Tourism industry mood remains gloomy according to IHK survey - Tourism Industry Remains Pessimistic According to IHK Survey
Tales from the Tourism Trenches: Lower Saxony's Hospitality Sector Struggles Amid Economic Strife
Lower Saxony's hospitality industry is feeling the heat, and it’s not just due to the summer sun. Rising labor costs and skyrocketing commodity prices are a double whammy for businesses in the sector, according to a recent survey by the Industry and Commerce Chamber of Lower Saxony (IHKN). With cautious optimism in short supply, restaurateurs, accommodation providers, and travel organizers are bracing themselves for a rocky journey ahead.
"Things ain't looking too peachy," admits IHKN CEO Monika Scherf to the German Press Agency. "The vibe among companies is down in the dumps. There's no grand optimism here." This gloomy outlook comes amid a broader economic malaise that has businesses across industries hesitant to make big investments.
The hospitality industry's so-called climate index, which ranges between 0 and 200 and is calculated as the average of all responses from businesses in the semi-annual survey, inched up only slightly after a downward trend this spring. The figure rose from 87.5 points in the fall to 90.6 points. While it's marginally better than the previous year's score, the industry is far from thriving.
Rules of the (Business) Game
The survey reveals that a quarter of hospitality businesses rate their current situation as good, while about half are satisfied. Approximately 28 percent describe their situation as poor. Similar results can be seen in the restaurant industry. However, business prospects have shown some improvement compared to the fall survey, with 18 percent expecting a better business situation, compared to just 8 percent in the fall. Conversely, around one-third expect a deterioration, while nearly half anticipate their situation to remain the same.
So, what's causing the gloom?
"The risks that we see are mainly cost risks," Scherf sums up the survey results. With labor costs being the top concern, 85 percent of businesses cite them as the biggest business risk for the next 12 months. This includes worries about the potential future increase of the minimum wage to 15 euros, which Scherf points out is particularly painful for the labor-intensive hospitality industry.
Other major business risks include energy, raw material, and food costs (76 percent), economic policy framework conditions (60 percent), and labor shortages (51 percent). These concerns could also lead to increased prices, with 44 percent of entrepreneurs expecting to raise their prices for the next season.
Calling for a Change
Scherf notes that changes announced by the federal government have provided some hope for the tourism industry. Measures such as the planned reduction of VAT on restaurant meals from 2026 and the flexibility of working hours, as agreed in the coalition contract, are steps in the right direction. But, she says, "it's still far from what this industry and other industries need."
The IHK business leader urges the federal government to trust businesses more instead of burdening them with more bureaucracy. By reducing reporting and documentation requirements, the hospitality industry could benefit from increased efficiency and cost savings. Moreover, the IHK calls for tax incentives to encourage investment and digital offerings to help businesses navigate the digital age smoothly[1][3].
In conclusion, the IHKN survey reveals that labor cost increases and rising commodity prices are two of the most pressing economic challenges currently facing the hospitality industry in Lower Saxony, posing serious threats to businesses’ resilience and recovery prospects[1][3].
The hospitality industry in Lower Saxony is grappling with escalating labor costs and commodity prices, as revealed by the Industry and Commerce Chamber of Lower Saxony (IHKN). Almost nine out of ten businesses identify labor costs as the biggest business risk for the next 12 months, with concerns about a potential future increase in the minimum wage being particularly significant for the labor-intensive hospitality sector. Meanwhile, other major challenges include energy, raw material, and food costs, economic policy framework conditions, and labor shortages, all of which could lead to increased prices.
In an attempt to alleviate these issues, the IHKN urges the federal government to trust businesses more, reduce reporting and documentation requirements, provide tax incentives to encourage investment, and support the development of digital offerings to help companies navigate the digital age more easily.
