Australian hospitality has survived another year mostly intact, but both this year and the year before have been challenging.
For most Australians in 2024, the cost of living crisis was at the forefront again, causing them to spend less and less on non-essential ingredients such as restaurants, cafes and bars.
Coupled with rising rents, staffing struggles, inflation and taxes many iconic Australian venues have been forced to close their doors in the last 12 months.
Azzet spoke with Wes Lambert, CEO of the Australian Restaurant and Cafe Association, to reflect on the economic year for the industry. He also discussed hospitality’s hopes for 2025.
Formed in May of 2024 Lambert says ACRA was “born from a large group of restaurant groups, cafe owners and restaurant owners around Australia that didn't feel that they had a strong enough voice”.
“The industry has been doing it tough and at the same time demand has been flat," Lambert says.
“They'd seen multiple legislative, multiple policies and laws put into place that were negative to hospitality. The minimum wage review committee has put wages up over 15% in the past three decisions. Insurance has skyrocketed, utilities have skyrocketed.”
Businesses have been facing insolvencies across the board in recent months, however hospitality is a sector that has certainly felt the squeeze more than others.
CreditorWatch reported this month that the hospitality sector was almost neck and neck with the Electricity, Gas, Water, and Waste Services sector. This was for reporting the highest business failure rate.
While the utilities sector experienced 40% of businesses defaulting on significant tax debts in the past 12 months. Food and Beverage Services were behind at 39.7%.
An earlier report from the group in November also predicted the hospitality sector's struggle would continue in the coming 12 months. This would enable it to reach a massive 9.1% insolvency rate.
These tax debts are one of the primary reasons Lambert says hospitality venues are closing out of business.
“Rents are up to 30% in some cases just since COVID ended and we see that many businesses have COVID debt, so both tax debt and rent arrears. That has certainly affected their ability to trade. It's the number two one and number two reasons.”
However, there is a ray of hope on the horizon for 2025.
Employment Hero’s November SmartMatch Employment Report found that November was the first increase in jobs growth since the same time last year.
Verified payroll data from over 1.1 million Australians and 300,000 SMEs worldwide was used for the report. The sector showed a 2.1% increase in jobs growth after Black Friday and Cyber Monday, the strongest month-on-month growth of any sector.
Looking towards 2025, Lambert says ARCA will hit the ground running and meet with members in January. This will enable them to get their pre-budget submission ready to be submitted by 24 January.
“And then we'll be putting together our election manifesto. We'll be asking both the government and the opposition for relief for the hospitality industry, including around utilities, deductibility of business meals and ultimately working to ensure that we can get the staff that we need into the roles that we need them in.”
“We do expect that things will be tough, but this hopefully the second half of the year we'll begin to see some blue sky.”