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German tourism sector suffers as energy costs rise

Some German hotels and restaurants risk going out of business due to higher energy prices, which are pushing up their cost base and making customers more frugal, a survey by the DIHK chambers of industry and commerce showed.

The survey of some 100 tourism sector firms, conducted over the past week, showed people were increasingly staying at home rather than going away for breaks. DIHK surveyed tourism sector firms including hotels, restaurants and holiday parks. “The energy price rise is proving life threatening for large sections of the tourism sector,” DIHK Managing Director Martin Wansleben told Reuters in remarks released on Sunday.

In Germany, unlike countries with a bigger tourism industry, the sector is heavily reliant on domestic demand. Rather than driving away for a weekend break, Germans are increasingly staying at home. “Due to the high price of petrol, oil and gas, guests have less money for holidays and free time,” Wansleben said. “They are staying away or resorting to bargain offers.”

Germans’ reluctance to raise their spending is a problem for their economy, Europe’s largest, as the export motor that drove a robust expansion in the last two years is slowing and domestic activity shows few signs of taking over as a growth driver. Despite a solid labor market backdrop, Germans’ savings rate is around 10%. Germany introduced a pensions freeze in 2003 in an effort to cap labor costs and plug holes in benefit funding, and households now feel they need to save more.

Retail sales fell sharply in June and a leading survey published last week showed consumers have become more pessimistic than at any time since 2003. (Reuters)