More hospitality businesses buckling under high costs and debts

More hospitality businesses closed in the first half of this year than in the five preceding years. Over 4,000 entrepreneurs buckled under the high costs and their debts, NU.nl reports based on figures from the Dutch Chamber of Commerce (KVK). The number of bankruptcies in the sector is also rising rapidly.

From January to June, 4,058 hospitality entrepreneurs closed their businesses – about 20 percent more than last year and even more than in the first half of 2020, when the pandemic broke out. These are businesses that closed without going bankrupt.

Another 141 hospitality businesses were declared bankrupt by the courts in the same period. That is also the largest number in five years, except for the first half of 2020.

According to the hospitality association KHN, hotels, restaurants, and bars are struggling. Revenues are rising as customers return to the sector more and more, but profits are not growing proportionally. “Entrepreneurs must deal with rising wages, higher rents, and expensive energy. Companies can only pass on these extra costs to their customers to a limited extent. After all, you don’t want to price yourself out of the market,” Marijke Vuik of the KHN told NU.nl. “But this puts profit margins under pressure.”

Many businesses also struggle with staff shortages and tax debts accrued during the pandemic that must now be repaid. “Many businesses also took out extra loans during the coronavirus crisis to keep their heads above water. Those loans have to be paid off,” said Vuik. “Some entrepreneurs even end up below the social assistance level.”

According to Vuik, the KHN dreads the plans to increase the minimum wage further, which is part of several political parties’ election programs. Another big increase would have major consequences for the catering industry because a significant part of the staff receives a minimum wage.