September growth in operating costs depletes hotel revenues

Some hotels resort to closing some of their rooms in an attempt to decrease operating costs

Operating costs in hotels increased by 30% during September, compared to the 20% increase in the previous eight months.
Workers in hotels said food prices increased by 15% in last August, while meat prices increased by over 10%, with a 7% increase for seafood, adding that the increase in operating costs depletes the hotel revenues.
According to Samy Soliman, Chairman of the Nuweiba-Taba Tourism Investors Association, the operating cost amounted to 30% in September, while the inputs of the tourism industry were stable in the previous eight months of the current year.
Soliman believes that the increase in the cost is a result of seasonal changes and the Eid Al-Adha holiday, during which food prices increase significantly, in addition to the increase in the prices of tourist groups' transportation.
Although tourism workers said operating costs are very high during this period compared to before the 25 January Revolution, they said the situation differs from one place to another, whereby the cost of the hotels located in Cairo is different from those located in remote areas, such as Dahab, Marsa Alam, Taba, or Nuweiba.
According to an official in the Egyptian Chamber of Hotels, the increase the energy prices is a major factor behind the increase in operating costs of Egyptian hotels, as well as the fees imposed by the municipalities.
The official, who preferred to remain anonymous, said that in spite of the tourism decline in Egypt over the last four years, the operating costs increased significantly, while they are not balanced by growth in revenues.
Egypt's tourism income amounted to $3.3bn in the first half of this year, compared to $3.2bn in the same period last year.
The revenues achieved in the first half of this year are very low given the high operating costs, such as food prices, salaries and electricity increase, according to the official.
He added that some hotels in Egypt offer their rooms at less than $20 per night, which weakens their ability to develop and raise the service quality they offer to customers.
Soliman said the taxes on imported foods and beverages, especially seafood and alcoholic beverages, significantly contribute to in the operating cost increase.
According to Hany Gaweesh, member of Nuweiba-Taba Tourism Investors Association, there are areas where the occupancy rates are better than other areas that suffer a significant tourism decline, especially in Nuweiba and Ras Sidr.
He added that in spite of the dollar exchange rate against the pound, which benefits Egyptian hotels, the increase in the food prices and salaries eats up this benefit.
According to Tarek Shalaby, Deputy Chairman of the Tourism Investors Association in Marsa Alam, some hotels have closed some of their rooms to decrease the operating costs, in accordance with the occupancy rates.
Shalaby added that "a lot of hotels do this now to decrease their expenses in order to be able to continue. The other option is to completely shut down, and layoff all the workers".
According to the official at the Egyptian Chamber of Hotels, the hotels give a lot of leaves to their workers, attempting to overcome the financial problems they face, without laying off the trained labour.
He said that the hotels do not currently receive operational loans from banks, in light of their high debts to the banking system.