They submitted 188 thousand signatures to Health demanding that tobacco be banned on terraces
In a year marked by rising operating costs, bars and restaurants pushed forward with unrestricted commissions in 2023, achieving a 10% bump in cash flow despite a challenging backdrop after a record summer. The sector also faced a looming question about a potential smoking ban on outdoor terraces that could reshape customer experience and profitability.
As the industry awaits definitive data, analysts anticipate turnover growth between 4% and 10%, supported in part by selective price increases. The latest consumer price indicators show a 5.6% rise in prices for bars and restaurants compared with the previous year, based on November figures. This outpaces the overall 3.2% inflation rate but remains well below the 9% surge seen in basic food shopping, underscoring a sectoral pattern of price adjustments and consumer resilience.
A recently published report by the Spanish Hospitality Employers Association notes that food and beverage services have entered a phase of moderated consumption after several years of post-pandemic recovery. Overall, 2023 closes as a year of recovery while the sector braces for the next step, with forecasts suggesting only modest progress in 2024, not exceeding around 4% according to the employers’ association.
A year in which labor and energy costs rose
For José Luis Yzuel, President of Spanish Hospitality, the year stands as a record in many respects. Employment data remained positive, but the sector continues to grapple with a persistent challenge: finding qualified personnel to meet demand. In his remarks to the media, he highlighted how inflation infiltrated the shopping baskets for bars and restaurants, with price elevations reaching double digits while operators strive not to pass all costs onto consumers.
Beyond wage pressures, the ascent in energy costs and payroll expenses, together with the purchasing component, accounts for a large share of operating expenses. This combination has a negative impact on profitability, with margins under pressure despite higher sales volumes. In short, improved results were driven by more activity rather than thicker margins.
Nevertheless, Yzuel maintains a generally favorable outlook for 2023 within the restaurant sector, even as other indicators point to caution. A survey among employers shows ongoing concerns about the rising cost of materials, a trend that began at the start of 2023 when energy costs were identified as the principal hurdle hoteliers had to address, continuing to dominate the conversation throughout the year. In addition to material costs, tax pressure and wage costs keep managers vigilant about margins.
Staffing challenges persist: 100,000 roles unfilled
A waiter takes payment from a customer on a terrace in front of a historic venue in Madrid. The hospitality industry overall posted a steady rise in employment through the year, reaching about 1.9 million workers during peak summer months. Hiring in the restaurant sector rose by more than 7% in both the second and third quarters, pushing headcounts over 1.35 million in each period. Yet the key issue remains the scarcity of qualified workers, with the industry identifying around 100,000 positions that still require filling.
Terraces as a lasting feature into 2024
Alongside the usual pressures of the sector, the possibility of a health ministry move to ban smoking on terraces emerged in late 2023. The aim would be to extend non-smoking areas to outdoor spaces, including terraces and other outdoor settings where minors or pregnant women are present, according to a briefing from the Health Minister. Industry leaders reacted promptly, with Francisco Yzuel calling for a meeting with the Health Director to discuss the potential impact on operations. The hospitality sector fears a radical shift that could alter consumer behavior and market dynamics.
Advocacy groups have presented a petition with about 188,000 signatures urging that all terraces, whether covered or open, become smoke-free by law. Regardless of the final policy, 2024 is expected to begin with careful price considerations, continued efforts to address the skilled-worker shortage, and a stabilized period following years of moderation in consumption.