Business Opinion

Hospitality sector crippled by cost of living crisis

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Cafes and restaurants are feeling the pressure as diners decrease in numbers (Image via PixaHive)

New challenges posed by the current economic crisis are proving difficult for the hospitality scene to overcome, writes Navishkar Ram.

HEADLINES ARE CROWDED with gloomy reports of the cost-of-living crisis currently gripping Australia. Among vigilant media consumers and even their less attuned counterparts, news feeds are positively bursting with stories of suffering, commercial and social decline and economic forecasts that the eternal optimists at the Reserve Bank of Australia describe as subdued.

It is not too hard then, with all this information clogging up our headspace, to feel massively overwhelmed and underprepared for the challenges that lie ahead. If what we as a community have faced already is any indication, we are in for a rough second half of the year. As though the past 12 months have been any easier.

But where the pinch is being felt with an especially poisonous sting is in our hospitality sector. Despite household spending remaining steady over the course of the past financial year, small businesses in the café, restaurant and takeaway industries are reporting diminishing sales, irregular purchasing patterns, and are noticing significant periods of low foot traffic.

While it can be tempting to dive deeper into the statistics and published information already circulating among the business community, a truer sense of exactly how the sector feels can only be obtained by that oldest and most effective method: having a chat.

“People are having a hard time; it’s having a big impact”

Susan (name changed) is a café owner in Sydney’s outer Western Suburbs. She has been in the café business for over a decade. “I have never seen it like this, we are struggling, the customers are struggling. My sales are down by quite a lot,” she describes.

Susan echoes the sentiments of a growing number of business owners that are increasingly noticing trends that spell potential disaster for the industry.

She notes:

“Our regulars are cutting back, but at the same time, we have had to increase our prices to stay in line with price changes.”

According to Hospitality Magazine, inflationary pressures caused by the current cost-of-living crisis are altering the spending habits of customers, with many now preferring to spend their money on a more cautious basis.

Susan also notes the same dramatic shifts in spending patterns, suggesting that “our customers are having to make difficult decisions, people who we would see daily are now coming in less often.” While such monumental shifts, accruing over a period, can have detrimental effects on the business's bottom line, Susan also states that “I understand their situation, I’m in it myself!”

“We will just need to adapt as well as we can, otherwise I don’t know what we will do,” she explains — a view largely consistent with that held by many hospitality businesses. Though, Susan also holds onto hope that soon, things may turn around and that with predicted steady consumer spending on discretionary items expected to continue, that the next few months may offer some reprieve.   

A cultural cornerstone of Australian life

Hospitality is almost universally dependent on discretionary spending by customers to survive. No one needs a coffee to survive, even though some surveys suggest that it has become an essential part of our daily routine.

While it may be obvious that cafes and restaurants are not holding up too great currently, there is optimism that the situation will return to some degree of normality once this current economic hiccup has been remedied. While Susan and her team are cautious of what the future holds, she is persistent that she will continue to operate as best as she can.

She says with a gleaming smile:

“I will not be going anywhere; my team and my customers are my priority.”

Hospitality as a sector has often been criticised as a low-wage and insecure working environment. These concerns are not without credit, as reports of massive underpayment of workers abound in the news cycle, mostly by very large companies. Most smaller operators are trying their best to meet their workforce demands and provide a quality experience for their customers.

Despite this, Australia’s world-famous café scene is in for a shaky few months and off the back of expected cash rate rises, will need to hold steady for the storm that is the second half of the year.

In any case, Susan and her team will stay where they are and are hoping for calmer waters ahead.

Navishkar Ram is an avid opinion piece writer, social commentator, lifelong progressive and a local of South-Western Sydney.

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