Is the number of bankruptcies in the Dutch hospitality business indeed soaring in ‘record year’ 2011?! Or is it not so bad yet?!

Today a small Dutch newspaper, called Nederlands Dagblad (www.nd.nl), wrote an article on the soaring number of bankruptcies in the Dutch hospitality business in 2011. The article was taken over by almost every newspaper in The Netherlands:

Record in bankruptcies hotels, pubs and restaurants (Link in Dutch - Paid article).

The Dutch hospitality business is currently in a record year with an unprecedented number of bankruptcies. Until and including November already 500 restaurants, pubs and hotels defaulted. 

This number was 433 in 2010 and only 334 in 2009. ‘While the peak of bankruptcies in the trade and industry is already well behind us, the numbers in the hospitality business keep on rising’, according to Marcel van den Berg of www.faillissementsdossier.nl (i.e. bankruptcy record).

Judging the observed situation in this article it sounds like the hospitality business is in deep trouble currently. Words like ´record year´ and ´unprecedented number of bankruptcies´ point to a very problematic situation.

But something worried me in the tone of voice of this article. Therefore I wanted to dive in the data mentioned in it. Originally the whole article was longer, but it was hidden behind a payment wall. The source of the data for this article ‘Faillissementsdossier’ was a paid subscription service. This meant that the data was also not available for regular visitors.

However, the most reliable and free source for this kind of data is the Dutch Central Bureau of Statistics (www.cbs.nl). I collected the bankruptcy data for the Hospitality Services Industry since 2000 and extrapolated the data for 2011. And this data told a whole different story (chart based on CBS-data).

Number of bankruptcies in the hospitality business 2000-2011.
Data courtesy of www.cbs.nl
Click to enlarge

First, the CBS bankruptcy data for 2011 (372) is nowhere near the number of 500 mentioned in the article: Not even when the data for November and December is extrapolated. 

Second, also the numbers for previous years mentioned in this article differed strongly from the CBS-data, which I regard to be of higher quality: 311 (CBS) vs 334 in 2009 and 345 vs 499 in 2010

Third and most important: the real record year was 2006 with 540 registered bankruptcies in the hospitality business. This amount is not even close yet in 2011.

As I noted the differences in numbers of bankruptcies between the CBS and Faillissementsdossier, I wrote a letter to the newspaper to challenge the quality of its data. I didn’t get a reaction in time.

Still I wouldn’t be surprised when the hospitality business will get into dire straits soon. This industry is the one that profited most from the deployment of the Euro in The Netherlands. In a number of months the prices rose substantially, as I wrote in the article To inflate or not to inflate (2):

The ‘no price increases’ policy changed in the months after the Euro introduction on January 1, 2002.

All companies, stores, non-profit organizations and government bodies that had been ‘silent as a mouse’ during 1999-2002, took their chances. Especially the food, beverage and hospitality industry took ‘this chance of a lifetime’ to kick their prices up in the months after the introduction of the Euro.

And the following data was collected by the CBS (also mentioned in this article):

• Since 2001, the prices at restaurants and cafés rose by an average 3.1% per year. 
• In January, 2002 alone, the prices at restaurants soared by 3.1% compared to one month earlier. 
• The price-increase of a glass of beer in cafés and restaurants since 2001, was 4.7% per year

Although the number of bankruptcies reached a peak in 2006, I expect another peak in 2012. The austerity measures that are kicking in, the current recession and the growing unemployment will certainly have a devastating influence on the hospitality business. 

Besides that, the people didn't forget that the hotels, restaurants and pubs raised their prices substantially in the ten years after the deployment of the Euro and some people are still angry about this. I therefore suspect this industry to be the first real victim of the next recessions 

But please let us ring the alarm bell based on reliable data. And not on data that differs too much from the ‘official’ bankruptcy data.