Declining Visits to Hotels and Restaurants: Consumers Deterred by Rising Costs

In recent times, dining out or booking hotel stays has become increasingly unaffordable for many individuals in Germany. Significant price increases within the hospitality sector throughout 2024 have deterred numerous consumers from indulging in these experiences.

The German hospitality industry is still grappling with the aftermath of the COVID-19 pandemic and the inflation resulting from the Ukraine conflict. After a modest recovery in 2023, the real revenues for restaurants and hotels saw a downturn last year, as reported by the Federal Statistical Office.

According to the latest data, the real revenue dropped by 2.6 percent, a figure that is more severe than the initial estimate of a 2.1 percent decline compared to the previous year. As businesses have raised prices for food, beverages, and accommodations, they experienced a nominal revenue increase of 0.6 percent in 2024. This suggests that fewer customers are paying more than before.

The impact of these price hikes has been more profound on the restaurant sector compared to hotels. The current revenue levels in the hospitality industry have not yet returned to pre-pandemic standards. In 2019, the real revenue of the sector was 13.1 percent higher than it was in 2024 when adjusted for inflation.

Long-term trends indicate that the restaurant industry has suffered more severely than the lodging sector. Hotels and other accommodation services have faced a real revenue decrease of approximately 4.9 percent compared to 2019, while bars and restaurants have experienced a significant drop of 15.8 percent.

Despite the challenging circumstances, hospitality providers managed to generate 9.9 percent more revenue in 2024 compared to 2019, although this does not necessarily reflect an improvement in profit margins due to the simultaneous rise in operational costs.

To further compound the situation, the German government had previously supported the hospitality sector during the pandemic by implementing a reduced VAT rate. However, since January 1, 2024, the standard VAT rate of 19 percent has been reinstated for food in restaurants, leading to even higher costs for consumers.