Hoteliers feel pinch as new taxes drive up costs

Hoteliers say their operational costs have gone up following increased taxes slapped on telephone calls and internet services.

Kenya Association of Hotel Keepers and Manufacturers said the cost of talk time and data which is heavily used in the sector for call-ins, orders and service provision has risen more that that of foodstuff.

The government introduced a 15 per cent excise duty on telephone and internet data services after signing of the Finance Act 2018.

“The increase in prices of raw food materials has not been much as that of talk time and internet. The changes have increased cost of operating for employers who also have to cater for buildings, furniture and cutlery expenses,” said KAHA chief executive Mike Macharia.

He said this, coupled with an increase in the price of vegetables, dry foods and fuel has further forced hoteliers to review their prices.

Latest Kenya National Bureau of Statistics data shows that the consumer price index for restaurants and hotels rose by 0.08 per cent to 4.48  in March 2019 compared to the previous month.

Year-on-year prices  increased by 3.04 per cent compared to March 2018. 

Macharia said prices may still rise in coming months as much as restaurants try to hold onto the current rates to encourage the eat-out trend.

Prices of commodities such as potatoes increased by 7.40 per cent to Sh82.08 per kilogram from Sh76.42 over the month, also registering a 32.5 per cent increase over the year. The month retail price of cabbage increased to Sh41.68 compared to Sh39.59 per kg in February, KNBS data showed.

Restaurants and hotels have devised a strategy by partnering with suppliers of commodities such as meat-related supplies, vegetables and bread for lower prices to increase customer traffic and drive sales.

The industry recently held the 6th annual Nairobi Restaurant Week in March that attracted 78 participating restaurants for exhibition and promotion of specific brands, offering food at discounted prices.

The evaluation of short-term sale is expected to provide customer feedback and financial returns.

In December 2018, cafes, restaurants, food manufacturers and food vendors also joined in the participation of Nairobi Food Festival.

According to KNBS, the accommodation and food service sector has been growing steadily. The sector grew by 16.0 per cent in the third quarter of 2018 compared to a growth of 12.4 per cent in the third quarter of 2017. KNBS also stated notable rise in conference activities of during the quarter.