Slowdown in the Hotel and Restaurant Sector in 2025: Is the Main Issue Demand or Profitability?

In 2025, for hotel and restaurant businesses in Turkey, it became a period where not only the number of customers but also costs, pricing, personnel efficiency, and cash flow had to be evaluated together.

In the sector analysis published by Food in Life on August 8, 2025, high inflation, instability in the exchange rate, contraction in the domestic market, and changes in the tourist profile were cited as the main reasons for the slowdown felt in hotel and restaurant businesses. However, the official data for the entire year shows that the sector did not experience a one-sided contraction; instead, it revealed a more complex picture where revenue growth and business profitability diverged.

Nominal growth can hide the pressure on businesses

According to data from the Turkish Statistical Institute, tourism revenue reached approximately $65.2 billion in 2025, an increase of 6.8% compared to the previous year. The number of visitors departing from Turkey also increased by 2.7%, rising to 63.9 million people. These results indicate that Turkish tourism continues to grow in terms of total revenue and visitor numbers.

In the first quarter of the year, tourism revenue increased by 5.6%, while the share of food and beverage expenses in total tourism revenue was calculated to be 24.7%. During the same period, visitors' food and beverage expenditures increased by 15.7% compared to the same period of the previous year.

However, the nominal increase in revenue or tourism income does not mean that every business is making more profit. If a business's sales revenue is rising while raw material, energy, rent, personnel, logistics, and financing costs are rising faster, profit margins can shrink.

According to the Producer Price Index data from TÜİK, producer prices in accommodation and food services increased by 38.38% year-on-year in May 2025. In July, the monthly price increase in this service group was recorded at 5.20%. These figures indicate that the cost and pricing pressures faced by hotel and restaurant businesses continue strongly.

Therefore, it is not sufficient to explain the slowdown felt in the sector in 2025 solely by changes in the number of customers or tourists. When the data is evaluated together, it is seen that the fundamental problem for many businesses is achieving sustainable profitability rather than generating revenue.

Why is raising prices not always a solution?

Restaurants and hotels may have to raise their prices to cope with rising costs. However, if price increases exceed the customer's spending tendency, the frequency of visits may decrease, there may be a shift towards lower-priced products, or customers may prefer different businesses.

Especially in restaurants dependent on the domestic market, as the gap between menu prices and consumers' purchasing power widens, demand becomes more sensitive. In this situation, businesses face a two-fold pressure:

On one side, there is the necessity to raise prices to cover costs, and on the other side, there is the risk of losing customers due to price increases.

Although the Central Bank of the Republic of Turkey (TCMB) stated in its February 2025 price assessment that monthly inflation in the restaurant and hotel group slowed compared to the previous month, the annual inflation in the service group was realized at 59.78% during the same period. This view shows that the price pressure in the service sector is not limited to a single cost item or temporary.

Why doesn't every business benefit equally from tourism growth?

The growth in tourism revenue is not evenly distributed across the entire hotel and restaurant market. Destination, business segment, customer profile, season length, sales channels, and brand positioning directly affect the share businesses receive from tourism activity.

Businesses operating in the luxury segment, those with strong international sales channels, or those that can reach high-spending tourists may achieve more favorable results, while businesses dependent on the domestic market, short seasons, or price-sensitive customers may not feel the same growth.

Therefore, businesses need to follow these indicators more than the total number of tourists:

• Average spending per guest

• Profitability per table or room

• Repeat visit rate

• Relationship between occupancy and profitability

• Contribution margin of product and service groups

• Commissions paid to sales channels

• Ratio of personnel costs to total revenue

• Costs of stock, waste, and spoilage

High occupancy or intense customer traffic does not automatically make a business profitable without proper pricing and cost control.

The pressure on personnel should not be overlooked

While the cost discussion in hotel and restaurant businesses is often conducted over product prices, human resources remain one of the most critical issues in the sector.

The lack of qualified workers, high personnel turnover rates, long working hours, seasonal employment, and lack of training directly affect operational efficiency. In the evaluations of the relevant sector committee of the Istanbul Chamber of Commerce, the increasing raw material costs, along with shrinking purchasing power and the shortage of qualified personnel, are shown as fundamental problems of the sector.

Reducing the number of personnel solely to cut costs may provide savings in the short term. However, an inadequate workforce can lead to:

• Longer service times,

• Faster burnout of employees,

• Increased errors and complaints,

• Weakened guest experience,

• Current employees leaving the business

For this reason, personnel planning should focus not only on the number of people but also on task distribution, shift efficiency, employee competencies, and peak operation hours.

What should businesses do during this period?

It is not sufficient for hotel and restaurant businesses to only adopt general expense reduction policies during uncertain times. First, they need to make visible where they are making money and where they are losing it.

Menu and product profitability should be recalculated

The best-selling product is not always the most profitable one. The number of sales, portion costs, preparation time, waste rate, and contribution margin of products should be evaluated together.

Keeping low-profit and operationally challenging products on the menu can increase the kitchen workload while reducing the overall profit of the business.

Purchasing and inventory processes should be standardized

Supplier prices should be regularly compared, delivery and payment terms should be documented, and off-recipe product usage should be controlled.

Instead of tracking inventory only during accounting periods, it should be conducted based on daily or weekly consumption data, allowing for earlier detection of losses.

Pricing should not be based solely on competitors

When determining the price of a product, in addition to competitor prices, product costs, operating expenses, targeted contribution margin, and the perceived value by customers should be considered.

Businesses can apply different pricing strategies based on product groups instead of raising prices uniformly across the entire menu.

Personnel training should be seen as an investment in efficiency, not a cost

An employee who receives proper training makes fewer mistakes, explains the product better, understands customer needs faster, and evaluates sales opportunities more accurately.

Cross-training, service standards, product knowledge, and basic cost awareness can ensure that operations are managed not with fewer people but with more accurate task distribution, especially during peak periods.

Cash flow should be tracked separately from profitability

A business that is profitable on paper may face financial difficulties due to inconsistencies between collection and payment dates.

Supplier terms, credit card payment periods, platform commissions, rent dates, and personnel payments should be planned together within the monthly cash flow.

Stafflink's view

Evaluating the slowdown in the hotel and restaurant sector in 2025 merely as "customer numbers decreased" is insufficient. The real issue is to convert increased revenue into sustainable profitability, manage costs without compromising service quality, and enhance employee efficiency.

If businesses' first reflex is to reduce personnel, it may lead to greater losses in the long term. A significant part of the experience in the HORECA sector is created by employees. Excessive reduction of the workforce directly weakens service quality, customer loyalty, and the brand perception of the business.

According to Stafflink, businesses that will gain an advantage during this period will be those that continue employee training, measure profitability on a product basis, conduct data-driven shift planning, and make procurement processes transparent.

The future of the sector will be shaped not only by those who can sell more but also by those who can manage their sales with the right operations and strong teams.

Sources

1. Food in Life – Slowdown in the Hotel and Restaurant Sector: Causes, Consequences, and Future Strategies⁠ – August 8, 2025.

2. TÜİK – Tourism Statistics, 2025 and IV. Quarter⁠ – January 30, 2026.

3. TÜRSAB – 2025 First Quarter Tourism Revenue Report⁠ – April 30, 2025.

4. TÜİK – Producer Price Index for Services, May 2025⁠ – June 30, 2025.

5. TÜİK – Producer Price Index for Services, July 2025⁠ – August 29, 2025.

6. TCMB – February Price Developments⁠ – March 4, 2025.