Restaurants in German cities see revenues rise after crisis years

The gastronomy sector in major German cities is finally enjoying better times despite multiple crises in recent years, according to a new study by the Ifo Institute.

Published: 14 September 2023 16:37 CEST

A waitress delivers drinks to guests at a Stuttgart restaurant. Photo: picture alliance/dpa | Bernd Weißbrod

The study indicates that restaurant revenues have rebounded in Berlin, Hamburg, Munich, Stuttgart, and Dresden, with inflation-adjusted figures even surpassing pre-pandemic levels.

“There’s an upswing in the gastronomy sector after the Covid-19 pandemic, despite the war in Ukraine and inflation,” said Simon Krause, one of the study’s authors.

However, he cautioned that the cities surveyed have particularly affluent populations. Rural areas may not be experiencing the same recovery, and data on tourist consumption, which remains below pre-pandemic levels, is not available.

Analysing the last six months, including the fourth quarter of 2022 and the first quarter of 2023, the study shows a consistent increase of at least 20 percent compared to 2019 across all cities. Munich and Hamburg recorded even higher numbers, while Berlin showed significant growth.

Carla Krolage, another author of the study, explained: “Establishments were able to pass on some of the increased costs of personnel, food, and energy to consumers without losing their customer base.”

Restaurant prices have risen more than the overall inflation rate, according to data from the Federal Statistical Office.

The Ifo researchers also observed a shift in the gastronomy landscape. Business in the usually lower-revenue outskirts grew proportionally more than in city centres.

Saturdays and Sundays saw above-average increases, possibly influenced by the increased prevalence of remote working, with more people eating out in their residential areas.

The German Hotel and Restaurant Association (Dehoga) recently expressed a less optimistic view of its members’ situation.

They reported that summer business had been worse than expected, although this period falls outside the scope of the Ifo study.

Dehoga also raised concerns about rising costs and called for the continued reduction of value-added tax for their industry.

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Intel’s delay

The US chip giant announced Monday it is postponing plans for its project in Germany for two years as it focuses more on the United States.

This is a blow to Berlin, which had pledged 10 billion euros ($11 billion) – a third of the cost – to build the production plant in the eastern city of Magdeburg.

While Intel’s own struggles are the immediate cause for the delay, it has also fuelled concerns that Germany is becoming less attractive as a place to do business.

In this year’s ranking of the most competitive economies by Swiss business school IMD, Germany slipped two spots to 24th, with taxes, bureaucracy and poor infrastructure cited as major handicaps.

Volkswagen stalls

Auto titan Volkswagen announced earlier this month it could take the unprecedented step of closing factories in Germany for the first time in its 87-year history.

Europe’s biggest carmaker is struggling with high costs, problems in the transition to electric vehicles, and fierce competition from local rivals in key market China.

Employees of German car maker Volkswagen (VW) protest at the start of a company’s general meeting in Wolfsburg, northern Germany, on September 4, 2024. Photo by Moritz Frankenberg / POOL / AFP

A week after VW’s shock announcement, BMW announced it was recalling 1.5 million vehicles due to problems with their brakes and downgraded its outlook for the year, also citing problems in China.

Steel storm

Efforts by Thyssenkrupp to spin off its loss-making steel division and get its business back on track ran into trouble last month when a host of senior executives quit in protest at the what they said was the unacceptable behaviour of the group’s CEO.

The row centres around plans to restructure the division, which operates Europe’s largest steelworks in Duisburg, western Germany.

The conglomerate wants to separate the steelmaking unit from its other activities, which include building submarines, as it faces higher manufacturing costs and competition from cheaper Asian steel.

It already announced that it plans to cut jobs in Duisburg and reduce production.

Firms face being gobbled up

Deutsche Bahn announced last week that logistics unit Schenker, traditionally one of its most profitable arms, is to be sold to Danish group DSV, with unions fearful it could lead to thousands of job losses in Germany.

Meanwhile Italian bank UniCredit is targeting a takeover of Commerzbank after building up a nine-percent stake in Germany’s second-biggest lender, a development that reportedly blindsided Berlin and has angered German unions.

Still some say such takeovers also highlight that German firms remain attractive, despite the woes of the broader economy.

Poor indicators

After starting the year on a positive note, recent surveys – from business morale to consumer confidence – have been on a downward trend, denting hopes of a strong rebound.

Some economic institutes have cut their forecasts, and now expect either stagnation or a slight recession for the whole year.

In its last official forecast in April, the economy ministry still expected growth of 0.3 percent this year, but it may downgrade that forecast when it updates the figure soon.

Commenting after a recent batch of negative data, ING economist Carsten Brzeski summed up Germany’s problems: “Years of stagnation, and underestimating technological trends and international competition do not come without consequences.”

By Sophie MAKRIS