Hospitality Industry Addresses Gov't on Extremely Serious Problems Caused by Pandemic

Representatives of the Georgian hospitality industry have released an open letter to Georgian Prime Minister Giorgi Gakharia and the Minister of Economy Natia Turnava, specifying the extremely serious problems the industry is facing during the coronavirus pandemic, and expressing their concern as to a further aggravation of the situation as a result of the tightened and expanded restrictions. 

The signatories of the letter claim that given the current epidemiological situation, they are trying to understand the government's decision to close food establishments in an aim to show civil liability and prevent the spread of the virus. They claim the current situation is catastrophic for the industry.

"Once the restrictions are lifted, 80% of food establishments will go bankrupt and most will no longer be able to resume operations," they state.

Based on the above, the industry representatives appeal to the government, "to save the hospitality industry during this pandemic and to promote economic activity and offer a unified vision for problem-solving, where the balance between private and public interests is maximized."

The initiative has been signed by 35 food establishments so far.

The open letter reads: 

Mr. Giorgi,

We are addressing you on behalf of the hospitality industry in a letter initiated by Georgian restaurant, cafe-bar and food establishments on problematic issues being faced during the global pandemic.

First, we would like to inform you that the hospitality industry (hereinafter referred to as the "industry") has faced extremely serious problems during the pandemic, which was initially due to the closure of the country's borders and the shortage of tourists, and now due to the tightening of isolation and quarantine rules in the large cities of the country (the so-called "lockdown").

Most of the hospitality industry is related to domestic and foreign tourism. It has been almost a year since the borders of Georgia were closed, and domestic tourism has, in fact, ceased to function, conditioned by the fear of infecting the population with the virus. Although industry members fully comply with the recommendations made by the Government of Georgia to prevent the spread of the virus, the activities of individuals working in restaurants, cafe-bars and other hospitality sectors, whose income is fully related to tourism, have now been suspended or ceased.

The current situation is further aggravated by the regulations of the Government of Georgia “On the Approval of the Rules of Isolation and Quarantine” N322 of the decision on Traffic and Restrictions on Economic Activities, and on November 26, 2020, the amendments made by Government Resolution N699, which imply a virtually complete restriction of economic activity for restaurants and cafes, and a transition to delivery service only. This puts the hospitality industry in a difficult position, as, for our industry, delivery service is actually ineffective and unprofitable.

In addition, we would like to draw attention to the fact that the hospitality industry employs thousands of people who they generate a livelihood for themselves, which was already minimized during the pandemic. It is now forbidden to move, and the costs of moving employees, for the employees themselves and the companies which have no income at all, cannot be provided. Industry members try their best to keep employees and not put them in an extremely difficult situation, although the resources that provide employee retention in the case of restaurants and cafes no longer exist. We consider such an extremely strict restriction on the operation of restaurants and cafes to be unjustified in the light of the fact that there are no statistics on what extent the visit of consumers to such establishments carries a risk.

Given the current epidemiological situation, we are trying to understand the government's decision to close food establishments, to show civil liability and to prevent the spread of the virus, but the current situation is catastrophic for the industry. Once the restrictions are lifted, 80% of food establishments will go bankrupt and most will no longer be able to resume operations.

Based on the above, we appeal to you in order to save the hospitality industry during the pandemic, and to promote economic activity and offer a unified vision for problem-solving, where the balance between private and public interests is maximized. In particular:

1. During the two-month limitation period from November 2020, the state provide compensation of 50% of the declared salary of people employed in the hospitality sector (numbering up to 300,000). We also offer the example of other countries and provide the hospitality industry with zero percent long-term loans so that industry representatives can pay salaries at least to employees.
2. We are ready, in the shortest possible time (maximum 5 days), together with the state, to develop additional regulations to renew the work process in the field of hospitality, and the responsibility for the protection and control of the developed regulations will be borne entirely by the private sector.
3. Given the situation in the country and the regulations, the hospitality industry is in an extremely difficult situation. Financial institutions refuse to lend to restaurants and cafes, as well as to those who work there. This action of the banks further worsens the situation of persons working in the field. As a result, companies are no longer able to borrow and turn over their capital as needed, further hampering their economic activities. The attitude of the sector is the same towards individuals, the majority of the population has lost their jobs, and many are facing this danger. Based on the above, we ask you to take into account the current difficult situation and the state to become a financial guarantor of the representatives of the hospitality industry, both legal entities and individuals, with the banking sector.
4. Since hospitality revenues are reduced to zero, it is necessary to take loans to continue post-deregulation activities, which include purchasing highly expensive products, paying salaries, paying utility bills or losses, debts and other expenses. Additionally, in conditions where banks do not immediately consider the applications of the representatives of the hospitality sector, we appeal to you to take these into consideration and to support us in negotiating with private financial institutions to develop a project for low-interest loans. Also, in case of reviewing/subsidizing the loan obligations of the representatives of the hospitality sector, the personal loan obligations of the founders of restaurants or cafes / bars should be considered individually, so that, if the purpose of these loans goes to the money spent on restaurants/cafes / bars, these liabilities to be included in the loan package to cover business liabilities.
5. Most of the development of the Georgian economy is related to tourism. As a result of our selfless work, the hospitality industry in the country is at the highest level. The existence of the hospitality component is one of the most important factors for the development of the country's economy, culture, agriculture and tourism. Each person working in the hospitality industry contributes millions of GEL to the state budget every year, which we consider as our obligation to serve the development of the Georgian economy. We have been fulfilling this obligation in good faith for years, but this time we need support from the state us to be able to contribute to the state budget again. Given the extremely difficult economic situation, we ask you to consider the issue of easing the tax burden for one year, in particular, the reduction of the VAT rate for the hospitality industry. We also express our readiness to present our visions on this issue.
6. Given the dire employment situation in the country and in order to maximize the retention of employees, we appeal to you again to make us eligible to use the Income Tax Subsidy Program for at least one year.
7. In the conditions of limited activity, we are not able to conduct full economic activity, the existing costs in the field and the consumers do not correspond to each other, and accordingly, we appeal to impose a grace period for legal entities on all types of utility bills.

We believe that with the strategy we have initiated, and in case of establishing the above-suggested preferential measures, the hospitality industry will be able to save its own economic activities under strict regulations and beyond, and retain employees with families to support. Please take into account the current extremely difficult situation and have the state support the private sector so that the outcome does not turn out to be even worse for the country and its population. We would like to positively assess the work process started by the state regarding the subsidy of income tax and the negotiation of giving low-interest loans with the financial sector. We request that this to be done in limited time so that the private sector can benefit from this relief as soon as possible. We welcome the appointment of coordination meetings and the joint discussion of these issues, which will facilitate communication between private and public structures.

The signatory organizations fully share the content of this announcement and express their readiness to conduct the joint work process.

Sincerely,

Members of the Hospitality Industry Initiative:

1. Restaurant "Black Lion"
2. Cafe "Leila"
3. Cafe "Litera"
4. Restaurant "Culinarium Khasheria"
5. Taqueria “Tacos”   
6. Restaurant "Lisi Lake"
7. Food Facility Agency “Gastronaut”
8. Restaurant "Keto and Kote"
9. Restaurant "Chveni"
10. Restaurant "Keti's Bistro"
11. Restaurant "Veris Duqani"
12. Restaurant "Dining Room"
13. Restaurant "Z10"
14. Pizzeria "Pazza"
15. Restaurant "Suliko"
16. Restaurant "l'Eclair de Génie”
17. Restaurant "Veriko"
18. Restaurant "Onore"
19. Cafe "Mziuri"
20. Georgian Culinary Federation
21. Restaurant "Barbarestan"

22. Restaurant "Zala"

23. Restaurant "Tamtaki"
24. Cafe "Coffee Lab"
25. Wine bar "G Vino"
26. Restaurant "Kakheli"
27. Restaurant "Tsiskvili Group"
28. Cafe "Kala"
29. Restaurant "HB"
30. Bar "Acid Bar"
31. Restaurant "Sofia Melnikova's Fantastic Douqan"
32. Restaurant "Pastorali"
33. Restaurant "Shushabandi"
34. Restaurant "Suzy Wong"
35. Restaurant "Tabla"

The government has yet to respond.