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Spike in food prices hinders Egypt’s hotels’ ability to enhance services

Written by editor

CAIRO, Egypt – Investors in the tourism field said the peak in the food prices has hit hotels, from September until the first week of October, raising the operating costs by 20%-25%.

CAIRO, Egypt – Investors in the tourism field said the peak in the food prices has hit hotels, from September until the first week of October, raising the operating costs by 20%-25%.

This limits the hotels’ ability to enhance the quality of the services provided to guests, the investors said.

According to the investors, the touristic areas in Sinai and the south of the Red Sea have the highest operating costs in comparison to other areas, especially in Greater Cairo, Alexandria, or Luxor and Aswan.

Head of the Tourism Investors Association in South Sinai, Hesham Ali, said the first week of October has witnessed the peak of the operating cost increase, especially due to the increase in food prices. The majority of hotels in Sinai buy their food needs from inland, which further heightens costs due to the increase in the transportation cost.

The rise in prices of tourism industry inputs in Sharm El-Sheikh amounted to 23%, according to Ali, while it reached 25% in the areas of Nuweiba, Taba, and Dahab.

According to Ali, the current occupancy rates in Sharm El-Sheikh fluctuate, ranging from 32% to 48%. However, he said: “In the rest of the cities, especially Nuweiba and Taba, God help the hotels there.”

The Central Agency for Public Mobilization and Statistics (CAPMAS) reported that inflation last September rose to 9.4%, its highest since September 2014.

Adel El-Seadi, a fruit and vegetable merchant supplying food to hotels in the Red Sea, said the prices of the fruits and vegetables witnessed an increase of more than 20% during the last Eid El-Adha, which pushed many hotels to limit their consumption of the contracted amounts.

He added that “hotels in Hurghada are the highest in terms of the contracts with the vegetables and fruits suppliers in comparison with the other areas in the Red Sea”.

He said many hotels have been indebted to suppliers over the last two years, due to the crisis facing tourism over the last four years.

According to El-Seadi, the number of hotels he has contracted with decreased from 20 hotels before 25 January 2011 to about five hotels now.

Head of the Tourism Investors Association in Marsa Alam, Adel Radi, said the increase in operating costs add to the financial burdens on hotels in light of the current circumstances facing tourism in Egypt.

Radi added that the increase in operating costs demands an increase in occupancy rates in order to balance between the costs and profits. If occupancy rates decrease to less than 40%, hotels will incur heavy losses.

The increases are not limited to food prices only, according to Member of the Egyptian Chamber of Hotels, Abd El Rahman El Anwar, who noted that “the increases include energy costs and salaries”.

He added that salaries increased by more than 30%, in spite of the decline in average occupancy rates, and the increase in operating costs over the last four years.

Egypt’s tourism income in the first eight months of the current year amounted to $4.6m, marking a 5% growth rate in comparison with the same period last year.

Radi said the contracts conducted with the hotels in Europe are in dollars, while the foreign currencies and the pound exchange rates fluctuate radically, which significantly increases the sector’s losses.

“Hotels should achieve profit growth with the decrease in the pound’s exchange rate against other foreign currencies. However, in reality that does not happen,” he said.