Tourism - Hotels - Restaurant - a downward spiral since 2002

Tourism and sanctions - the noticeable effects!

It is difficult to see the difference between the effects of the sanctions and the effects of the Corona policy, as both have economic consequences for the hotel industry and tourism, like all other sectors of the economy, hit hard and merge. How do the sanctions really effect tourism and hospitality?

Michael Butler wrote a very good article on Linkedin that describes how 90% of all restaurant openings go bankrupt in the first 5 years and that the conditions must be adjusted to prevent further victims (rent, supplier contracts, insurance but above all taxes and duties). Profit margins have always been very bad in gastronomy and going from “no loss” but also “no profit” to a minus that endangered your existence was always easy. There are too many amateurs and fewer and fewer professionals in the hotel and catering industry. The continuing cost catastrophe is difficult for professionals to cope with - fatal for amateurs.

Perhaps one should go back a little to January 1, 2002, the introduction of the euro. At that time, according to politics, exchange was 1 to 1 so that salaries - albeit halved in total - kept the same purchasing power. Everyone noticed that this was nonsense when they had to experience price increases of up to 100% a year before the introduction of the euro. In the end, one euro was one mark - only the income was half! The first sting - the media effectively talked nice about it and for many it was still manageable. Not for everyone - many have already had to give up here.

The 2008 financial crisis was the next sting.

Here simply described by Google:

What were the effects of the 2008 financial crisis?

In the months following the bankruptcy of American investment bank Lehman Brothers, banks reduced their lending to companies, leading to rising unemployment, a drop in investment and a drop in productivity.4 Jul 2019 Google

Many lost money back then and all the effects as described here result in less willingness or even make it impossible for many to invest money in restaurants and travel.

The taxes in Germany, for example, are 19% for gastronomy, which is enormous and to make a profit you have to calculate very sharply and need mass, which is particularly difficult for smaller businesses.

Then Corona followed with unimaginable measures, which was a deadly sting for many companies.

Corona has triggered a huge wave of bankruptcies. Around 40,000 companies had to close nationwide.”

Focus 05/09/2023

And that is only in Germany! During the Corona measures, the tax was reduced from 19% to 7%, but that probably doesn't help with any sales. Now the tax is to rise again to 19% percent in Germany and the number of businesses that will go bankrupt in the catering industry is estimated at 20,000 - 30,000. In all EU countries, in contrast to Germany, gastronomy is taxed much less.

Rising energy prices, inflation and the associated price increases can only be coped with by a few catering establishments.

The sanctions seem to harm the European economy and thus tourism and gastronomy more than the countries for which they are intended.

Even in Russia, the rich don't travel less just differently. The punished are middle class and average earners. Was that the point of sanctions?

Thailand appears to be one of the most popular destinations for these holidaymakers (Russians), with an 81 percent increase in premium travel compared to 2019.

Premium travel to the United Arab Emirates is up 108 percent. Tourists are also flocking to Turkey (up 41 percent), the Maldives (up 137 percent) and Egypt (up 181 percent). Travel sanctions haven't stopped wealthier Russians from taking vacations in the past year. Popular destinations were Thailand, Turkey, Egypt and the Seychelles.

euro news 03/15/2023

FINLAND LOSES BILLIONS DUE TO MISSING RUSSIAN TOURISTS AND RUSSIAN AIRSPACE CLOSURE

Michael Trout - Jun 13, 2022

The Closure of Russian Airspace Costs 1.5 M Euros a Month (just Finnland)

"If we talk about the income that Finland received from international tourism, the share of Russians in it was as much as 19%," Hietasaari added. "Losses will amount to more than 600 million euros annually.”

TourismReview 13 June 2022

What can we do?

Most decisions are of a political nature over which we have no control. Taxes, duties, insurance, rents and leases would have to be adjusted to the situation. The hotel industry should again offer attractive training positions and future prospects. This also requires clever political decisions to make it affordable.

Before 2002 it was not easy to make a profit in the hotel and catering industry, but there are now many other factors that makes it increasingly difficult. As with banks, there are certainly many companies that are not worth saving, but people should not completely destroy the gastronomic places. People need these places. We've lost a lot, but we still have a lot to lose.

Stephan Busch has an invaluable and diverse experience in the hospitality industry ranging from senior management positions with the most renowned hotel and resort companies to the project development - launch of operations, business development- for hotel and cruise companies in Asia, Europe, Canada and Russia.

His expertise includes not only planning, opening and operating of hotels, international golf clubs, airports, resorts and cruise ships, but also successful restructuring and repositioning of businesses during the financial crisis in Asia.

Stephan Busch earned his Master Certificate in Hospitality Management from Cornell University, USA and served many years as Academic Director / Faculty of Hospitality & Tourism at the State University for Humanities RGGU as well as the Swiss International University St. Petersburg.