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Rising Minimum Wage and Its Impact on Germany's Hospitality Sector
The recent increase in Germany's minimum wage, scheduled to reach €14.60 per hour by 2027, is causing ripples in the hospitality sector, particularly in restaurants.
Lars Schwarz, president of the German Hotel and Restaurant Association MV, has expressed concern over this development, viewing it as a much-needed relief for the industry that has been particularly hard hit. The increase in the minimum wage by almost 40% over the past five years is a significant additional cost for restaurants, leading many establishments in MV to raise their prices.
The return to the 19% VAT rate on food in the hospitality industry, which reverted back to its original rate on January 1, 2024, after a temporary reduction during the corona pandemic, is another factor contributing to increased prices for restaurants in MV.
Despite these price increases, the catering industry ended 2024 with a real drop in turnover, according to the Federal Statistical Office. The tourist season has been lackluster for hotels and restaurants in MV this year, with many vacationers opting for cheaper options, such as wine from the supermarket in their vacation rental, instead of dining out.
The duration of guests' stays at restaurants in MV has become significantly shorter, further exacerbating the financial strain on the industry. The statement "The impression that restaurants are always full and well-visited is misleading" indicates that the perception of constant high demand for restaurants in MV is inaccurate.
The current black-red coalition wants to make the reduced VAT rate of 7% on food in the hospitality industry permanent from January 1, 2026. However, it remains to be seen whether prices on menus will also be reduced.
Economic pressures and rising wages in the food and accommodation sectors are observed in other countries and have shown to raise wage costs but may eventually support consumer spending as real wages stabilize or grow. However, the interplay of labor cost increases and labor shortages may push restaurants to become more efficient or raise prices, possibly affecting tourism spending behavior.
In summary, the minimum wage increase in Germany's hospitality sector raises labor costs and contributes to moderate inflation in service prices, which can affect restaurant revenues during the summer tourism peak. Its correlation with tourism is complex: while rising prices might dampen discretionary spending, labor shortages could limit restaurant capacities, both influencing overall revenue dynamics during the season. However, official data explicitly linking these wage changes with summer tourism revenue in Germany's restaurant sector for 2025 is not directly reported in the available sources.
- The German Hotel and Restaurant Association MV's president, Lars Schwarz, advocates for the permanent reduced VAT rate of 7% on food in the hospitality industry to counteract the impact of rising employment policies on prices.
- The interplay of employment policy increases and employment policy shortages in the food-and-drink sector could lead to restaurants becoming more efficient, potentially affecting lifestyle choices such as tourism spending.
