Inflation, taxes and interest rates heating up the pressure on hospitality

COVID restrictions were meant to end the pain and suffering so many businesses felt across Victoria, but inflation alongside rising interest rates, electricity, gas, groceries and even luxuries like beer taking a hit, the hospitality industry is feeling the pinch more than ever.

The recent HospoVitality Index Report revealed that restaurant owners are making both necessary business decisions and demonstrating strong innovation and resourcefulness, that will enable them to navigate - and prosper - through the business pressures over the next 12 months.

Three in 10 owners are temporarily no longer taking an income. A further third of owners reported feeling at financial risk and some have had to put business improvement plans on hold. 

However, many are demonstrating the resourcefulness they showed during periods of lockdowns, by hyper localising their food and beverage supply chain, utilising promotions to attract customers, relying more on delivery platforms, along with forty percent making changes to their menu and eight per cent even growing their own produce.

In Victoria, and perhaps an indication of the continued lockdown impacts, 41 per cent of Victorian restaurant owners sought access to finance.

Locally, Dave Peters of The Caledonian Hotel in Wonthaggi has felt the pinch. 

“Numbers are down – people are really reluctant to go out,” Dave said.

“They’ve been locked down for a couple of years, they start to go out and get the confidence about going out again, and then COVID slips through, so they all bunker down and are happy to sit at home.

“Once it runs its course, people start going out again because they’re not hearing of people getting COVID; they start to feel safe and venture out.

“And then obviously, you’ve got all your house prices, interest rates, electricity, fuel, it just seems that everything’s costing more and more, and hospitality, in most parts, is a luxury spend. It’s not a necessity. We’re one of the first to feel the slowdown in the economy, and certainly the reduction in people spending money.”

On the flipside venues are being hit with the same costs individuals and families are feeling.

“The kitchen prices have been going up, obviously the recent beer tax going up as well. A lot of the suppliers did a price rise on August 1, even if it wasn’t related to the beer excise increasing.

“This year with beer taxes, wages rising, plus suppliers going up, it’s about 12 percent for the year. Then you’ve got electricity, gas…

“We put our prices up a couple of days ago, we’ve not seen the direct impact on the business as yet, as to whether people are going to come out less.

“We are hoping that once the weather picks up, we start to see people getting out a bit more.”

In the meantime, Dave has had to look to other areas of the business to cut back on.

“We’ve had to cut back on entertainment, even sponsorship.

“We donate vouchers to the Salvos, if a local school has a fete or fundraiser, we’re more than happy to help them out but were going to have to start looking at that. We’re happy to spread the love but at some point, if it’s not getting returned… it’s a struggle.”

Countering the rising costs are still the staff shortage challenges faced by many in the industry.

“I’m still having issues with licensed security,” Dave explained.

“It’s a Gippsland wide problem.

“In reality it’s a 15 day TAFE course to get your security licence – it just seems it’s heavily over regulated.”

The report highlights the hospitality industry is calling for government support in its first six months, with 60 per cent wanting wage subsidies to employ more staff, 51 per cent wanting visa processing times fast tracked, and 48 per cent asking for incentives to strengthen local food supply chains.