Over 17 hotels have shut down during the past nine months due to low number of tourists, according to a member of the Marsa Allam Investors Association.
He is considering closing two hotels due to low occupancy rates and the declining inbound tourism flow.
According to the investor, who preferred to remain anonymous, he started his business in Marsa Allam in 2002, when he built a 650-room hotel and a water park, which is currently operating at full capacity.
The hotel expanded by 300% over eight years before 2010 from 120 rooms to 470 rooms and then to 650 rooms during the past four years.
Deputy Chairman of Tourism Investors Association Tarek Shalaby said occupancy rates during the past four years have declined significantly due to the political circumstances in Egypt.
Shalaby hopes for occupancy in hotels to increase during the winter season starting in November.
The investor said the increase in investments in the region over the past years is associated with direct and indirect employment and increased operating movement of labour, contractors, and suppliers of construction materials and equipments.
When he started the hotel, he had only 196 employees with an average monthly salary of EGP 755. The employment rate at his hotel increased over the two years by 223% and he had a total of 633 employees.
Shalaby said salaries increased over the past four years to an average of EGP 1,114 monthly from EGP 755, and that recently the average increased to EGP 2,286.
The investor said the sales tax was 5% in 2005 and was increased to 10%, to be paid after 60 days.
Shalaby said this tax is paid according to the price of a room, not from profit and it is paid whether the hotel is making profit or losing money. Prices of hotel rooms have declined following the 25 January Revolution.
The investor’s hotel paid about EGP 59m in taxes between 2012 and 2014 or $8 per room per night, although average occupancy rate was at 58%.
Shalaby believes the tourism industry’s revenue on investment is no more than 5% in light of low prices of accommodation, less than 60% occupancy rates, increasing costs of energy, and operation requirements.
He said imposing the sales tax applies to the price of the room, while all sales taxes of operating requirements are not subtracted.
He said the industry is currently suffering a shortage of skilled labour workers, which negatively affects it due to high costs and low revenue.