How adapted government policies can increase resilience to SME accommodation shortages in Europe

The tourism industry is a vital pillar of the EU economy, accounting for around 10% of GDP and a similar share of employment. In many ways, our sector does not receive the attention it deserves from policymakers, yet it is a key driver of EU competitiveness, a major source of services exports and a provider of local development across our continent.

Following the European elections, we look forward to a new set of priorities and hope that government policies will be better calibrated to strengthen the position of hospitality SMEs in Europe. The first step, as always, is knowledge. What is on the minds of European hoteliers? Has the sector fully recovered from the worst crisis in travel history? Will international hotel chains or local SMEs benefit more from government action? And what types of policies would they find most helpful?

For the third year running, we’ve partnered with Statista to survey almost a thousand hospitality professionals for the European Accommodation Barometer. What we found out may surprise you.

Despite accounting for the majority of European accommodation, independent companies have seen their share rooms fall in recent decades. The latest barometer shows that chain hotels continue to perform well, outperforming their smaller counterparts – across a range of economic and sentimental indicators, including access to capital, as well as developments in occupancy and room rates.

While 77% of chain hotels report positive economic activity, only 59% of independent businesses do so. Large hotels, especially those with more than 250 employees, benefit from economies of scale, making it easier to obtain loans and manage rising costs. This advantage is reflected in the 84% of larger hotels that reported positive business development in the past six months, compared with only 50% of micro-businesses with nine or fewer employees.

The Barometer reports also shed light on how government action is perceived by type and size of accommodation. While everyone recognises the importance of the regulatory and political context in which our industry operates, chain hotels consistently reported a greater appreciation of government policy, by 8-10 percentage points compared to independent establishments.

Geographically, perceptions of government policies vary significantly. In the Nordic countries, 59% of hoteliers predicted a positive impact of these policies in autumn 2023. In sharp contrast, German hoteliers were much less optimistic, with only 10% expecting positive results and 50% predicting negative effects. These statistics not only underline regional disparities, but also underscore the need for tailored and hyper-local policies that are sensitive to the specific economic and cultural contexts of each country, region or destination.

The survey results further reveal the effort required to comply with the various requirements and orders imposed by governments. Over the past year, an increasing number of European hoteliers (almost half) have reported an increase in the level of effort required to comply with government regulations, with only 6% believing that compliance has become easier. This growing challenge is particularly evident among small and medium-sized enterprises (SMEs), which often do not have the same resources as larger chains to meet these requirements.

When looking at the types of government actions that resonated with hoteliers, investment in destination marketing emerged as the most praised policy in the fall of 2023, supported by 42% of respondents. Other beneficial policies included accommodation support programs (38%) and travel education/training programs (33%). On the other hand, taxation was singled out as the most burdensome policy area, with 50% of hoteliers feeling it negatively impacted their business.

As the tourism industry looks to continue to revive progress, hoteliers have expressed clear preferences for the types of government support they consider most important. These include a desire for a reduced VAT rate, strong investment in local infrastructure and an emphasis on macroeconomic stability, with each of these areas receiving support from more than 70% of respondents.

In addition, facility size is inversely associated with the perceived need for government intervention. Smaller facilities, often without the buffer of extensive capital reserves or brand recognition to ensure a steady flow of guests, are more vulnerable and therefore more dependent on support policies. For example, almost four in five (78%) of the smallest businesses highlighted the urgent need for macroeconomic stability, compared with just over half (53%) of the largest establishments.

Independent properties do not have access to the closed systems used by global chains and face much greater obstacles in terms of access or cost of capital. In an environment where international and intra-European travel is playing an increasingly important role, this puts SME hotels at a structural disadvantage. A research paper on the Belgian hotel market found that hotels listed on digital platforms achieve higher profitability. Importantly, the smaller the property, the more pronounced this effect was.

In the European accommodation sector, government policies and regulations have always been key to maintaining standards, ensuring consumer protection and fostering competition. It is essential that policymakers, regulators and governments at EU and national level engage more deeply with all stakeholders, including micro-enterprises in the hospitality industry, global chains and industry platforms such as Booking.com, to develop policies that not only respond to global megatrends in travel but also adapt to the specific challenges faced by SME accommodation facilities.