Lebanon’s restaurants, cafes, nightclubs and pastry shops are facing one of their toughest periods in decades as consumers cut back on non-essential spending, inflation drives up operating costs and businesses struggle with dwindling liquidity.

Weak liquidity, the absence of bank financing and shrinking profit margins are making it increasingly difficult for businesses to finance day-to-day operations. At the same time, owners face a difficult choice between preserving jobs and absorbing rising wage costs.

The sector had hoped the tourism season would help compensate for the decline in domestic spending, but industry representatives say the season was too short to make up for losses accumulated during the year.

Lebanese expatriates, another important source of spending, are also arriving with less purchasing power as they face rising living costs and economic difficulties in their countries of residence.

One of the sector’s worst downturns

Tony Rami, president of the Syndicate of Owners of Restaurants, Cafes, Nightclubs and Pastries, described the current period as one of the worst the sector has experienced in about 20 years.

“The sector is experiencing a clear state of stagnation and contraction, as a large segment of Lebanese people have lost their purchasing power,” Rami told Nidaa Al Watan.

“Today, we are facing stagnation, contraction and lost purchasing power for the first time in 20 years. This is the worst phase we have gone through,” he said.

Rami also pointed to what he called a “psychological factor” affecting both wealthy and poorer consumers, while the middle class — which he described as the “dynamo and engine of the economy” — has also seen its purchasing power deteriorate.

“The psychological factor has become a key factor in market activity,” he said. “There is no appetite for spending. The bottom line is that purchasing power is no longer available — not for restaurants, not for cafes and not even for delivery.”

The sector is seeing the impact directly, he said, with both the number of delivery orders and the value of individual bills declining.

Rami attributed the sector’s difficulties to the accumulation of economic, financial and living-cost crises, as well as developments in the Gulf and broader inflationary pressures.

Lebanon’s dependence on imports makes businesses particularly vulnerable to global price increases.

“Lebanon imports around 80% of its goods, so the Lebanese economy imports part of global inflation through its foreign purchases,” Rami said.

At the same time, operating costs have risen across the board, particularly energy expenses.

The burden extends beyond fuel and electricity to generator maintenance, diesel, gas, water purchases and water treatment, he said.

These costs are eating into already narrow margins and making it increasingly difficult for establishments to remain open.

“If this situation continues at the same pace, there will be no ability to continue, and we will start seeing businesses close one after another,” Rami warned.

The problem is not simply that expenses have increased. Businesses also lack the financial tools needed to absorb the shock.

“There is no solvency in companies, no inventory and no banks,” Rami said, adding that business owners were no longer able to rely even on their personal savings to cover operating expenses.

“We have been left in the desert, and there is no government stimulus plan for the private sector,” he said.

Without a change in conditions, he expects dozens of businesses to close in the near term.

The sector’s difficulties also extend beyond Lebanon, Rami said. Lebanese expatriates in the Gulf, who have traditionally provided an important source of spending, are themselves facing economic pressures.

“Our group in the Gulf is also facing a crisis,” he said.

Labor costs have created another difficult equation for restaurant owners.

Rami said the sector recognizes the need to increase salaries as living costs rise, but warned that businesses already operating under severe financial pressure may not be able to absorb higher wages.

“We have no choice when it comes to workers. We are supposed to raise salaries, but if we raise salaries, businesses will collapse,” he said.

“On the one hand, we want to preserve the business, and on the other, we want to preserve the workers. The situation is extremely, extremely dire.”

The sector has already suffered a substantial decline in activity.

Rami said business was down 40% compared with the first six months of the year, with establishments having pinned their hopes on the tourism season to recover part of their losses.

But the tourism boost was too brief.

“The season lasted 30 days, and that is not enough,” Rami said, noting that spending during that period was still constrained by weak purchasing power.

Nor can the sector rely on expatriate visitors to spend as they did in the past.

Whether coming from the Gulf or Europe, Lebanese expatriates are facing higher living costs and economic difficulties in their countries of residence, limiting their ability to spend while visiting Lebanon.

“In Europe, there is a high cost of living, and in the Gulf, economic conditions are difficult,” Rami said.

The deterioration has been particularly pronounced in food delivery, an area that had become an increasingly important part of the restaurant business.

Rami estimates that delivery orders have fallen by around 50%, reflecting a sharp change in consumer behavior.

Restaurants themselves are increasingly being treated as a luxury rather than a routine expense, while delivery has undergone the same transformation.

“The number of delivery orders has fallen by about 50%,” Rami said. “Restaurants have become a luxury, and so has delivery. Customers now prefer to have a sandwich at home.”