Labour costs and regulation choking hospitality sector

This article originally appeared in OpenHouse Magazine.

Increased competition, operating costs, a transient workforce and increased regulation are hampering growth in the hospitality sector.

The findings come from a survey of 652 hospitality professionals by POS firm Impos that found penalty rates (71 per cent), credit card and EFTPOS fees (48 per cent), and tax and GST compliance (46 per cent) to be the top regulatory concerns facing businesses.

“The recent decision by the Fair Work Commission to cut Sunday and public holiday penalty rates for full-time and part-time hospitality employees will enable business owners to employ more staff, open at peak trade days and times, and invest more in their business,” said Sean O’Meara, CEO of Impos.

“If you consider a large proportion of sales are made over the weekend and on public holidays, and that the industry has dubbed penalty rates their number one issue for the second year in a row, it’s clear why this decision will be a welcome reprieve.”

Many are also hoping to see the anticipated cut in the corporate tax rate announced in the upcoming Federal Budget. More than a third (37 per cent) of businesses would reinvest savings into their venue, and nearly a quarter (24 per cent) would repay business debt. However, 21 per cent stated the cut would have no impact on the business.

“The corporate tax cut would create a more competitive industry with business owners investing more in their business,” added O’Meara. “It would also decrease the debt burden on small business owners if they are able to pay off loans quicker.”

Outside regulation, findings show the top three business issues hospitality businesses face are the hiring and retaining of staff (54 per cent), increasing operating costs (52 per cent) and attracting and retaining customers (47 per cent).

“As an industry known for attracting transient staff, it’s no surprise staffing issues are a pain point for hospitality businesses,” he added.

“Factors contributing to increasing operating costs are; venue maintenance costs including rising electricity prices, high cost of goods, rents and high labour costs.”

Increased competition was also affecting customer loyalty, with a growing “foodie culture” seeing diners eat out more often.

Nearly three quarters (73 per cent) of the hospitality industry found competition has increased in the last 12 months, with over half (54 per cent) admitting this was the top reason for losing revenue over this period.

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