This article is part of our special report Hospitality sector: Re-connecting EU citizens after the pandemic.
Hit hard by the pandemic, Europe’s hospitality sector is struggling to find a way out of the current chaos. Speaking to EURACTIV, its representatives have painted a bleak picture and called on governments to take immediate action to help the sector revive rapidly before it’s too late.
The tourism season officially starts on Wednesday (1 July) as Europe is opening its external borders to several countries. Bars, cafes and restaurants, considered an integral part of tourism offer, are trying to adjust to the new reality, which is far from the old normality.
Spain: 85,000 establishments expected to shut
According to data from Spain’s hospitality association (Hostelería de España), before the crisis, there were more than 300,000 establishments, which accounted for 6.2% of the Spanish GDP and employed 1.7 million people.
“20% of hospitality establishments have closed, and an increase in this percentage of definitive closures is expected at the end of the year […] estimates suggest that between 55,000-85,000 establishments will close permanently,” Hostelería de España told EURACTIV in an emailed response.
In terms of turnover, the most serious period of the crisis has seen losses of more than 90% compared to the same period last year while in terms of employment, the average decrease of around 400,000 workers is expected compared to 2019.
For the Spanish hospitality sector, an economic recovery plan should be accompanied by fiscal measures, such as reducing VAT to 4% and extending tax moratoriums.
“Specific financing lines for catering companies and the establishment of microcredits of around €25,000 of quick concession will be needed, as well as measures to support employment, such as the extension of ERTEs (temporary labour force adjustment plan) until 31 December, or the exemption of social security contributions for employees in the sector,” the association said.
Denmark: every day is Monday
Torben E. Hoffmann Rosenstock, director of Denmark’s Horeca (hotels, restaurants, cafés), said strict safety measures such as social distancing prevent restaurants from working at full capacity and therefore being fully profitable.
In normal times, he said, Mondays and Tuesdays are done at half capacity and the rest of the week usually compensates for the two slow days.
“Now it’s Monday every day and it’s very hard to make a profit on that basis,” he said.
In addition, all hospitality establishments in Denmark are obliged to close at midnight, which means all nightclubs are completely shut down and no one knows when they will re-open.
It is estimated that the lockdown in Denmark cost the sector a 70% drop in revenue, and only takeaway services prevented a complete disaster as Danes largely switched to those services to support local restaurants.
Right after the de-confinement, he said, Danes indeed went out, also thanks to the good weather which allowed people to stay in outdoor places where restrictions are not applied.
However, the lack of tourists this summer is expected to deal another severe blow to the sector. “Every inhabitant needs to spend approximately an extra €1,000 to make up for the income lost due to the lack of tourism,” he said.
August: a crucial month
The government has taken a number of measures to support employees, such as covering 90% of wages on condition that no lay-offs take place, which has saved numerous jobs.
But after supporting schemes stop at the end of August, jobs will no longer be guaranteed.
August could also be problematic for businesses as it’s the month when tax collection takes place. “We have some concern that not everybody is ready to come up with the amount of money that needs to be paid,” Rosenstock said.
Last but not least, he stressed that despite government pressure, the reality shows that banks remain cautious and reluctant to grant loans to companies.
Denmark has ruled out the possibility to extend the supporting measures until the end of the crisis and the hospitality sector is now pushing for growth-related alternatives such as total refund of the VAT.
“We are the only country in Northern Europe which doesn’t offer a full refund on VAT for Danish and foreign companies, on their restaurant spending […] This could make a great difference,” Rosenstock said.
According to him, granting low-interest loans to be paid back over a long period of time could also be an option in the right direction which would help businesses run properly.
Czechia: Need for concrete and innovative measures
Lubos Kastner, co-owner of Czech gastronomy group Hospodska, said the lockdown has resulted in a 40% drop in sales while projections for the summer period are -30%.
“The first indications are that 5% of operators intend not to open after COVID-19. 10% is expected to limit existence in the autumn due to shortfall in sales. Hence total bankruptcy of operators will most probably be around 10-15%,” he said.
Kastner insisted that rents will have to go down. “Rent is a big part of our costs, so it is crucial that we find a supportive model here,” he said, adding that long-term supporting tools such as VAT reduction or direct support is needed.
“We cannot expect that business will return fast to former levels. Without support, the industry would be under dramatic pressure. However, no specific plans in this direction were announced”.
Kastner said in order for the sector to survive, innovative solutions should be introduced.
“Innovative ways for marketing and revenue management need to be followed as businesses now face smaller groups, smaller frequency and smaller purchase baskets […] Operators will have to reduce loses through adjusting our offer to new online sales channels,” he said.
That is why, he said, they have launched a fully digital order&pay system in their Prague outlet, using QR code technology.
“That will help to optimise waiters’ time and limit the need for paper menu [everything is accessible on mobile phones]. Everything is served to the guest as per his/her orders, they can pay anytime and leave.”
[Edited by Zoran Radosavljevic and Benjamin Fox]