Decline in Patronage for Hospitality Industry Increases
German Hospitality Industry Faces Challenges Amid Economic Uncertainties
The hospitality industry in Germany is grappling with a decline in customers, resulting in a 3.7% real revenue drop in the first half of 2025 compared to the previous year. This downturn is primarily attributed to economic uncertainties, rising operational costs, and changes in consumer spending behavior.
Restaurants have been hit hardest, with a 4.1% decrease in real revenue, while hotels saw a more modest 2.6% decline. A significant factor contributing to this trend is the return of the full 19% Value-Added Tax (VAT) rate on food in 2024, which had been temporarily reduced to 7% during the pandemic. This increase in VAT has raised prices, discouraging consumer spending in dining establishments.
International tourism has also weakened, partly due to the absence of exceptional events like the UEFA European Football Championship that boosted 2024 figures. In June 2025, international overnight stays dropped 12.7% year-on-year, contributing to lower hotel occupancy rates, which were down by 5.5 percentage points compared to June 2024.
In response to these challenges, the hospitality sector is urging the government to reinstate the reduced VAT rate of 7% on food to help alleviate financial pressure and recover consumer demand. This measure is seen as crucial for the survival of many restaurants.
Some businesses are also adapting their pricing and cost structures in response to rising operating expenses, though consumers may not immediately see lower prices even if VAT is reduced. Hotels and restaurants are also trying to attract more domestic visitors and stabilize occupancy rates amid shifting patterns, though this remains challenging given the economic context and weakened international travel.
In summary, the decline in customers is closely linked to higher costs from VAT changes and economic insecurity. Businesses in the industry are responding mainly by advocating for tax relief and adjusting to new market conditions. As the situation evolves, it will be interesting to see how the German hospitality industry adapts and recovers.
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