Despite the unprecedented crisis in Lebanon, the restaurant and hotel sector continues to struggle. Result: the market is doing less badly than one might think. Customers and restaurateurs have adapted to the new situation. Nagi Morkos, founder and director of Hodema Consulting Services, gives an encouraging and optimistic overview of the situation of this sector in these gloomy times.
For the catering sector, 2021 has been a year of transition and adaptation to new market conditions for both customers and restaurateurs. The summer of 2021 and the end of the year were better than 2020. And 2022 looks good with new projects.
The year 2021 was marked by several "surprises", restaurateurs no longer knowing on which foot to dance. First there was the dizzying rise in the dollar exchange rate, the change in payment methods, the rise in commodity prices, the adjustment of salaries, then the problems linked to power cuts, rationing of power supplied by generators, soaring oil and gas prices; not to mention the Covid-19 pandemic and the explosion of August 4, 2020 at the port of Beirut.
Less reluctance
For Nagi Morkos, founder and director of Hodema Consulting Services, 2021 was a year of adaptation and reconstruction. The balance sheet, at the end of this transition, seems to be less negative than initially feared. “Customers have adapted to the higher prices in Lebanese pounds, they are less reluctant to pay 800,000 or one million Lebanese pounds for a bill that would have been 600 dollars before the crisis,” underlines Mr. Morkos. “The Lebanese have gradually become accustomed to the strong devaluation of the pound. Selling a burger for 200,000 LL was impossible, even shocking,” he explains.
In fact, when the Lebanese undertook to change dollars on the parallel market, they were able to accept the price increase. The mentality of the customer has changed, he is less reluctant to go out after a period in which everyone thought that restaurants were too expensive. Restaurant owners, for their part, have also had to adapt to the new prices and the new invoicing. A fly in the ointment, however: the refusal of credit cards, or an increase which can go up to 10% of the invoice. “In Lebanon, we are moving towards a totally dollarized market,” says Nagi Morkos, before adding: “In Beirut, the neighborhoods have undergone little change. In Badaro, nothing has closed, on the contrary, new concepts have emerged, as well as in the city center. Mar Mikhael was hardest hit because entire streets failed to reopen after the blast. In addition, Batroun and Faraya are two regions that have experienced remarkable growth”.
New projects
Despite the economic crisis, the catering market seems to be returning to normal, with turnover increasing significantly, "even if we are at less than 30 or 50% of pre-crisis turnover", specifies Mr. Morkos. Indeed, the business model of restaurants has changed. Today, the increase in oil and gas prices is offset by a notable drop in rents, sometimes five times lower than before the crisis. Salaries have also collapsed since they are still paid in Lebanese pounds. A serious challenge remains, however, to be met: the exodus of skilled labor to work abroad.
With regard to new projects, there are several with substantial investments, such as "Cheese on top" in Abraj, "Tom and Mutz" in Mar Mikhael, the "Wine Bar" which is opening a project at Gefinor, two others projects in the same centre, etc. Other projects were launched before the crisis, such as the "AI" of the Kampai group, the "Grand Bar" instead of "Celsius", and the extension of the Albergo with the opening of several restaurants which were inaugurated in 2021. “The market is much less moribund than is said and many restaurateurs manage to generate profits, otherwise they would not have maintained their activity”, estimates Nagi Morkos.
Highlighted local products
The right formula to adapt to Lebanon is to use as many local products as possible. The latter are on the rise, such as Lebanese wines, gin, whiskies, cheeses (mozzarella, burrata), exotic fruits and locally grown vegetables. Lebanese production has done well. Restaurant owners are adapting their menus. “For example, they abolish expensive imported ingredients and replace them with more affordable local products,” says Morkos.
And to continue: “We adapt the menu, we sell less meat and more chicken. The portions have changed, they are smaller. The size of shawarma sandwiches, for example, has decreased significantly. The sector has adapted and the new formula is working. People keep coming out,” Morkos continues. Who exit ? These are the people who obviously have the means, who cash in cash and dollars, or also the expatriates passing through Lebanon.
And Mr. Morkos concludes: “The restaurant sector is resilient, like the country, and its current survival gives rise to optimism. The opulence has certainly disappeared, but there are still restaurants that open and have a clientele, not to mention those that existed and continue to work. The market is holding up and adapting.”