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Cost explosion: Effects of global inflation on the hotel industry

On December 15, RateBoard was able to speak with highly renowned experts from both the financial world and the tourism industry on the subject of inflation. In this blog article we report how our experts Monika Rosen, Lisa Neumeier, Martin Gächter, Sebastian Ott and Matthias Trenkwalder take up this topic, which forecasts have been made and to what extent hoteliers can best react to rising inflation in the future.

The hot topic attracted a lot of interest and we at RateBoard are proud of being able to have reached an impressive number of 300 participants! For those who did not make it, we are preparing the most important content here again and making the recording available.


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The topic of inflation is very actual at the moment and the news world is booming about it. Where does the high inflation come from, how far will prices continue to rise and how can hotels adapt to it in the best possible way? These were the central questions raised in this webinar. The moderators Martin Maneschg and Johanna Holzknecht led the experts through keynote speeches and interviews.


Martin Gächter

Martin Gächter is Head of Financial Stability at the Liechtenstein Financial Market Authority. After completing his dissertation at the University of Innsbruck, he gained various experiences at both the Austrian National Bank and the European Central Bank. Today he is still teaching at various universities and is also a member of the ATC and an alternating member of the ESRB.


Our current generation actually knows about inflation only from the history books. The last great inflation goes back to the 1970s."


Martin Gächter describes the background to the current inflation trend. He gives us an overview and explains that core inflation is the key factor that central banks use to orientate themselves. Core inflation represents the price increase by ignoring the volatile components. Volatile components, in turn, are usually defined as energy prices and food prices.

When the pandemic shock hit in 2020, unemployment rose sharply - in the USA even more than in Europe. If such a shock occurs, said Mr. Gächter, unemployment rises and GDP collapses, and all these lead automatically to downward pressure on inflation. "That was exactly the case: the oil price and the volatile components have fallen for the time being due to the Corona crisis."

As a result, there was then a very strong recovery in the real economy, on which the fiscal policy packages are based. Now this recovery is flattening out again - due to delivery bottlenecks and supply shocks. "This has a negative impact on the economy and if the economic slowdown occurs on the basis of supply shocks, it has the potential to increase inflation."

To answer the question of whether inflation is temporary, it is important to look at the development of the base effects (energy prices). The oil price, as an example, initially slumped significantly in March 2020, but then returned within 12 months to the 2019 level. This has an extreme impact on the base effects of inflation. If the oil price remains constant for now, this base effect would dissipate again and inflation in the Euro area would fall again, so the finance director.  

Mr. Gächter also described that the interest rate trend currently does not actually match the inflation trend. For the level of inflation, according to him, the long-term interest rates should actually be much higher. This happens because either the markets assume that the rise in inflation is really only temporary, or the central banks are so involved in the bond markets that it does not yet reach the expected rise. At the moment, however, it is assumed that interest rates will rise more quickly.

In conclusion, Mr. Gächter points out that there is absolutely no need to worry about hyperinflation, since the central banks' instruments are so good that they can intervene at any time.


Monika Rosen

Monika Rosen is chief analyst at Uni Credit Bank and has been working in the banking and securities business since 1989. Ms. Rosen is a certified stock exchange trader, member of the supervisory board and vice president of the Austrian - American Society and lecturer at the St. Pölten University of Applied Sciences.

Ms. Rosen talks about the reaction of the stock markets, how the development of inflation is related to the pandemic situation and the differences between different industries and segments.


There used to be inflation for a long time, triggered by globalization and technology. Then came the pandemic, I don't think we've ever had that! And now the question is: do we now have a sustainable upward turn in inflation or does that oscillate and we return to the world as it was before?"


The stock markets have risen sharply on the basis of inflation. According to Ms. Rosen, this was supported by the expansive monetary policy of the central banks. Tourism shares in particular are very strongly dependant of pandemic factors, but it can be clearly seen that the Hilton stock, for example, has risen by over 30% since the beginning of the year. This massive support from the low interest rates is also reflected in the development of the shares, according to the chief analyst of the Unicredit Bank.

One of the key statements by Ms. Rosen is that tech playerslike Amazon, Zoom or Netflix are in conflict with the cyclically dominated values such as airlines and hotels. The whole thing is clearly controlled by the development of the pandemic. "Until we have a clearer picture of how the pandemic can finally be resolved, this area of tension will certainly remain."

Ms. Rosen once again makes it clear that the oil price is a very decisive factor that has pushed inflation. Moreover, in addition to other industries, there is also a dichotomy in tourism, luxury vs. discount, which can pass the inflation on to guests. Those two ends benefit and the middle comes under pressure. That's the way it is, it was the case before the pandemic and it was present not only in tourism industry."


Lisa Neumeier

Lisa Neumeier is a partner in the Munich office of Simon-Kucher & Partners. Simon-Kucher is a global management consultancy with more than 1,600 employees in 26 countries worldwide. As a management consultant, she supports her clients in the tourism and leisure industry primarily with marketing, sales and pricing, and thus helps companies in this industry to generate profit increases.

Ms. Neumeier reports on a current study on travel and leisure trends and gives unique insights into how travel behaviour, booking behaviour, budgets and preferences have developed among our guests due to the new situation.


"The consumption restraint that Corona put on customers has definitely shifted consumer preferences."


At the beginning of Ms. Neumeier's lecture, it becomes clear that people absolutely want to travel and that higher prices are not perceived as higher by the higher-income half of the respondents.

During the pandemic, a very rapidly growing segment has also developed: the Revenge Traveller. "This segment tends to consist of younger people who tend to live in larger cities and tend to have a higher income."

In general, Ms. Neumeier reports that the length of stay is becoming shorter and there are fewer vacation trips. Avoiding crowded places also means that public transport is more likely to be avoided. Among other things, bookings for package tours are also declining, as flexibility is being taken away there.

The way people travel and how people book has changed significantly as a result of the Corona crisis. This study clearly shows that there are higher travel budgets and that bookings are always made at shorter notice than it was customary before the crisis. According to Ms. Neumeier, this increased flexibility on the employee side also offers an opportunity for the hotel industry. "We see shorter stays and higher budgets at the same time - upselling can be actively included in process management and offers a great opportunity to easily increase sales."

As more people can work from anywhere, workers have the potential to associate a business trip with follow-up bookings. The business travel market is likely to be a bit shaken in the long term, but the topic of workation is a big trend and therefore, says the consultant, hotels should be prepared for it. The workation traveler is looking for stable internet and possibly a separate room where he can work in peace. That's why it's relatively easy to adapt to this target group. "

Ms. Neumeier also recommended an immediate implementation of revenue management by hotels. In addition, she says that this workation trend should be picked up because it offers an opportunity to accommodate one or two guests even in the off-season.


Matthias Trenkwalder

Matthias Trenkwalder studied international economics at the University of Innsbruck and the LUISS in Rome. After several years of work experience in the startup and investment industry, he founded RateBoard together with Simon Falkensteiner and has been the company's successful managing director for six years.  

Mr. Trenkwalder gives exciting insights into the price developments in the premium hotel industry over the past few years and also talks about the outlook for the coming winter season. Data from over 300 hotels in Germany, Austria and South Tyrol were evaluated and presented, from entities which already work with dynamic prices.


"The number of hotels that use RMS is tragically small. Only around 10% of all owner-managed hotels in Europe work with revenue management systems."


In Austria there were price increases that were well above inflation rates even before the pandemic. Within 3 years, price increases of over 30% were achieved in the luxury segment. Since Austria has a comparably small domestic market, the country suffered more from the pandemic shock in July 2020 than in the other regions. That's why, as an exception, rooms were sold more cheaply during this time than before the pandemic, says the managing director of RateBoard.

Compared to Austria, South Tyrol probably had the advantage that this destination has a much larger domestic market with Italy. Based on this, significant price jumps followed in 2021. In total, there have been price jumps in South Tyrol of over 20% in the last 3 years, reports Mr. Trenkwalder.

In contrast to the zones in Alpine tourism, there were no major price increases in Germany in 2019, but the rate of inflation has always been adjusted there, too. German hoteliers benefited from the extraordinary increase in domestic tourism in 2020 and have also been able to implement significant price increases of over 20%. This trend continued in 2021. "

The current booking figures for the more than 300 hotels analysed would show that only approx. 25% less turnover was generated among these hotels in Austria than 2 years ago. This can also be related to the fact that bookings are made at shorter notice and means that the probability is high that the same numbers will soon be written again as before the pandemic. As far as the inflation situation in tourism is concerned, it can be seen that the price increases are higher than the inflation development. A similar, even a little better, picture can be seen in South Tyrol. There, too, it can be seen that the prices are above the values of recent years month after month .

According to the CEO of RateBoard: The more unique the hotel, the easier it is to push through price increases, to react to new circumstances and thus not to suffer from inflation.


Sebastian Ott

Sebastian Ott is the CEO of Familotel AG and therefore a representative for almost 70 hotels. Mr. Ott was the managing director of various hotels and therefore has a lot of experience as well as a lot of contacts with the hotels.

Mr. Ott reports in a practical way which challenges have to be mastered and which possibilities the hotels have to react as best as possible to the high inflation, so that they can continue to work economically and do not suffer from the rising costs.

In the hotels, inflation is perceived differently at different levels. On the direct level, in other words, in the increased purchase price situation. Inflation is particularly noticeable in energy costs but also in food prices.

There is also an increased cost pressure on the indirect level, namely that of the employees. Our employees can no longer afford so much. This is noticeable on the way to work, when the car has to be refueled and the bill for it is suddenly much more expensive than last time. "

So the employee already realizes that he needs more money to be able to work. As a result, according to Mr. Ott, we have to face increased pressure from the workforce for higher wages. "That is a very massive pressure, but it is also quite understandable."

With regard to cost management, Mr. Ott explains that oil and gas prices in particular, but also meat and fish prices, are current prices, which means that there is relatively little that can be done to counteract inflation. The increased costs can only be compensated by increasing sales.


"Ultimately, it is the way forward to implement higher room rates, because we as individual hotels won't be able to do anything against ricing food- and energy prices."


Mr. Ott advises hoteliers not to get nervous and to deal with the prices very self-confidently, as the increased prices are not perceived by the guests as expensive. This holds an incredible opportunity, but then, according to the CEO of Familotel AG, it is of particular importance that the quality is right. Our employees are of course the basis of every quality. We need employees who have been with us for a long time, we need less fluctuation and reduced costs for personnel acquisition." That way we can ensure the quality and also get a good sales price in the short term.


We at RateBoard would like to thank the top experts and all participants once again. We are already looking forward to the next events.

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