Despite inflation, consumers spent 0.9 percent more in the second quarter of this year than in the first quarter, according to Statistics Netherlands (CBS). ABN AMRO’s transaction data for July shows that entrepreneurs in the hotel, culture and leisure sector also started the third quarter well.
In July, for example, Dutch consumers still spent more money at cafes and restaurants and at museums, amusement parks and zoos than in July 2019. Only cinemas and catering are not yet at the same level as before the corona crisis.
In the catering industry, especially cafes, it is important that more and more pay with pin and contactless and less with cash. Cash is not part of ABN AMRO’s transaction data. For example, the total value of cash payments in the catering industry fell from 19 percent in 2020 to 16 percent in 2021, according to data from the Dutch Payments Association. But even taking this shift into account, spending in the aforementioned sectors rose sharply.
Although the catering industry, culture and recreation are recovering from the mandatory closures during the corona pandemic, there are also reasons for concern. This is the result of the sharp drop in catering business confidence from almost 41 in the second quarter to over 15 in the third quarter. Inflation, pressure on profit margins and staff shortages are the main reasons for the worsening sentiment.
A quarter of the companies within culture, recreation and sport – industries such as CBS have merged into one sector (see figure below) – indicate that they cannot transfer the increased costs of energy, food procurement, personnel and transport onto their own companies. .-customers and almost 55 percent can only do this to a small extent. Only 7.2 percent of entrepreneurs in the catering industry indicate that they cannot pass on costs, although more than 62 percent say that they are able to do so only to a small extent.
The difficulty of passing on the increased costs from museums, zoos, cinemas, theaters and conference organizers is evident from the small price increases in these sectors. These were no higher than 3 percent in July. A comparison with other industries and the total inflation of 10.3 percent shows that this is not a large increase. Campers (10.5 per cent), hotel rooms (15.7 per cent) and package tours abroad (18.1 per cent) have, on the other hand, increased dramatically in price in the past month. Fast food and takeaway meals have also become significantly more expensive, increasing by 9.7 percent in July. Restaurants and cafes had a harder time fully passing on the increased costs; here, prices rose by 6.2 percent in July.
At museums, cinemas and theatres, the disappointing visitor numbers, primarily as a result of the good weather, have probably led to the postponement of price increases. Attraction fares are more difficult to compare because they often work with peak and off-peak prices or with dynamic pricing. The scope of discount promotions for theme parks also varies greatly from season to season.
Many entrepreneurs in the leisure sector saw their results deteriorate in the first half of 2022 as a result, according to data from Statistics Netherlands. Although 47 percent of catering entrepreneurs were profitable, 17 percent suffered a loss. Within culture, sport and leisure, these percentages were 36 and 20 per cent respectively. This makes the results for entrepreneurs in the leisure sector the least positive of all sectors in the Dutch economy. On average, more than 63 percent of all Dutch companies made a profit and 9 percent lost.
High work pressure
In addition to rising costs, the lack of staff is causing entrepreneurs’ confidence to drop. There were 44,600 vacancies in the hotel industry in the second quarter; an increase of 3,000 vacancies compared to the first quarter. With 23,400 vacancies, catering companies in the western Netherlands account for more than half. Staff shortages are a major problem. For example, 42 percent of the catering entrepreneurs indicate that the staff experience a high workload due to the staff shortage and just under 24 percent feel that the labor costs – read: especially the wages – have clearly increased.
Digitization work can provide relief in these times of staff shortages. No less than 73 percent of all tasks in the hotel industry lend themselves to digitization and automation due to the degree of repetition and predictability. This is much more than, for example, in education (27 percent) (McKinsey 2017). Check-in and check-out at hotels, ordering extra drinks, optimizing purchases and stock positions and payment are examples of things where technology can help.
More information: ABN AMRO Leisure Update September 2022