German election result: What does it mean for travel and hospitality?

Insight Comment We likely won’t know the exact direction German politics will take for weeks or maybe months but the signs point to a general shift leftwards with a focus on green policies.

Coalition talks have begun in Germany after last Sunday’s election ended with no party winning enough votes for a majority.

As expected, the centre-left Social Democrats (SPD) eked out a narrow win, taking 25.7% of the vote, followed by the Christian Democrats (CDU/CSU) on 24.1%, the Greens on 14.8% and liberal Free Democratic Party on 11.5%.

The result puts the SPD’s Olaf Scholz in pole position to form a new coalition, likely with the greens and liberals, although Angela Merkel’s successor as leader of the CDU Armin Laschet hasn’t given up hope of becoming chancellor.

With the process potentially taking months, Merkel will stay on in temporary charge and could overtake Helmut Kohl as the longest-serving chancellor if she stays on til 17 December.

What does it all mean?

In our pre-election deep dive we argued that there wasn’t a huge difference between both leading candidates with both occupying the centre ground. However, there has been a broad shift to the left across many Western countries with a much greater emphasis on tacking climate change and social inequalities. The Green Party have been fairly critical of air travel in the past with Annalena Baerbock talking up a potential “climate friendly” tax earlier this year. 

To get a sense of what it all means for the hotel investment industry we contacted two leaders in the sector.

Andreas Ewald, managing partner at Engel & Völkers Hotel Consulting

“Germany has chosen a change to strengthen sustainability and accelerate the carbon-free policy. We are expecting a coalition of three parties for the first time in the Federal Republic’s history.

“Both smaller coalition partners of the probable coalition, the Green Party and the Liberal Party have been elected mostly by the younger generation and will therefore push hard for change and modernization.”

“The probable introduction of a higher carbon-pricing will have effect on the ticket prices and (business) travelling. We need to strike the balance between taking responsibility for the generations to come and making the effort as well as the investment for change.”  

Michael Widmann, global CEO, PKF Hospitality Group

“German elections were rather inconclusive. The key message of the electorate seems to be ‘we want change, but not too much, please’. If the two largest parties (social democrats and conservatives) will not agree on a - rather unlikely - continuation of the so-called grand coalition (albeit, this time, under the leadership of the social democrats), we will see a three-party coalition involving one of two larger parties, plus liberals and greens.

“What will that mean for the hospitality and tourism sector in Germany? A three-party coalition would, as explained, include the liberals (the main proponents of business-friendly free market policies and tax reduction) and the greens (for which fighting climate change, if needed by raising taxes, is the main mission). This will likely translate into a reciprocal blockade, with only cosmetic real changes (a strong verbal commitment to climate change, but no immediate radical action; coupled with only cosmetic tax changes).

“Germany will continue to be a stable democracy, a stable investment market and a stable source of outbound tourism. Innovation, leadership in combating climate change and a convincing vision of a more unified Europe (in light of an increasing China-USA power duopoly) are, unfortunately not on the table. Boring and stable are the keywords of what we can expect - but maybe this is not too bad in a world of populistic firebrands. And probably it is also a sound basis for the hospitality and tourism sector in Germany.”