Job vacancies and business performance in hospitality: Reassessing vacancy rates as an indicator of binding labor constraints

Labor shortages are widely regarded as a major constraint on business performance in the hospitality industry, with job vacancies often interpreted as evidence of binding labor constraints. However, direct empirical evidence showing that higher vacancy rates translate into weaker business performance remains limited. This research note examines whether higher job vacancy rates are associated with weaker business performance in hospitality using sector-level panel data for Spain from 2014 to 2023. Fixed-effects estimates show no evidence that higher vacancy rates are associated with lower business revenue in these sector-level data. In the baseline model, vacancy rates in hospitality are positively associated with revenue, and a similar pattern appears when vacancy rates are lagged by one year. However, this positive association disappears when the pandemic years are excluded. Overall, the findings question the use of vacancy rates as a robust sector-level proxy for binding labor constraints in hospitality, while not ruling out the existence of firm-level recruitment difficulties or operational staffing constraints.