Inflation at 3.5 per cent: holidays in Austria will be expensive this year

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After stagnating in the previous month, inflation fell significantly in April to 3.5 per cent after 4.1 per cent in March. This is the lowest price increase in Austria since September 2021 and was driven by gas prices, which fell significantly below the previous year’s level for the first time since 2020. ‘However, the price increases in the catering sector are still above average, and the price increase at petrol stations has even increased,’ explains Statistics Austria Director General Tobias Thomas.

High inflation or not: the demand for summer holidays is likely to continue unabated this year. According to a recent analysis by the Institute for Retail, Sales and Marketing at Johannes Kepler University in Linz, 58 percent of Austrians say that they will not be deterred from taking a summer holiday. ‘The battle for consumers’ wallets this summer is shopping versus travelling,’ says Institute Director Christoph Teller. According to the study, 44 per cent of Austrians would rather spend their money on a holiday trip than on retail purchases. To make this worthwhile, 29 per cent would even save money on their purchases in order to raise the necessary funds for a holiday. Households with comparatively high incomes, in particular, would rather go on holiday than spend their money on shopping. The enforced abstinence during the pandemic has fuelled many people’s desire to travel all the more.

More overnight stays
This is also reflected in a recent industry survey by Bank Austria. In 2023, the number of overnight stays almost reached the all-time high of 2019. 30.8 billion euros from domestic and international travel combined, or almost 3.5 billion euros or 12.5 percent, more revenue was generated in Austria in the previous year than in 2019, the year with the highest value to date before the outbreak of the coronavirus pandemic. So, are businesses now swimming in money? ‘No,’ says Martin Stanits, spokesperson for the Austrian Hotel Association (ÖHV). What can be heard from the industry: ‘The excitement about the price increases is perceived as unjustified.’
Keyword price increases: The bare figures from Statistics Austria show that the price increase for holidays in Austria has been well above average and is likely to remain so. To illustrate: while inflation in Austria has totalled almost 24 percent over the past four years, the cost of accommodation services, i.e. staying in hotels or similar establishments, has shot up by almost 36 percent.

ÖHV spokesperson Stanits points out that the establishments are unable to pass on the cost increases in full because guests try to renegotiate prices. Stanits cites energy costs and the subsequent increase in food and staff costs, as well as rising interest rates, as cost drivers for the hotel industry. There are also second-round effects: Every agency, every contractor, and every vendor has passed on price increases. A view that supports Bank Austria’s analysis to a certain extent: The increase in total revenue is relativized in view of the high inflation in the tourism sector, it says. Adjusted for prices, revenue in 2023 was 13.5 per cent below the 2019 figure.

This will probably be little consolation for holidaymakers faced with high prices, especially as the cost of overnight stays is by no means the end of the story. Prices for hospitality also rose sharply, with restaurants and cafés 34 per cent more expensive in March than four years ago. What is striking is that despite the very limited range of vegetarian dishes on offer in most restaurants, these, in particular, have become extremely expensive and cost 47 percent more than four years ago. But there have also been hefty price increases for schnitzel and roast beef: Meat dishes recorded increases of around 40 per cent.

When it comes to drinks consumed in pubs, wine stands out with a 41 percent increase in price, while beer and non-alcoholic drinks have become around a quarter more expensive. There are other additional noises on holiday. Those travelling by car have to spend almost half as much on diesel or petrol, while the normal price of train tickets has only risen by a comparatively mild twelve percent in four years. All in all, you will have to fork out a lot more for a holiday in the country.

What can we expect on the tourism price front in the future? ÖHV spokesperson Stanits assumes that, by and large, that’s it for the price increases. There will probably still be a knock-on effect here and there in view of the wage increases. The collective agreement was recently finalised: employees in the hotel and catering industry have received an average increase of six percent since May and a further two percent from November. In the quality catering and hotel industry, it is easier to swallow such salary increases, says Stanits.

Lower profits
Wifo economist Oliver Fritz also does not want to see tourism as a price driver. ‘The balance sheets of businesses don’t look so rosy now.’ Although some businesses are making a lot of turnover, profits are still falling. ‘People are going on holiday, but they are also saving money,’ says Fritz. In any case, guests are an important corrective. In other words, holidays are not essential, and consumers have a choice – a different destination, a shorter holiday, or a holiday on a balcony. So, if the companies can push through price increases in this area, then there is little to object to.

Do the holidaymakers see it the same way? In any case, a survey by Erste Bank shows that only one in five people surveyed intends to dig deeper into their pockets for their holidays this year than last year. In view of the current price increases, it will be necessary to maintain the same level, at least when travelling within Austria. The 57 percent who want to spend the same amount will, therefore, be able to afford less than in 2023—not to mention those who will have to cut their holiday budget anyway due to financial constraints.

  • source: derstandard.at/picture: pixabay.com
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