Solage Brings Modern Luxury To Resort Market
By Karyn Strauss, Senior Editor -- Hotels, 9/30/2006 11:00:00 PM
BEIRUT Heading into 2006 Lebanon was viewed as one of the most promising markets for new hotel development. Tourism was on the upswing with tourist arrivals forecast to grow by 20% over last year to 1.6 million. Travel & Leisure magazine named Beirut one of the “Top 10 Cities In the World” this year, and a new Lebanese government-sponsored tourism Web site had been launched. Further, at the Arabian Hotel Investment Conference held in Dubai in April a panel entitled “Why Lebanon? Opportunities & Outlook for the Hotel Industry” featured industry insiders and hotel executives sharing their positive outlook for the Lebanese market, as well as their plans for new hotel development there.
All that positive press changed, however, on July 12 when Hezbollah captured two Israeli soldiers, sparking a war that would last 34 days (at press time a ceasefire had been tenuously reached), cause at least US$3.5 billion in damage to Lebanese infrastructure and an estimated US$84 million loss to its hotels as direct result of reservations cancellations. Given these challenges, the question remains, can Lebanon bounce back (again), and if so, when?
Pre-War Landscape
In 2004 Lebanese hotels experienced record occupancies and RevPAR growth. While 2005 was negatively impacted early by the assignation of Prime Minister Rafik Hariri in February—and led to an approximate six-month slump—by late 2005 the market had picked up very strongly, and 2006 was poised to be better than 2004, according to Elie Younes, director and co-head of the Middle East region, for HVS International, London. “This had an effect on investors’ appetites. We had a lot of calls from clients about investment in Beirut and Lebanon,” he says. Many of the big brands, including Four Seasons, Hyatt, Rotana and Hilton, and luxury boutique operators like Gordon Campbell Gray and designer Philippe Starck had been planning new properties in Beirut and surrounding areas.
As of mid-July, however, Beirut hoteliers saw occupancy fall to around 33%, some 40% below the levels achieved in 2005. According to the Daily HotelBenchmark™ by Deloitte, rates fell by more than 30% in the second and third weeks of the conflict, and the overall impact has been RevPAR figures that have more than halved, to just under US$40.
The Outlook
“So the market went from a record year to zero,” Younes, says. But, he does not think this slump will last long. “The whole region is very resilient to any political shock. In 1998 it took Egypt eight months to rebound (after terror attacks), and after 9/11 the region bounced back after a short period.” Given this framework, Younes says, “it’s reasonable to forecast a realistic recovery in February 2007—assuming nothing else significant happens.” He believes the GCC tourists would return first, while Europeans would follow perhaps six months later. As for investment in new hotels, Younes says he already has received a call in mid-August from an investor looking to buy a hotel in Beirut. “This pool of investors has a different profile—their attitude toward risk is different because they are attuned to the market and used to it. It’s normal given the history of the region.”
Hoteliers agree. A spokesperson for Four Seasons says its new Beirut hotel “is still very much on the project pipeline,” as the company takes a long-term view of all its new developments. Similarly, Marwan Kheireddine, managing director of Al Mawarid Bank, developer of the Philippe Starck project, says its 100-unit, all-suite boutique hotel in a “village-like” setting also is going forward as scheduled. “We are proceeding with our plans. We may experience some delay as a result of the war; however, given that our project is still in the early phases, that delay will not be substantial, he says, adding that he believes tourism will begin recovering “immediately,” with a major improvement by October for the end of Ramadan festivities. London-based hotelier Gordon Campbell Gray—who prior to the conflict was among those most bullish on the Lebanese market, calling the attitude there “euphoric” in terms of opportunity—also is carrying on with his newest boutique hotel, Le Gray, an 88-room property in central Beirut that will feature a rooftop pool, restaurant, lounge and cigar bar to appeal to party-loving locals. “I think it’s our sexiest work to date and captures the magic of the Lebanese people—who are very glamorous, very outgoing,” he says. Campbell Gray believes they are also very resilient, and, therefore, he remains optimistic that business will come back. However, rather than its planned April opening, the hotel now will open in September.
“Unfortunately, Lebanon is used to these sorts of crises. Once the political situation gets clearer, and the UN forces are in the country, [we believe it] will once again start to rebound,” adds Daniel Hajjar, corporate vice president, sales and marketing, for Abu Dhabi-based Rotana Hotels, which has one property under development in Beirut and another scheduled to begin construction for a 2008 opening. “The road will definitely be long. The infrastructure will have to be built again, and the confidence needs to be re-established. Assuming that we have no more aggressions, I believe that we may see a shy movement during Eid (end of October) and a stronger number of arrivals during Christmas/New Year/Eid Al Adha, mainly from the Lebanese expatriates and GCC nationals who would be eager to visit the country again. The real test will be next summer.” As a result, Hajjar says projects underway will go ahead as planned.
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