Debt in the HoReCa Sector is Rising, but Not Everywhere. Hotels Are Faring Better Than Restaurants

Despite mixed opinions from the market, accommodation owners will likely consider this season a success. According to the Central Statistical Office (GUS), the number of tourists is increasing, and data from the BIG InfoMonitor Debtor Register and the BIK database, which also tracks delays in loan repayments, shows that the growth rate of debt has slowed down. However, the hospitality industry, still eager for guests, is facing a more challenging situation. The ongoing problems, which have persisted for several years, continue to cause an increase in overdue debt in this sector. In June, the total debt of the entire HoReCa industry exceeded PLN 2 billion! The leading regions for companies failing to meet their financial obligations are Mazowieckie, Łódzkie, and Śląskie provinces, where hoteliers and restaurateurs struggle the most.

The total debt of the HoReCa industry exceeded PLN 2 billion at the end of June, reflecting an increase of nearly PLN 200 million (11%) year-on-year. Approximately 13,500 companies (6%) are struggling to pay their current bills, loans, and invoices from suppliers and contractors, and their number increased by 594 entities during the same period. On average, an entrepreneur in this industry has nearly PLN 153,000 in overdue liabilities. – Without a doubt, HoReCa representatives in tourist regions and large cities, where one can count on a higher number of tourists, including seasonal vacationers, as well as business clients, are in a much better starting position. However, this does not mean they are free from problems with overdue debts. The leading regions for companies failing to meet their financial obligations in this sector are Mazowieckie, Łódzkie, and Śląskie provinces. Companies in Podkarpackie, Zachodniopomorskie, and Kujawsko-Pomorskie provinces are faring better – notes Sławomir Grzelczak, President of BIG InfoMonitor.

Data from the Central Statistical Office[1] shows that the number of tourists using accommodation facilities in Poland from January to May this year is nearly 1 million higher than in the same period last year and 2.7 million higher than in the same period two years ago. The Polish Chamber of Hotel Industry[2], which continuously monitors the market situation, reports that while hotels recorded slightly lower occupancy in June compared to the previous year, July saw an increase in guest numbers. The overall situation in the industry and reservations for the entire season can be considered satisfactory.

The improved condition of the industry is confirmed by the latest data collected in the BIG InfoMonitor Debtor Register, which shows delays in the payment of current bills and invoices to contractors, and in the BIK credit information database, which also includes data on overdue credit obligations. According to these sources, unpaid debt by entrepreneurs offering accommodation amounted to nearly PLN 1 billion at the end of June, representing only a 0.4% year-on-year increase. The previous year saw an increase of almost 6%. Moreover, only 3.1% of companies in the accommodation industry have problems paying their debts. However, there are significant differences depending on the type of facility. Among hotel owners, 8% have overdue liabilities. For camping and tent sites, this figure is 2.7%. The smallest percentage of companies with debt issues is among so-called tourist accommodation facilities, such as guesthouses and lodgings, where it stands at 1.7%. Among other facilities, 6.3% have difficulties settling their obligations. The average overdue debt of each of these entities is nearly PLN 500,000 – still a significant amount that will be difficult for many entrepreneurs to manage.

– When we look at individual segments of the accommodation industry, it turns out that the overdue liabilities of hoteliers and owners of camping and tent sites have decreased over the year. In the case of hotels, the decrease is PLN 11.1 million, or 1.3%. Against this background, the decrease in the debt of campsite owners by PLN 904,000 may not seem impressive, but for them, it represents an improvement of over 50%! Considering the occupancy of campsites and the growing activity of Facebook groups dedicated to mobile homes, it is clear that this form of travel is currently experiencing a renaissance – says Sławomir Grzelczak, President of BIG InfoMonitor Debtor Register.

– Facilities offering a larger number of accommodation places within a single reservation, such as year-round cottages, are also benefiting, as the cost of rent can be split, for example, between two families. Location, view, as well as intimacy and high comfort are key factors in choosing accommodation for guests. They are willing to pay more for these amenities, and this part of the industry that can meet these expectations is thriving. Currently, many new, intimate, high-standard facilities are being built in Poland, providing guests with a wide choice of quality accommodations. As a representative of the “middle” of the industry, I consider this season successful. Our segment is very competitive, but more and more guests appreciating high standards are recognizing the attractive price-to-quality ratio – says Marta Paczka, owner of the “Beskid Sielski” facility in the Beskids.

The slight increase in overdue liabilities for the entire industry is attributed to entrepreneurs in the category of tourist accommodation and short-term lodging, who added PLN 13.4 million (14%) in unpaid debts. – In the hotel industry, a new trend is emerging; some vacationers choose the cheapest accommodations, while others opt for exclusive, expensive hotels. As a result, the most difficult situation is faced by owners of mid-range accommodations. This is due to the impoverishment of the middle class, which has traditionally used this type of lodging. This trend will likely deepen in the coming years – notes Sławomir Grzelczak, President of BIG InfoMonitor Debtor Register. This observation is supported by data on the financial condition of various industry segments, compiled by the Dun & Bradstreet business information agency. While over 53% of hoteliers and 39% of campsite and tent site owners describe their financial situation as at least good, only 28% of entrepreneurs running tourist accommodation facilities make the same claim. At the same time, as many as 70% of the latter group consider their financial situation to be poor.[3]

Gastronomy Remains in a Difficult Situation

Immediately after the closing of the Olympic Games in Paris, French restaurateurs and hoteliers are counting their losses. According to Euronews, entrepreneurs who expected increased interest due to the Olympics ultimately lost up to 60% compared to the previous year. The situation in Poland’s gastronomy industry is also not favorable. According to data on non-credit arrears from BIG InfoMonitor and credit data from BIK, creditors in this sector are waiting to recover over PLN 1 billion. In the past year, unpaid obligations increased by PLN 194 million, representing a nearly 23% increase. This debt is held by almost 7% of companies in the industry, with each owing an average of PLN 93,000. – The main reason for the increase in restaurateurs’ debt is the rise in the minimum wage. With the current minimum wage at PLN 28.1/hour, we had to reduce staff and slightly raise prices to keep the business profitable. All employment-related costs, business taxes in Poland, and the entire bureaucracy are significant burdens for every entrepreneur – says Wojciech Kaczmarczyk, owner of two restaurants in Silesia.

The most significant surge in overdue debt relates to mobile food service establishments, whose liabilities increased year-on-year by almost 230% – from PLN 39 million in June 2023 to PLN 129 million in June 2024. The smallest percentage increase recorded in the BIG InfoMonitor and BIK databases was by

entrepreneurs preparing and serving beverages (13.3% year-on-year) and restaurateurs (12.2% year-on-year), who achieved lower profits. – I haven’t noticed a decrease in the number of guests, but there is definitely a slight drop in profits. Despite raising prices, the significant increase in costs results in lower margins – observes Wojciech Kaczmarczyk.

Another Cause for Concern is Poles’ Wallets

Poles are using restaurants less often due to high prices. Especially in resorts, there are reports of “bill shock.” Experts also note that some of the regular patrons of fast-food outlets have switched to establishments offering food-to-go products, dominated by retail chains and gas stations[4]. Some food service points are coping with this situation by shortening their weekly opening hours. As a result, it is increasingly common to see signs indicating that a venue is closed on Mondays.

A visible trend in the gastronomy industry is the growing popularity of diet catering for individual customers. However, this group of entrepreneurs has not been spared from rising overdue liabilities. An increase of nearly 16% year-on-year means that by the end of June this year, catering companies owed over PLN 76 million. A year earlier, the year-on-year increase in debt for this segment, recorded in the BIG InfoMonitor register and the BIK database, was 26.6%. Therefore, we can speak of a slight improvement in the situation and a slowdown in the negative trend.

Uncertain Prospects

According to the Dun & Bradstreet business information agency, the HoReCa sector is gradually recovering, though still significantly battered. In the first six months of this year, nearly 3,000 HoReCa businesses suspended operations. Assuming this trend continues over the next six months, it is highly likely that by the end of the year, the number of suspended operations will range between 5,000 and 6,000. This is significantly lower, representing only one-third of all suspended businesses in 2023. The outlook for resuming operations is bleaker, as D&B data shows that in Poland’s post-pandemic reality, suspending operations is almost equivalent to liquidation. Only about 1% of suspended businesses return to the market, meaning that out of 3,000 HoReCa businesses suspended in 2024, no more than 30 will return to the market. In the hotel and accommodation sector, 781 companies suspended operations in the first six months of this year, and slightly over 2,000 restaurants did the same.

On the other hand, for the first time since the COVID-19 pandemic began, all HoReCa sectors monitored by Dun & Bradstreet reported an increase in the number of establishments and outlets compared to the end of 2023. For example, in the last six months, the Polish gastronomy market grew by 2,600 restaurants, mobile food service units, catering companies, and popular bars. This suggests that the Polish gastronomy industry has left the worst behind and is returning to a growth path. Similar data comes from the hotel and other accommodation sectors. Most companies, however, remain in a difficult and very challenging financial situation.

It’s too early to summarize the season, but so far, it hasn’t brought disappointments. The authors of the report “HoReCa Market in Poland 2024″[5] estimate that the market value in 2024 will increase by 8.4% compared to the previous year. All indications are that despite a significant pool of unpaid liabilities, the HoReCa industry is slowly emerging from a difficult period.

[1] https://stat.gov.pl/obszary-tematyczne/kultura-turystyka-sport/turystyka/turysci-w-bazie-noclegowej-maj-2024-roku,5,142.html

[2] https://www.ighp.pl/aktualnosci/szczegoly-aktualnosci?NewsID=80243

[3] Analysis by Dun & Bradstreet Poland

[4] https://businessinsider.com.pl/gospodarka/mamy-boom-na-fast-foody-zwlaszcza-wsrod-zetek/vfmf6cq

[5] PMR Market Experts