Food commodity companies cling to hope of tourism return

Aisha Zidane
5 Min Read
Calculating real estate taxes is based on the replacement value, by calculating the average of the room rate multiplied by the number of rooms without equipment (AFP PHOTO / KHALED DESOUKI)

The negative repercussions of the decline in tourism not only impacts hotels and tourist facilities, it also extends to many aspects of economic life in Egypt. The food commodities sector, which supplies hotels and touristic facilities with their food, needs has been hit especially hard.

Food commodity supplies for hotels and tourism and hospitality facilities dropped by up to 70% in light of general tourism declines and a sharp drop in occupancy rates. Those working in the sector cancelled 90% of previously signed contracts to supply the hotels with food and expressed their hopes that occupancy rates would return to normal so that demand for food products would follow suit.

The Deputy Chairman of the Tourism Facilities Chamber at the Egyptian Federation of Chambers of Tourism, Nagy Erian, said that food commodity supplies for tourism facilities, including restaurants and hotels, fell by 70% from typical levels due to a decrease in tourism.

The decline includes all food commodities especially meat, fish, poultry, water, yogurt, vegetables, and fruit in all tourism destinations in Egypt.

He said that tourism facilities entered into contracts to purchase food commodities after receiving bids from more than one supplier and that the contracts are long-term in some instances. After the emergence of the recent crisis, many contracts were cancelled because facility owners were unable to pay.

According to Erian, 90% of contracts between facilities and food commodity supply companies have been cancelled and the sector is waiting for tourism to return to normal levels. Hotel facilities are also unable to bring in enough domestic tourism to fulfil their obligations.

General Secretary of the Giza Chamber of Commerce and head of the Tourism Division Mohamed Embaby said the demand for food commodities from the tourism sector is no greater than 10% of normal rates in light of the crisis, which currently plagues tourism following a Russian plane crash in the Sinai Peninsula on 31 October.

He estimated the decline in supply to restaurants and hotels to be approximately 70% of rates recorded during the same period last year due to a lack of tourist traffic.

All tourism destinations are suffering from the declining demand due to the deterioration of Egypt’s tourism industry, in particular following the Russian plane crash last October. However he does expect that tourism indicators will be gradually restored in the near future, noting that “tourism is sick, not dying”.

Deputy Chairman of the Hotels Chamber of the Egyptian Federation of Chambers of Tourism Magued Fawzi agreed and emphasised that there has been a significant decline in food commodity supplies to hotels due to a drop in occupancies.

Hotel owners are not able to store food commodities at their facilities so that they do not spoil because no one knows when tourism will be restored and whether the products will be utilised before they begin to expire.

He expects supply companies and hotel facilities to experience a crisis in the upcoming days due to facilities failing to make payments and anticipated another crisis would emerge between the banks and hotel owners.

At the end of last year, the Central Bank of Egypt (CBE) launched an initiative to support tourism sector employees, including delaying loan payments for consumption and real estate loans for a period of six months from the date they are due beginning last October without late fees. Thus delayed payments do not mean that the credit facilities will be considered irregular.

Fawzi said the sector has suffered a cash crunch since it is handcuffed to government agency debt and social insurance debts in particular. These debts amounted to EGP 60m for the hotel industry, which threatens banks with administrative detention.

He noted that domestic tourism will not represent a significant enough proportion of bookings that will allow hoteliers to make new contracts with food commodity suppliers.

Chairman of the Tourism Facilities Chamber at the Egyptian Federation of Chambers of Tourism Amin Sabla said that demand for food commodities from supply companies for the sector has declined by approximately 80% and that sector growth rates have dropped by a similar amount over the past year.

Share This Article
Leave a comment