Rising Costs and Staff Shortages Force Numerous Restaurants in Portugal to Close

Portuguese are increasingly opting to dine at home due to escalating restaurant prices and service issues caused by staffing shortages.

Despite the growth in tourism, the hospitality industry in Portugal, particularly restaurants, is grappling with a concerning loss of customers during the early months of 2023, primarily on weekdays. Recent survey data suggests that businesses in the hospitality sector, heavily reliant on domestic consumption, have experienced a significant decline in patrons.

According to data from the Associação da Hotelaria, Restauração e Similares de Portugal (AHRESP), there were an average of 14 restaurant closures per day between October and December of last year, totaling 1281 business dissolutions in the fourth quarter of 2022. These figures mark an alarming increase of 162% compared to the same period the previous year, implying that approximately 5000 restaurants shut their doors annually.

The worrisome trend is further exacerbated by the rising operational costs. According to AHRESP data, restaurants are facing an increase of up to 25% in personnel expenses. Additionally, sharp price hikes in raw materials, such as food, have been reported, with some prices even surging by 50%. The overall inflation of costs, including energy, has resulted in significantly higher prices at restaurants, rendering them less accessible to many Portuguese. The downward trend in customer numbers has led to a critical crisis in the sector, and an increasing number of Portuguese are choosing to dine at home, in turn driving up supermarket sales.

Shortage of staff

The shortage of staff presents another substantial challenge to the industry. The gathered data shows that as much as 51% of restaurants and 24% of hotels indicate insufficient staffing to provide adequate services. Entrepreneurs emphasize the urgent need to attract qualified personnel. While immigrants are available, many lack the necessary training. Workers complain about low wages, long working hours, and inadequate working conditions, deterring even graduates of culinary programs.

Restaurant owners and café managers have repeatedly urged the government for stimulating measures to encourage the recruitment of immigrants. On the other hand, unions and employees stress the need for better working conditions and more attractive wages to enhance the appeal of the hospitality sector as an employer.

With Portugal being one of the EU member states with a minimum wage of less than 1000 euros, according to Eurostat, the hospitality sector faces complex challenges that not only threaten the economic viability of restaurants in the country but also jeopardize Portugal's culinary culture.