European Accommodation Sector is the Only One to Have Experienced Productivity Growth Within Existing Firms

In 2021 a report by the European Central Bank (ECB) delivered a stark conclusion: the growth in labor productivity has slowed significantly from 2007 to 2021. One of the primary drivers of productivity gains across sectors be it manufacturing or trade has been the reallocation of resources, such as labor and capital, from less productive to more productive firms. This process, driven by competition and the exit of inefficient businesses, spurs overall sector productivity. However, within-firm productivity growth has been negative, acting as a drag on all industries.

The only exception was the accommodation industry, which bucked the trend. Increasing the productivity of SMEs is notoriously difficult, yet this is exactly what happened, and it coincided with the rise of online travel platforms. This case highlights the potential for strategic technology adoption, even in sectors traditionally seen as lower-tech. For the accommodation industry, the partnership with digital platforms has offered a critical lever for growth, enabling even smaller players to compete in a global marketplace. The success of the accommodation sector underscores the importance of technological integration through partnerships between small and large firms for long-term productivity gains.