Malta’s restaurant industry is at a crossroads: diners are spending more than ever, yet profit margins are shrinking. The 2025 restaurant study commissioned by the Association of Catering Establishments (ACE) reveals that while the average customer spend per meal jumped from €22.74 to €30.16, overall restaurant revenues declined by 1% and profits fell by 2.4% compared to the previous year.

The findings show that rising operational costs and labour pressures are eroding the financial gains restaurants made during Malta’s post-pandemic boom. Despite higher average bills, restaurateurs are being squeezed by wage inflation, staff shortages, and new administrative burdens such as the Skills Pass requirement.

Spending up, profits down

Customer spending has risen across all price brackets, especially in mid-range and premium venues. The share of customers spending €30–€50 per head rose from 29.1% in 2024 to 33.7% in 2025. Those spending €50 or more jumped to 11.3%, reflecting both higher menu prices and a shift in consumer habits toward dining out less frequently but spending more per occasion.

However, the study shows that increased consumer spending hasn’t translated into healthier balance sheets. The average restaurant recorded a small decline in total revenue and a sharper fall in profitability, with energy prices, rent, ingredient inflation, and staff costs all cited as the main culprits.

Labour remains the biggest pain point

Recruitment and retention continue to dominate industry concerns. More than two-thirds of respondents said staff shortages were affecting their operations, particularly in kitchen and service roles. Many owners report having to offer higher wages or overtime incentives to retain talent — costs that cannot always be passed on to customers.

The Skills Pass, a certification introduced to standardise hospitality training and improve food service quality, was ranked as the most challenging regulatory issue in the sector. Restaurateurs argue that while the initiative has long-term merit, its rollout has added new compliance costs and administrative demands at a time when businesses are already stretched thin.

The VAT question

Another clear signal from the report is the sector’s call for tax relief. When asked which government measure would most improve sustainability, a reduction in VAT on food from 18% to 7% was by far the top request. Restaurateurs argue that lowering VAT would bring Malta closer to the European average and help offset the cost of wages and supplies.

ACE has long advocated this reform, saying it would give smaller, family-run restaurants — which make up over 90% of Malta’s catering landscape — the room they need to stay viable.

A maturing market

Despite the financial strain, restaurants are not standing still. Around 61% of respondents reported making business investments in the past year, ranging from kitchen upgrades to digital payment systems and sustainable waste solutions. The study also notes that 55% of customers are now locals, up from 49% in 2024, indicating a gradual rebalancing away from pure tourism dependence.

In many ways, the Maltese restaurant sector is entering a more mature phase. The data paint a picture of a crowded market under stress but still evolving — a transition from recovery-fuelled growth to a fight for efficiency and quality. As customer expectations rise and costs continue to climb, the challenge for restaurateurs is no longer just to fill tables, but to find profit in every seat

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