German hospitality revenue falls 3.1% under rising labor costs

Small and midsize businesses in Germany kept revenue broadly stable this year after a difficult 2025, but the hospitality sector is under more pressure as labor costs continue to climb.

That was the picture from the DATEV Mittelstandsindex for October 2026, released Wednesday by the German software and business services group DATEV. The index showed overall revenue development in the Mittelstand, the country’s broad base of small and medium-size companies, remained steady despite persistent challenges including higher energy costs and a shortage of skilled workers.

DATEV said the index stood at 102.6 points in October, a level it described as stable. The report said manufacturing posted a particularly positive revenue trend, while retail and services recorded slight declines. The data suggests that many smaller companies have managed to hold their ground this year even as cost pressures remain in place.

Within that broader picture, hospitality businesses showed a weaker performance. According to the DATEV index, revenue at small and midsize hospitality companies fell 3.1% year over year in September 2026 on a seasonally and calendar adjusted basis. At the same time, wages rose 6.5% from a year earlier, pointing to a widening gap between sales growth and payroll costs for parts of the service economy.

DATEV’s head of business research, Dr. Andreas Schaber, said it was encouraging that many midsize companies had been able to stabilize their economic position. He said the data showed the sector’s resilience and its ability to adapt to changing conditions. He also warned that the next challenge will be to raise income at a pace that matches personnel costs, adding that innovation and digitalization will play a key role.

The report said employment in the Mittelstand continues to increase, which DATEV linked to ongoing investment in skilled workers and training. That trend may support longer-term competitiveness, but it also adds to short-term cost pressure for employers that are already dealing with higher input bills and tight labor supply.

For hospitality operators, the combination of falling revenue and rising wages can put pressure on margins even if broader small-business revenue remains stable. If that pattern continues, it could affect purchasing decisions across the drinks trade, including orders for wine, beer, and spirits, and may also feed into menu and bar price increases as venues try to protect profitability.

The divergence between stronger manufacturing and softer service activity also highlights the uneven nature of Germany’s small-business recovery. Some companies appear to be benefiting from improved operating conditions after last year’s weakness, while others are still struggling to pass on higher costs or generate enough demand to offset them.

DATEV’s latest reading suggests the Mittelstand has avoided a broad deterioration in 2026, but the data also shows that stability at the aggregate level does not mean conditions are improving everywhere. In sectors such as hospitality, where labor is a major expense and consumer demand can be sensitive to prices, the strain from a 6.5% rise in wages alongside weaker revenue remains a central issue.