Our figure of the month 04/2020: COVID-19 and the hospitality industry

How big is the economic impact?

The coronavirus pandemic keeps Germany in a state of emergency: production stops, forced closures of shops and contact bans have severely restricted if not completely brought economic and social life to a standstill. The hotel and restaurant industry is one of the sectors most affected by the compulsory measures. For several weeks, the clientele for restaurants, pubs and cafés, but also for hotels, will be absent. What is the economic impact of a two-month shutdown of this industry on the overall economy?

This question is examined in the figure for the month of April. It is assumed that a two-month shutdown would reduce the demand for accommodation and catering services by 16 percent (approx. 8 percent per month). The effect on private consumption would then be a decline by 1.1 per cent – significantly less than the initial effect. Nevertheless, the effect is still large enough to cause real GDP growth to fall by 0.5 percentage points. Here, too, the effect is slowing down, albeit to a lesser extent, since private consumption, at a good 50%, accounts for the bulk of GDP.

The effects on the labour market would also be noticeable without the short-time working arrangements introduced, as the hotel and restaurant industry is a labour-intensive sector. Without the short-time working measures adopted by the federal government, there would be a Germany-wide loss of nearly 200,000 jobs. 82 percent of this in the hotel and restaurant industry alone. The results for the hotel and restaurant industry emphasize the necessity of both the extended short-time work regulations and the possibility of maintaining businesses with loans and subsidies.

Other figures can be found here.