site.btaRestaurant Sector Anticipates Summer Tourist Season with Reservations Due to VAT Hike, Labor Shortages - Expert

The restaurant sector is anticipating the upcoming summer tourist season with reservations. To avoid anticipated losses, prices for services will need to be updated, as the VAT rate for the sector was raised to 20% on January 1, which is expected to lead to reduced consumption, Chairman of the Association of Restaurants in Bulgaria Emil Kolarov told BTA in an interview. According to him, over the past two months, there has been a trend of restaurants, even in attractive locations including the seaside, being put up for sale. 

“In light of the situation following the VAT hike from 9% to 20% as of January 1, we certainly don’t expect a very strong season. Colleagues who haven’t yet adjusted their prices to reflect the new VAT will most likely do so,” said Emil Kolarov.

He explained that the sector had absorbed this VAT increase for several months, but the real impact is between 20% and 25% due to accumulated costs. Combined with rising expenses for wages, minimum salaries, social contributions, etc., prices must be updated; otherwise, many businesses will operate at a loss.

Kolarov also predicted lower consumption as a result.

Another issue the industry faces is ongoing motorway construction work just before the summer season, which, according to Kolarov, will likely continue through the mid-season. “Getting from Sofia to the seaside is an ordeal — you set out not knowing when you'll arrive, exhausted and irritated after a full day’s drive. How will you feel like going to a restaurant?” he asked, commenting on the travel difficulties faced by tourists.

Labor shortages remain a major challenge this summer as well. “It’s difficult to find staff — there are almost no workers available from Bulgaria. The import of foreign labor is still not happening in the way we would like. There’s much to be desired in easing this process, and I’m not very optimistic for the summer,” he concluded.

While acknowledging the growth of tourism in recent years, Kolarov noted that Bulgaria is lagging behind neighboring countries, which have already reached pre-pandemic 2019 levels. “The fact that many establishments along the coast and inland, including very attractive ones on the beachfront, are being sold before the season starts indicates that many owners can no longer afford to operate at a loss,” he said.

The industry is still hoping for state support — specifically, infrastructure improvements and restoring the reduced 9% VAT rate, as is standard in all European countries except two.

However, the sector is not optimistic that proposed amendments to the VAT Act to restore the 9% rate will be passed by Parliament before the summer season begins, citing various objective and subjective reasons. “They’re probably waiting for the European Commission’s report on Bulgaria’s readiness to join the eurozone before deciding what action to take. I don’t see this happening before mid- or late summer,” Kolarov added.

According to him, foreign tourists are unlikely to offset the decline in restaurant consumption by Bulgarians this summer. “I don’t know where we’re expecting more tourists to come from. The key markets — Romania, Germany, the UK, Turkiye, Serbia, Greece — are doing much better in developing their own tourism, and all of them apply reduced VAT for restaurants,” he said.

Kolarov also pointed out that the ongoing trend of all-inclusive packages results in tourists rarely leaving their hotels to dine in restaurants. Therefore, there’s little hope for increased revenue for restaurants outside hotel premises this summer. “Over the years, we’ve come to see the Bulgarian customer as the best one, but right now, it’s hard to know what to expect,” he added.

He noted a steady trend of increased revenue in food stores along the coast. “People shop at supermarkets, carry food in bags, cook at home. It’s understandable, given the tight budgets for summer vacations amid widespread inflation,” he said. Nonetheless, he believes that the younger population will continue to visit restaurants, seafood eateries, and nightclubs — although consumption will decline due to higher prices.

In recent years, there has also been a change in how people order at restaurants, with fewer customers opting for three-course meals.

On the topic of earning a Michelin star in Bulgaria — particularly along the coast — Kolarov emphasized the need for a shift in mindset and professional attitude, especially among staff and chefs. “Without passionate chefs who care about more than their hourly wage, work hours, and social insurance, and who don’t twist employers’ arms (a trend that’s become clear due to staff shortages), we won’t have high-end restaurants in Bulgaria,” he said.

Change will come, he argued, when people are motivated to work toward higher goals by improving their culinary skills. Bulgaria has excellent infrastructure, he noted. “We have venues that rival European and even global standards. Our restaurants are refurbished every couple of years, unlike in other countries where older, unchanged establishments are more popular. Our facilities are very good, and we should strive for Michelin stars — but this depends on the desire and, most importantly, the skill to cook at a world-class level. We have such chefs — we just need to put in a bit more work,” Kolarov concluded. 

BTA presents a series of forecasts from industry organizations for the upcoming summer season in Bulgaria until June 1, when the Agency organizes the seventh edition of its BG Tourism forum in Pomorie.