EMCC European Monitoring Centre on Change

Hotels and catering - what future?

The first article in the Sector Futures series on the hotels and catering sector sets out by defining the sector, outlining its market size, structure and employment figures. It then looks at the trends and drivers with a significant influence on the sector, raising some uncertainties and issues at stake for the industry and governments. Examples include the impact of technology on operations and labour demand, the current skills gap in the industry and the impact of consumer protection legislation.

Defining the hotels and catering sector

The hotels and catering sector referred to in this article is defined following the statistical nomenclature NACE revision 1.1, where hotel and catering services are classified in section H comprising ‘the provision to customers of lodging and/or prepared meals, snacks, and beverages for immediate consumption’. The section includes both accommodation and food services because the two activities are often combined at the same unit.

Table 1: Hotels and catering sector based on NACE Rev. 1.1 nomenclature, 2002
Code Description
H Hotels and restaurants
55 Hotels and restaurants
55.1 Hotels
55.10 Hotels, motels and inns
55.2 Camping sites and other provision of short-stay accommodation
55.21 Youth hostels and mountain refuges
55.22 Camping sites, including caravan sites
55.23 Other provision of lodging not elsewhere classified
55.3 Restaurants
55.30 Restaurants, including self-service, cafeterias, fast-food outlets, take-away facilities, dining car activities of transport companies
55.4 Bars
55.40 Bars, pubs, nightclubs, beer halls and vending machines
55.5 Canteens and catering
55.51 Canteens
55.52 Catering

Source: Eurostat, 2002

The hotels and catering sector in the EU generated €338 billion in 2001 and employed more than 7.5 million workers. Of the 1.4 million enterprises in the sector in 2001, more than 90% were micro-enterprises employing 10 people or less. Employment growth in the sector has remained healthy in the wake of September 11, but education and skills levels remain comparatively low, and the workforce composition is skewed towards women and younger workers.

Trends and drivers with a significant influence on the sector include changing lifestyles, low-cost air travel and information technologies (IT). These and several other factors are having positive and negative effects on the industry and affected agents, raising some uncertainties and issues for the industry and governments. Examples include the impact of technology on operations and labour demand, the current skills gap that exists in the industry and the impact of consumer protection legislation.

Market size, structure and employment

Market size

In 2001, there were over 1.4 million enterprises in the hotels and catering industry. Together they contributed €338 billion to the EU economy (see Table 2). The difference between the EU15 and the EU25 was around €10 billion, indicating the relative underdevelopment of the sector in the new Member States (NMS) which joined the EU on 1 May 2004. France, Italy and Spain accounted for more than half (51.5%) of the sector’s enterprises in the EU in 2001. The United Kingdom (UK) was home to just 8.5% of the enterprises, but accounted for the greatest shares of employment and turnover: it employed 24% of the workforce and generated 24% of industry turnover in the EU25 in 2001.

Market structure

Restaurants, bars and catering enterprises (H55.3 to H55.5) dominate the sector. Together, they accounted for almost two-thirds of the sector’s gross value added (GVA) and 75% of its employment in 2001. However, despite the success of big fast-food chains and catering chains such as Compass Group and Sodexho and hotel franchises such as InterContinental Hotels and Hilton Accor, the hotels and catering sector is dominated by small enterprises.

In the European economy, hotels, restraurants and catering represent a major service sector. As part of the service sector, over 90% of firms in the hotels and catering sector can be classed as micro enterprises (fewer than 10 persons employed). On average, each enterprise in the EU employs around 5.4 employees. Micro-enterprises alone generated over 40% of the sector’s turnover and employed almost half of the sector’s workforce in 2001. At the same time, large enterprises (more than 250 persons employed) only accounted for 0.1% of total enterprises, generated 24.6% of the sector’s turnover and employed around 20% of the sector’s workforce.

Table 2: Number of enterprises, employment and turnover in hotels and restaurants, 2001
Country Enterprises Employment Turnover Persons employed
. Number % Number % € million % per enterprise
Austria 38,679 2.7 211,670 2.8 10,512 3.1 5.5
Belgium 40,217 2.9 157,699 2.1 8,627 2.5 3.9
Cyprus 7,103 0.5 33,270 0.4 1,592 0.5 4.7
Czech Republic 42,580 3.0 162,653 2.1 2,684 0.8 3.8
Denmark 13,442 1.0 94,597 1.2 4,405 1.3 7.0
Estonia 1,338 0.1 13,268 0.2 215 0.1 9.9
Finland 10,514 0.7 52,939 0.7 4,275 1.3 5.0
France 207,326 14.7 796,433 10.5 51,826 15.3 3.8
Germany 172,999 12.3 1,082,339 14.3 42,001 12.4 6.3
Hungary 32,121 2.3 111,287 1.5 1,766 0.5 3.5
Ireland 13,662 1.0 125,187 1.7 6,592 1.9 9.2
Italy 255,739 18.2 904,973 11.9 47,996 14.2 3.5
Latvia 1,876 0.1 17,018 0.2 212 0.1 9.1
Lituania 2,906 0.2 24,053 0.3 199 0.1 8.3
Luxembourg 2,570 0.2 12,643 0.2 862 0.3 4.9
Malta 2,135 0.2 17,080 0.2 497 0.1 8.0
Netherlands 39,740 2.8 299,340 3.9 14,302 4.2 7.5
Poland 51,645 3.7 200,232 2.6 3,085 0.9 3.9
Portugal 62,083 4.4 239,142 3.2 7,021 2.1 3.9
Slovak Republic 1,161 0.1 20,482 0.3 254 0.1 17.6
Slovenia 6,056 0.4 27,842 0.4 794 0.2 4.6
Spain 261,671 18.6 1,073,666 14.2 41,393 12.2 4.1
Sweden 21,383 1.5 109,436 1.4 7,250 2.1 5.1
United Kingdom 119,195 8.5 1,792,138 23.6 80,244 23.7 15.0
EU15 1,259,220 89.4 6,952,202 91.7 327,306 96.7 5.5
EU25 1,408,141 100.0 7,579,387 100.0 338,604 100.0 5.4

Note: Data for Greece not available. Source: Eurostat, 2004b, p. 4

Table 3: Main enterprises in the hotels and catering sector in the EU15, 2002
Main hotel chains
Company Country Number of rooms
. . .
InterContinental Hotels United Kingdom (UK) 514,873
Accor France (FR) 440,807
Hilton Group plc United Kingdom (UK) 96,380
Sol Melia Spain (ES) 81,096
TUI Hotels and resorts Germany (DE) 75,000
Main restaurant, bar and catering enterprises
Company Country Turnover (€ million)
. . .
Compass Group UK 7,953
Sodexho Alliance FR 4,554
Elior FR 2,036
Whitbread UK 1,832
Six Continents UK 1,334

Source: Adapted from Eurostat, 2004a

Figure 1: Share of enterprises, employment and turnover in hotels and restaurants, by size class in the EU25, 2001


Note: Data for Greece and Luxembourg not available; Netherlands data is for 2000.

Source: Eurostat, 2004b, p. 2

Employment

Hotels and catering in the EU employed more than 7.5 million workers in 2001. The sector plays an important role in job creation in the EU economy. According to Eurostat figures, during 1995 to 2000, employment in the sector increased on average by 1.6% per year. Despite the economic downturn in the wake of 9/11 in 2001, employment in hotels and catering grew by 2% to 2.5% per year in 2001 and 2002, well above the 1.3% in 2001 and 0.38% in 2002 for the economy as a whole.

The hotels and catering industry is heavily dependent on tourism, so employment levels tend to be seasonal. In addition, the labour force is, on average, much younger and less skilled than in other sectors, and also has a higher percentage of women.

In 2004, women accounted for 55% of the total jobs in the sector, which is about 20% higher than in the EU economy as a whole. At a sub-occupational level, the higher female share exists only in core jobs in the sector, such as travel attendants, housekeeping and restaurant workers. Other, often more senior, jobs, such as cooks and managers, are dominated by men.

Figure 2: Employment by type of work in EU25, 2004


Source: Based on Eurostat, 2004a, p. 309

Part-time work is also relatively more common in the sector: 28% of employment was part time in 2004, compared with only 18% for the whole economy. Qualification levels of workers in hotels and restaurants are relatively low (ISCED 1997 classification). Fewer than one employee in 10 had attained a high level of education (all tertiary education, including university education) and more than 40% of employees were relatively unskilled.

Recent developments in the sector

In the wake of the 9/11 attacks, turnover growth in the hotels and catering sector slowed from around 4% to 4.5% per year before the attacks to about 1.5% per year (see Figure 4). Turnover growth started to pick up in 2004 as consumer confidence was restored and US visitor numbers started to recover. Employment growth also slowed following the 9/11 attacks, and despite picking up in 2003 it continued its downward trend in 2004.

Figure 3: Recent development in the hotels and catering sector, EU25 (%)


Source: Business trends, Eurostat data

Figure 4: Employed persons in hotel and catering sector by level of education attained (ISCED 1997), EU15


Source: Annual detailed enterprise statistics, Eurostat data

In the EU15 in 2000, more than 40% of employees in the sector were relatively unskilled (see Figure 4). In 2004, a small increase in the proportion of those with upper secondary or tertiary education was seen, thus the qualification level of workers had improved slightly and the share of workers with relatively low skills had diminished. It is not clear to what extent EU enlargement will help in raising skills levels in the sector. Certainly, enlargement is likely to provide a pool of more mobile and cost-effective labour. However, as all the NMS are former communist countries where consumer expenditure on hotels and catering was low or non-existent and the tourist industry was comparatively underdeveloped (except Slovenia), there will perhaps be skills lacking in this area among the workforce from some of the new Member States.

While Figure 3 indicates that employment in the sector has grown by around 2% per year during 2000 to 2004, Figures 5 and 6 indicate that most of this expansion has been among older and part-time workers. During 2000 to 2004, the number of part-time workers increased by 10% to 12%, while the number of full-time workers, despite rising temporarily, has not noticeably changed. This reflects, in part, the role of technological advances in increasing demand for more flexible working patterns. At the same time, the number of 15- to 34-year-olds working in the sector remained largely unchanged during 2000 to 2004, while the number of older workers rose significantly. Workers aged over 55 have registered the biggest rise, of around 30%, while those aged 35 to 54 have increased in number by about 10%.

Figure 5: Employed persons in the hotel and catering sector by age group, EU25


Note: 2000 = 100

Source: Annual detailed enterprise statistics, Eurostat data

Figure 6: Employed person by full-time/part-time activity, EU25


Note: 2000 = 100

Source: Annual detailed enterprise statistics, Eurostat data

Trends and drivers

The key drivers in the sector are presented below with a brief description. A more detailed assessment of these drivers is presented in the second article of this series.

Sociological

Key sociological drivers include the ageing of populations in many of the EU Member States, combined with changing lifestyles and tastes among workers and consumers across the EU. The ageing of the workforce and the increasing levels of educational attainment among young people can be expected to affect the structure of the workforce and its working conditions. Population ageing is also likely to lead to a change in consumer preferences and, hence, in the services supplied. Changing consumer lifestyles and tastes, brought on by improvements in living and working conditions, evolving social conventions, economic development and new technology, are creating more informed and demanding consumers, who are also becoming more organised as a collective force.

Technological

On the supply side, the prevalence of information technologies over the last 20 years, and in particular the last 10 years, has allowed enterprises to be more flexible by allowing them to manage and monitor both their resources and supply chains better. Information technologies also facilitate the greater customisation of services on offer. For consumers, it has led to an expansion of choice of information providers and where they spend their money. It is also changing consumers’ shopping habits and the way they interact with enterprises. Beyond developments in information and communication technologies (ICT), new kitchen and production technologies are leading to structural changes in catering establishments by allowing the outsourcing of many operations and the simplification of kitchen processes, but with largely negative effects for the workforce.

Economic

Globalisation is one economic driver influencing the hotels and catering sector. Through the free movement of labour and capital as well as economic and political integration, globalisation has opened up new geographical and consumer markets. These present both threats and opportunities. For all companies, there is the prospect of tapping into new consumer and new labour markets. However, for existing workers, this also throws up the potential threat of more efficient and/or better-skilled labour elsewhere and the threat of new destinations, cultures and companies. Another economic driver is the recent, rapid expansion of low-cost air travel. This has made it easier for agents to travel as both tourists and workers, but it also creates further problems. Together, these drivers stimulate other socio-economic and political issues concerning skills levels, migration and working conditions.

Environmental

Adverse weather patterns in recent years have pushed the issue of climate change and energy use into the political mainstream. Adverse weather itself is likely to affect the sector where it forms part of the tourist industry situated in areas at risk from climate change, with coastal and winter sports resorts most at risk. Politically, part of the response is to target air emissions and energy efficiency. In this way, political efforts to improve resource efficiency across the economy, particularly with respect to utility inputs, are likely to lead to cultural and hardware changes within the industry. Another issue affecting the sector as part of the tourist industry is the environmental impact of tourists who use hotel and catering establishments.

Political

While legislation and international relations represent the clearest types of political drivers, EU enlargement and social dialogue are, respectively, partly economic and partly social drivers. International relations appear to have become more confrontational in recent years, spurred on, in part, by the 9/11 attacks. Developments in international relations continue to influence consumer confidence and behaviour, and this is likely to continue to affect demand for the hotels and catering sector as part of the tourist industry. As the EU becomes more attuned to consumer and human rights and standards of living, key pieces of legislation likely to affect the sector relate to working conditions and to the marking, quality and safety of food. This desire to promote higher living and working conditions should also stimulate social dialogue between companies and employees. Within this social dialogue framework, the accession of new Member States is likely to generate new pressures and perspectives. Beyond this framework, the expansion of the EU offers further opportunities in existing and new Member States by opening up new untapped consumer markets and labour forces.

Uncertainties and issues

Working conditions in the hotels and catering sector are characterised by low wages, long hours, poor career structures and often weak enforcement of equality policies. As a result, staff turnover is typically high. This, along with absenteeism, low commitment and poor employee performance, acts as a disincentive for employers to train and invest in their staff. The small, often family, nature of firms and tight margins is also likely to work against opportunities for staff development. The prospects for future skills levels and career prospects are therefore likely to remain an issue, and legislation may be needed to force firms to take staff development more seriously and improve their career prospects.

Within the EU, the hotels and catering industry has been identified as a sector where staff are most at risk of physical violence. Staff may have to work in highly stressful conditions, with frequent contact with inebriated clients and customers. Exposure to violence and sexual harassment is sometimes viewed as being a regular occurrence and as being part of the job in this sector. The dominance of small enterprises in the sector means that most employers lack the means to support and protect their staff from these pressures.

Employee and employer representatives in the sector are working together in order to improve the economic environment for enterprises while making working conditions better for workers. Even so, union membership in the sector is low because of its employment structure. Attracting workers to union membership is therefore one of the European Federation of Food, Agriculture and Tourism Trade Unions (EFFAT) main priorities in order to increase the intensity of social dialogue, from the ILO-defined ‘exchange of information’ and ‘consultation’ to a higher level of involvement (‘negotiation’), such as collective bargaining and negotiating in the decision-making process.

While future legislation will likely raise standards of working conditions, it will also probably lead to job cuts and lower wage growth. Because of their generally tighter operating conditions, small businesses are likely to find it hardest to conform to the new legislation. In general, more rules and regulations are likely to hurt small businesses (which account for 90% of total enterprises in the sector) the most, but the impact may be less if the European Commission succeeds in cutting red tape for business.

The impact of migrant labour should also be considered. In theory, low-skilled migrants can be expected to fill low-skill vacancies that are unfilled by native workers and suppress wage inflation in the sector. However, as recent data show, there has been less labour migration than was expected following EU enlargement. In addition, because the economies of the new Member States are expected to develop with relatively greater speed than was the case with previous accession countries, the reasons for migration from these countries are expected to diminish more rapidly. As a result, migrant workers are less likely to be a significant force in affecting working conditions. If the scale of migrant labour does become sufficiently large, it may well lead to more legislation to protect workers rights, but there is also the possibility that it may lead to protectionist legislation in countries where unions are, or become, powerful political bodies.

The adoption of technology in the sector carries some uncertainty and raises certain issues. It is not entirely clear to what extent new technology will improve working conditions and job opportunities and to what extent its impact will be negative. It has led, and will continue to lead, to changes in the quantity and structure of labour demand in the sector. The International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers’ Associations (IUF) argued that new technologies require less-skilled staff and so result in many job losses in the industry. Moreover, the IUF argues that technology will devalue wages by deskilling the remaining workforce. In contrast, time-saving technology could benefit workers in the sector by reducing the stress and pressure placed on workers, allowing them to work in a more favourable environment. Given the small scale of many of the enterprises in this sector, the adoption of technology is likely to be very sensitive in terms of the cost of implementation and the expected flow of benefits over time. Another influence in the adoption of new technologies is likely to be legislation on working conditions and health and safety standards. Adopting new technologies generally raises working conditions, but its impact on labour demand is unclear. Time-saving technology may lead to reduced labour demand or it may create new work opportunities, and specialist technology may require new skills that demand higher wages.

It is not clear if globalisation, changes in consumer demand and the internet will benefit the sector. It appears to have made consumers more mobile and flexible as shoppers. It may well be that it leads to a dichotomy where some companies successfully adapt to these forces while others fail to adapt and become unable to compete. Furthermore, these forces probably favour larger businesses more than small ones. Their greater scale and pool of resources makes it easier for them to exploit these new opportunities. At the same time, although current conditions in the hotels and catering sector are forcing small enterprises to find new ways to compete in order to survive, potential benefits from technologies to small enterprises are likely to be limited because their size limits the opportunity to generate economies of scale. As a result, further consolidation and an increasing presence of chains within the sector can be expected.

Further articles in this series

This concludes the first article in this series on the hotels and catering sector, providing a snapshot of the sector. It outlines the business areas the sector incorporates as well as its key features and the issues facing the sector. The trends and drivers identified here are carried forward and examined in more detail in the second article of this series, Hotels and catering - visions of the future. Consideration is given to their likely consequences and the relationships with other trends and drivers, including the presentation of a schematic framework. The article then reviews recent scenario work conducted for the sector and concludes by looking at the implications on the sector.

References

All links accessed on 13 December 2005.

European Federation of Food, Agriculture and Tourism Trade Union (EFFAT), Study on medium term trends in the hospitality sector and their impact on enterprises and labour market, The Hague, 2001, available at http://www.effat.org/8/8_1/Files%20EN/HOTREC/D%20HOTREC%202%20Study%20medium%20terms%20trends%20EN.pdf.

Eurostat, Data, Industry, Trade and Services, available at: http://epp.eurostat.cec.eu.int/portal/page?_pageid=0,1136195,0_45572097&_dad=portal&_schema=PORTAL

Eurostat, European business: Facts and figures - Data 1998-2002, Panorama of the EU, Luxembourg, Office for Official Publications of the European Communities, 2004a, available at http://epp.eurostat.cec.eu.int/cache/ITY_OFFPUB/KS-BW-04-001/EN/KS-BW-04-001-EN.PDF (pdf 5.52Mb).

Eurostat, ‘Hotels and restaurants in Europe’, Statistics in Focus, Industry, Trade and Services, Issue 38/2004, Luxembourg, Office for Official Publications of the European Communities, 2004b, available at http://epp.eurostat.cec.eu.int/cache/ITY_OFFPUB/KS-NP-04-038/EN/KS-NP-04-038-EN.PDF (pdf 595kb)

Eurostat, Statistical classification of economic activities in the European Community Rev. 1.1, 2002, available at: http://europa.eu.int/comm/eurostat/ramon/nomenclatures/index.cfm?TargetUrl=LST_NOM_DTL&StrNom=NACE_1_1&StrLanguageCode=EN&IntPcKey=605615.

International Labour Organization (ILO), Human resources development, employment and globalization in the hotel, catering and tourism sector, Geneva, 2001, available at http://www.ilo.org/public/english/dialogue/sector/techmeet/tmhct01/tmhct-r.pdf.

Ishikawa, J., Key features of national social dialogue: a social dialogue resource book, Geneva, International Labour Organization (ILO), 2003, available at http://www.ilo.org/public/english/dialogue/ifpdial/downloads/papers/key.pdf.

The Confederation of National Associations of Hotels, Restaurants, Cafés and Similar Establishments (Hotrec), EU regulatory challenges and the hospitality sector, Belgium, 2004, available at http://www.hotrec.org/Leaflet%20EU%20Regulatory%20challenges-Ann.pdf.

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