving the country.

“It’s a catastrophe, first of all for the companies, but also for employees.” – Owner of Nakhal travel agency

“{Bank] transfers for us are very important because we cannot sell a product that we cannot pay ,” Nakhal explained. “If we book a hotel in Switzerland for example, we have to be able to pay for it, which is something we are not able to do anymore. That was the first problem we faced.”

The official exchange rate of the Lebanese Pound (LBP) to the US dollar was 1507:1. Now, the Pound has depreciated to more than LBP 4,000 per $1 on the black market.

“Then, we had the problem of currencies, which caused issues like clients not being able to pay by credit card. Then came the impact of the coronavirus. The worst thing was the lockdown which closed the airport and forced people to self-quarantine.”

While Lebanon has not undergone a 24/7 quarantine yet like other Arab countries such as the UAE and Kuwait, the country has been exercising variant lockdown strategies, from permitting vehicles with certain license plate numbers on the roads on particular days, as well as 3- or 4-day closures during a week, among others. Most businesses during this time were ordered to close their doors. These restrictions have been eased in recent weeks. 

Airlines still grounded for the most part
As Élie Nakhal explained, perhaps the greatest factor curbing the progress of the travel and tourism industry sector has been the closure of Lebanon’s only airport due to the coronavirus pandemic. What started as a Lebanese-created crisis that put a damper on travel demand has evolved into an international one that has nearly obliterated it. Most of the remaining activity at the Beirut Rafic Hariri International Airport today concerns special flights whose purpose is to repatriate Lebanese citizens. 

Speaking to AMEinfo on the condition of anonymity, an employee working in Lebanon’s aviation sector gave us a brief snapshot of the chaos and uncertainty currently gripping the industry, where employees are having to contend with new directives and constantly-changing government (national and international) regulations regarding COVID-19, which has created a “brutal wheel of unpredictability.” 

“The longer the outbreak lasts, the longer the industry will suffer,” they said.

In March, the International Air Transport Associaton (IATA) shared a grim outlook for the MENA region’s aviation sector. According to IATA, “The disruptions from the COVID-19 could result in 1.9 million loss in passenger volumes and US$365 million loss in base revenues in Lebanon. The disruptions to air travel could also put at risk about 51,700 jobs in the country.”

Additionally, Alexandre de Juniac, IATA’s Director General and CEO, said: “The scale of the current industry crisis is much worse and far more widespread than 9/11, SARS or the 2008 Global Financial Crisis. Airlines are fighting for survival. [They] need urgent government action if they are to emerge from this in a fit state to help the world recover, once COVID-19 is beaten.”

The problem is, the Lebanese government is in no shape to play saviour, given that this current lineup of Ministers has only been in office since late January, after the revolution led to the previous government stepping down. While the new government has taken some action, it has failed to solve any of the country’s intrinsic, underlying issues. It’s failure to handle the dollar crisis, for example, which it inherited from the previous government, has put increasing pressure on these new public servants from the populace, as basic food and drink products are witnessing unprecedented inflation, among other products. Basics like meat, milk, cheese, fruit and vegetables have all seen price increases in recent months. 

Mass protests started in Lebanon on October 17, 2019

When the population is seeing their savings depreciate and the price of basic essentials constantly inflate while the government sits helpless and continues to ask for more foreign aid that it’s likely to default on again, how are airlines meant to find hope in this landscape?

The problem is, the Lebanese government is in no shape to play saviour.

More capable governments, like those of the UAE, Saudi Arabia, Bahrain and Egypt, had already pledged support to their aviation sectors back in March, IATA highlights. For Lebanon, this is a tough ask. 

Still, here’s what IATA is proposing: 

  • Direct financial support to passenger and cargo carriers to compensate for reduced revenues and liquidity attributable to travel restrictions imposed as a result of COVID-19;
  • Loans, loan guarantees and support for the corporate bond market by governments or central banks. The corporate bond market is a vital source of finance, but the eligibility of corporate bonds for central bank support needs to be extended and guaranteed by governments to provide access for a wider range of companies.
  • Tax relief: Rebates on payroll taxes paid to date in 2020 and/or an extension of payment terms for the rest of 2020, along with a temporary waiver of ticket taxes and other Government-imposed levies.

The Lebanese hospitality sector is in the same boat

The ongoing, two-fold economic and pandemic crisis has proven even crueler on businesses than the 15-year civil war that gripped Lebanon between 1975 and 1990. Such was reality for one of Lebanon’s oldest hotels when it permanently shut down after nearly 70 years of operation

The prestigious Le Bristol hotel, situated in capital city Beirut and founded in 1951, hosted royalty over the decades and survived 15 years of violent turmoil, and was initially shut down temporarily in compliance with government guidance regarding COVID-19 precautions. Soon, the closure went from temporary to permanent, as Lebanon found itself losing an iconic part of its rich history. Just like that, Le Bristol was no more. 

Le Bristol Hotel in Beirut

The ongoing, two-fold economic and pandemic crisis has proven even crueler on businesses than the 15-year civil war that gripped Lebanon between 1975 and 1990.

If one of Lebanon’s most prominent hotels could not withstand the headwinds of these recent months, what hope do smaller hotels have? That is a question many hospitality firms will have to contend with. 

Local media has reported that upwards of 17,000 hotel employees have lost their jobs in recent months. Local media also quoted Syndicate of Hotel Owners president Pierre Ashkar as saying that the current occupancy rate in Lebanon’s hotels stands at 5%. 

On the condition of anonymity, an employee working at one of Lebanon’s most presitgious hotels shared with AMEinfo insights on some behind-the-scenes ongoings. Generally, layoffs in the sector are rampant, with the staff member’s employing hotel cutting a significant chunk of their workforce to lower costs. 

“[Management] laid off more than 60% of all employees, regardless of age or years of service at the hotel,” the employee said.

Those that were spared from redudancy measures were left working for decreased pay given the nearly non-existent clients. 

The staff member goes on to highlight the consolidation and bankruptcy running rampant in the sector, with their own hotel spared Le Bristol’s fate by virtue of their long-term clients. 

Despite all this, they explained that hotels in the country are anticipating recovery in the summer season, which they expect will bring “bright days” should global lockdown measures ease as the pandemic is put under control. They believe resurgent tourism and a return of foreign travellers will help bring back foreign currency into the country and reinvigorate the sector. 

However, given the trajectory of the world and the growing number of worldwide coronavirus cases, it’s not clear if this is merely ill-advised optimism on hotels’ part or a true assessment of the situation. 

On the F&B side, we have seen a similar contraction. 

Tony Ramy, president of the Syndicate of Owners of Restaurants, Cafes, Night Clubs and Pastries in Lebanon, told news site Al-Monitor: “Fast-food services constitute only 5% of the operations of the food and beverage businesses,” adding that “785 fast-food businesses have shut down during the period from Sept. 1, 2019, through Feb. 1, 2020, with 25,000 workers having lost their jobs.” 

According to the Syndicate’s data, the sector now employs around 125,000 people when considering the recent jobs lost, which makes the F&B industry the biggest employer after the public sector in Lebanon. With most restaurants still in lockdown, these are 125,000 families at risk. 

Lebanese resilience remains

“I am sure we will have better days.”

Given that Lebanon has seen a surge in new coronavirus cases in recent days, “the Cabinet is set to approve Thursday a recommendation by the Higher Defense Council for a two-week extension of the nationwide lockdown, an official source said Tuesday, as reported by The Daily Star.

This would extend the lockdown to June 7, from the previous May 24 date. 

At this point, travel, tourism and hospitality firms are left with little agency. If anything, it is now a battle of attrition. 

“We are surviving. We are a long-established company. Optimism remains, and we still hope for better days – I’m sure we will have better days,” Élie Nakhal said, displaying the traditional spirit of resilience the Lebanese have shown over centuries.