Michael Heinzler is normally a very optimistic person. But the coming year worries the hotel owner from Immenstaad on Lake Constance. The 51-year-old will increase prices in his hotel by 16 to 18 percent. Inflation, increased operating costs and the return to a VAT of 19 instead of 7 percent in the catering industry would drive up prices.
He couldn’t say how guests would react to the price increases from January 1st. “This situation has never existed before,” says Heinzler, who wants to offer something for both large and small budgets in his house with 34 rooms and suites on the lakeshore.
“Challenging times”
Many people in Germany are feeling the same way as the hotelier on Lake Constance. “These are challenging times,” says Tobias Warnecke, managing director of the Germany Hotel Association. During the pandemic, the industry looked into the abyss. Things were slowly improving, but then the war in Ukraine came. “We slipped from one crisis to the next.”
After severe slumps in 2020 and 2021, the industry’s sales are still lagging behind pre-crisis levels. According to the Federal Statistical Office, hotels and other accommodation companies recorded a price-adjusted decline of 6.7 percent in the first three quarters of the year compared to the pre-crisis period. This year, the number of guest overnight stays has returned to pre-Corona levels. In May and September, the industry was even higher than in 2019. Profitability in the hotel industry has always been relatively low, says Warnecke. “There was never really much left over.”
Stephanie Zarges-Vogel from the hotel consulting firm Zarges von Freyberg says it is certainly possible to be in the black. But you have to get used to the fact that, despite increased sales, the result isn’t necessarily much better. The margin has shifted significantly downwards due to the significantly increased costs.
“Never been so difficult to plan”
The hotel industry is characterized by uncertainty and difficulty in planning, says Zarges-Vogel. “I think it’s never been so difficult to plan.” Hotels without a clear concept and strong positioning would have a difficult time in the future. Things will also be difficult for mid-range hotels. “Cheap and very expensive work, but the middle is difficult to represent,” says Zarges-Vogel.
According to the managing director of the hotel association, the price-performance ratio has always been very good in Germany. It has always been difficult to achieve appropriate prices because Germans are very price sensitive. He currently sees no scope for falling prices.
Consultant Zarges-Vogel argues: “A certain level of performance simply has its price.” It needs to be better anchored in the minds of guests that they can’t “go to the junk market” if they expect a certain level of performance. “In the consumer goods sector this is completely normal and when it comes to travel, I think we will have to get used to it.”
Price sensitive guests
The needs of guests are increasing, and with the higher prices they are also becoming more sensitive, says the consultant. Individuality is therefore very important. It starts with the little things at the breakfast buffet, such as regional products. But also when it comes to the design or furnishings of the hotel, by thinking about things that guests won’t find everywhere. Or when it comes to service, for example, with a personal atmosphere. “This allows you to build unique selling points that hotel chains will never have.”
Hotelier Heinzler benefits from its location in the Lake Constance tourism and holiday region. The city and business hotel industry is suffering more from the consequences of Corona than the holiday hotel industry, says association managing director Warnecke. Tourist demand picked up much more quickly.
Difficult search for a successor
Another problem: According to Warnecke, many hotel owners are no longer the youngest and cannot find a successor. Hotel chains pushed into the resulting gap. When a place becomes available, it displaces the private hotel industry. Hotelier Heinzler, on the other hand, hopes that his family business will be taken over by the fourth generation of his own children.
What makes the search for a successor more difficult: According to Warnecke, hoteliers have to deal with a lot of annoying bureaucracy. Large hotel companies have corresponding structures or entire departments that regulate everything. On the other hand, small private hotels are faster and can react much better to new market conditions.
Meanwhile, Heinzler looks out over the gray Lake Constance. His mood is not quite so gloomy. But he and many of his colleagues are unsettled. The location gives him hope. “Lake Constance has developed extremely well in recent years,” he says, referring to the number of overnight stays. He would be satisfied if he could maintain the level despite the price increases.
A forecast from the hotel association could give him hope: the association expects to achieve the guest numbers and sales of 2023 next year.
