Challenges in Germany's Hospitality Industry and Retail Resilience

Germany's hospitality sector is struggling to recover from the impact of the COVID-19 pandemic, with sales figures continually underperforming compared to pre-crisis levels. In August 2024, the industry experienced a decline in sales both in real and nominal terms when compared to the previous month and the same period in 2019. Notably, sales in August 2019 were 12.6% higher, emphasizing the persistent gap between current performance and pre-pandemic benchmarks.

The federal government had previously supported the sector with a temporary reduction in VAT, which has since been reversed, placing a further burden on customers and complicating the industry's recovery. This tax increase has resulted in price hikes that are affecting consumer spending in hotels and restaurants. The hospitality sector's decline contrasts with developments in the retail industry, which has shown signs of resilience and growth.

In September 2024, Germany's retail industry reported a 1.2% increase in real sales compared to the previous month, with nominal sales also on the rise. This growth reflects an improved mood within the sector, although expectations remain cautious. Despite facing challenges like price increases in some areas, the retail industry has managed to maintain positive momentum, which is a stark contrast to the struggles faced by the hospitality sector. The retail upturn is partly attributed to reduced prices for certain goods, like mineral oil products, and structural growth following adjustments in the market.

Overall, while the hospitality industry grapples with ongoing challenges, the retail sector's growth offers a glimmer of hope for economic recovery.