Étienne de Callataÿ: “There is no reason to cry over the difficulties in the hospitality sector”

Étienne Callataÿ is one of the country's most influential economists. He doesn't hide his exasperation with the restaurant sector's complaints, while acknowledging the difficulty of the profession.

© Orcadia Asset Management.

Hospitality establishments are key links in the Belgian economic fabric. Although they operate on a significantly smaller scale than other SMEs, these players exert a ripple effect beyond their suppliers alone. However, this hotel, restaurant, and café sector operates on an economic high: 27% of these businesses in Belgium are operating at a loss.

What are our thoughts on the challenges of this sectoral fragility, as well as the resilience of certain non-traditional chains or models? Gondola Foodservice gathered the comments of Étienne Callataÿ, co-founder and chief economist of Orcadia Asset Management, a wealth management specialist. He is one of Belgium's most influential economists and has no equal when it comes to deciphering current socio-economic developments.

And the first thought our interviewee expressed was based on the media outburst by Belfius CEO Marc Raisière, which was deemed controversial at the time. In essence, when asked about the impact of the health crisis, the banker referred to "a wave of consolidation" needed by our economy to comment on the upcoming bankruptcies in the hospitality industry.

"If you look at it, relative to the population, Belgium has twice as many cafes and restaurants as Germany. There are certainly valid reasons, but one could imagine an economy with half as many establishments. It wouldn't be the end of the world," says Étienne de Callataÿ.

"The hospitality industry keeps complaining"

To elaborate on his point, Orcadia's chief ecologist highlights a paradox in the newspapers. "The hospitality sector never stops complaining in the media, but on the ground, openings keep coming. There's a persistent form of inconsistency. If it's so hard, why would we be so focused on opening new retail outlets?" he asks, without hiding his lack of sympathy for this sector, which is at odds with the societal virtues that some professional federations attribute to it.

"Don't get me wrong: I have nothing against the hospitality sector as such, of course. My premise is that this sector should be treated like any other, no more, no less. And if there is a problem, whether it's with social security contributions, the labor market, or anything else, there needs to be a cross-cutting response for the entire economy, not one-off, tailor-made measures," he clarifies.

The economist likes to think in terms of externalities, external effects. He naturally recognizes certain benefits of restaurants and cafes for the community, particularly in terms of entertainment and social life. Nevertheless, he raises an element that is rarely highlighted in public debate, even though he considers it important.

"Working hours don't match what we want in terms of public health. Evenings and weekends are primarily for resting and spending time with family or friends. This is not a societal ideal," laments Étienne de Callataÿ. This is an economic activity with positive effects, therefore, but whose serious consequences are not sufficiently taken into account.

Like the CEO of Belfius in his time, the economist and wealth manager seems to be a follower of a certain Schumpeterian vision and its principle of creative destruction, according to which crises make the economy progress. This helps to defuse the situation.

"The hospitality industry does not suffer from unfair competition"

"For me, when a company closes, there's no reason to cry," admonishes Étienne de Callataÿ. "A struggling sector won't make me cry either, unless there are positive externalities, like with culture. Sometimes people go to great lengths to present Michelin-starred restaurants as the equivalent of a museum or a play. I don't subscribe to that. I have a lot of respect for people who put a lot of talent into preparing a good dish, but it doesn't bring the same level of added value to society."

That said, he insists that businesses must be able to compete on a level playing field and not be victims of unfair competition. While criticizing sectoral policy measures, he does not subscribe to this discourse of stimulating economic activity and admits that he does not understand why this area would require specific aid.

"Unlike other industries, the hospitality industry has no reason to complain about Chinese competition, for example. As for the wage disadvantage in Belgium, this doesn't mean we need to help the hospitality industry, but rather reduce labor costs for the entire economy. It's not the hospitality industry that will boost our competitiveness. Just as it's not, to go further, tourism that will serve as a vector for economic development. We like to repeat this in Wallonia. Except that Wallonia will never have Venice, Paris, or London," Étienne de Callataÿ states.

"Fraud in the hospitality industry is tolerated by the authorities"

Returning to basics, as a liberal economist, Étienne de Callataÿ simply asks that two activities be taxed in the same way, that the same two hours of work be subject to the same social security contributions. Before confiding in us his "holy hatred of flexi-jobs. I find this intellectually unacceptable. Flexi-jobs are tax breaks in the absence of being able or willing to combat undeclared work," he declares, prior to a broader discussion on the issue of tax evasion.

"When I'm at a restaurant, more than half the time, if not four times out of five, I'm brought a pro forma receipt and asked if I want a VAT receipt. I find that unacceptable. It's tolerated fraud, with complacency from the authorities. The MR has managed to capture this constituency and has made it one of its mainstays. It's lamentable," laments the man who was once deputy chief of staff to Prime Minister Dehaene (CD&V).

This fraud factor remains a dimension that's still tricky to estimate. But Étienne de Callataÿ says he's weak enough to think that it will actually be closer to 30% of turnover than 10%. And he thus echoes the phenomenon of paradoxical grievances. "It's a sector that complains but is treated outrageously well. I'm not saying that everyone in the hospitality industry is doing well, obviously not, but we have to realize that this sector already receives, particularly through tolerated fraud, preferential treatment that is unjustifiable."

“Same rules for everyone and may the best man win”

The hospitality industry is not a homogeneous ecosystem. While some brands are struggling, others are growing thanks to the specificities of their models, as shown in Gondola Foodservice's most recent industry analysis, The Financial Anatomy of Hospitality in Belgium . In the quick service restaurant (QSR) sector, for example, single-product chains seem to have found the winning combination (ease, efficiency, convenience) to satisfy customers. The question remains whether this is desirable, sustainable, and fair.

"It's not up to me to say who should win the race," says Étienne de Callataÿ, who advocates above all for a level playing field . "The right attitude is to say that social and fiscal rules must be the same for everyone and that the best wins. The one who makes his own little café in his corner or the one who is part of a chain."

If further clarification were needed, the chief economist at Orcadia Asset Management points out that interference distorts competition. "Let's look at the difficulties of Lunch Garden, which clearly wasn't a fan of stoemeling or other labor. Distortions harm those who play by the rules," notes Étienne de Callataÿ.

And he concludes with a personal anecdote illustrating the problem. "I'm a director of Les Petits Riens. We thought about a solidarity restaurant. We would have done it with employees who would receive decent salaries, without anything extravagant. But we quickly realized that faced with the advantages of self-employment, flexi-jobs, students, and, to call a spade a spade, an undeclared share, we were never going to last. So the project was abandoned."