Hospitality: A Value Chain Analysis 2021

In this chapter we set the value added of the Hospitality Value Chain (HVC) in a sequence of accounts. This is a structure used in National Accounts, to present the flow of transactions in the economy of a country in a coherent series. Each of the items in bold in Table 6.1 is calculated from the transactions above it, creating a linked series of key indicators. The sequence of accounts is shown for both subsectors, Accommodation and Food & Beverage Services. 

The total output for these sectors was €6.8 billion in 2021. Around two-thirds of this (€4.4 billion) came from the Food & Beverage Services sector, with the remainder generated by Accommodation. 

The intermediate consumption of these sectors was €3.0 billion. These are the goods and services that are used up in production by these enterprises. This includes the food that is cooked and served ('transformed'), but excludes drinks that are directly resold without any transformation (goods for direct resale are not added to the output or intermediate consumption of the sector that resells them, but rather to the sector from which they come; in the case of food for example, that is Agriculture (NACE 01) or Manufacture of Food Products (NACE 10)). Intermediate consumption also includes energy bills and purchases of services, such as insurance, or out-sourced cleaning and laundry. 

The Gross Value Added (which forms part of Gross Domestic Product by which the economy is measured), was €3.9 billion. This was made up of €3.4 billion in labour costs (compensation of employees) and €1.7 billion in profits (gross operating surplus). Taxes less subsidies on production were -€1.2 billion. Subsidies were high in this year, owing to the Employee Wage Subsidy Scheme which was paid to employers and passed on to workers during COVID-19. 

The operating surplus of €1.7 billion came mostly from the Food & Beverage Services sector, however, this sector also had higher employee costs. The profit share of a sector is a measure of the proportion of the value added which is operating surplus, rather than compensation of employees. As a proportion of total GVA, the profit share of Accommodation (37%) was higher than Food & Beverage Services (30%). This is as expected: hotels generally require more capital investment than restaurants and have a higher return on that investment. 

The gross operating surplus includes around €500m in consumption of fixed capital, that is, the wear and tear on long-term fixed assets such as buildings and machinery and equipment used in production. This leaves a net operating surplus of €1.2 billion. 

Net interest and dividends were €173m. Corporation tax and other taxes on income and wealth amounted to €48m, leaving gross saving of €1.5 billion. Of this, €260m was invested in new fixed capital assets, far less than the €518m in consumption of fixed capital (depreciation of existing fixed assets), as might be expected in a year in which activity was curtailed and there was uncertainty about future returns. This left these sectors with €1.3 billion in net lending, reducing financial liabilities, and increasing financial assets.