Egyptians working in the country’s tourism sector described President Mohamed Morsi’s recent decision to raise taxes on a number of food products as a move that would place additional burdens on the sector, causing companies to suffer an estimated additional 20% in losses to earnings.
Hani Al-Sha’ar, vice-president of Egypt’s Hotel Facilities Chamber, said that the price of a number of goods at tourist destinations throughout Egypt is set to increase at the beginning of November, largely due to an increase in food prices caused by recent amendments to the country’s customs duties. A 30% rise in the price of imported furniture used to furnish hotels is also expected.
He added that price increases for food such as meat and seafood, which hotels consume in high amounts, will help contribute to the decrease in the amount of tourists entering Egypt because these increases will most likely be passed onto customers.
Al-Sha’ar pointed out that recent increases in the price of the US dollar would have had the potential to revive the market to a certain extent if food prices had remained fixed; however the sudden rise in food prices have dashed any hope for improvements in the market.
Al-Sha’ar further pointed out that the need to call a meeting of the General Assembly of the Hotel Facilities Chamber was further evidence of the market’s deteriorating state. He added that the market would not be able to withstand the effects of Morsi’s most recent decision, especially considering that the hotel industry was already on the verge of collapse under the weight of Egypt’s volatile economic environment.
However Hatim Munir, secretary of the Red Sea Hotel Facilities Chamber, said that the president’s most recent increases would actually have to be borne by hotels themselves. This would leave many hotels and restaurants trapped with existing contracts since many of them negotiate with foreign travel agencies at fixed prices negotiated in advance. Unable to pass the cost onto the consumers, these economics factors will force hotels to bear the burden of price increases as their revenues drop and costs increase.
Price increases in fuel, Munir said, would also contribute to the rising cost of transportation for food and other necessary products to Egypt’s various tourist facilities, forcing some companies to purchase fuel on the black market to avoid waiting in the long lines that regularly form at fuel stations.
Wagdi al-Kurdani, member of the Board of Directors of Egypt’s Tourist Federation, said that Morsi’s most recent decisions would have a negative effect on the country’s tourism sector and that increasing prices on products such as caviar and shrimp were “provocative”.
He said that it was necessary for the government to inform those working in the tourist sector of any decisions to increase prices before they are made, so that companies have time to coordinate with their counterparts abroad and change the price of their services accordingly. It would be impossible, he said, to change existing contracts until November. He added that hotels could expect to suffer an additional 20% in losses as a result of the president’s decision to raise prices on food products.