'Hospitality industry must become more expensive to avoid bankruptcy'

Hospitality businesses need to charge more for food, drinks and overnight stays to avoid going bankrupt, says chairman Marijke Vuik of Koninklijke Horeca Nederland (KHN). This is because profit margins in the sector have narrowed due to higher costs for staff and energy, for example.

,,We hear that entrepreneurs are worried, but when they ask for help they are actually already too late," the industry president said during hospitality trade fair Horecava. Exactly how much more expensive everything should become varies greatly from business to business. To compensate for increased costs, according to Vuik, pubs, restaurants and hotels should actually have profit margins averaging 10 to 13 per cent. Now, entrepreneurs have to make do with about 7 to 9 per cent. That, according to Vuik, is too little.

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Hospitality industry must raise prices

According to the chairman, the hospitality industry is already trying to cut costs as much as possible by buying for less money, for example. But there is little entrepreneurs can do to change some developments, such as increased inflation. Therefore, they do have to raise their prices, says Vuik.

Marijke Vuik Koninklijke Horeca Nederland (KHN): We hear that entrepreneurs are worried, but when they ask for help they are actually already too late

How many businesses are facing financial problems Vuik cannot say. According to the KHN-chairman, the problem is mainly for entrepreneurs who were unable to make use of the scheme Contribution to Fixed Charges (TVL) during the corona-pandemic. This gave entrepreneurs financial support if they lost sales due to the corona pandemic.

Earlier Monday, knowledge institute FoodService Instituut Nederland (FSIN) reported that the sector's profitability is under pressure. According to the institute, some entrepreneurs do not pass on all costs in full to consumers for fear that people find it too expensive to eat out, for example. Vuik also notices this, but she sees that many customers understand. "The higher costs have been a known problem for some time," she explains.

Number of hospitality venues decreases due to not passing on costs

The consequences of not being able to pass on costs are already being felt. Partly because of this, the number of catering establishments fell last year for the first time since 2015, according to KHN. There were almost 45,000 hospitality businesses in 2022, down from around 44,400 at the end of last year. Vuik expects more businesses to go out of business this year.

Despite the gloomy outlook, there are bright spots. For instance, turnover in the hospitality industry rose to 31 billion euros last year, well above pre-corona levels. The number of employees in the sector also increased.