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‘Besieged’: Restaurants shuttering as hospitality sector struggles

The hospitality sector has fallen on tough times amid the cost-of-living crisis.

The hospitality sector has fallen on tough times amid the cost-of-living crisis. Photo: Getty

A growing number of hospitality companies are calling it quits as tough economic conditions hurt restaurants and cafes, with one business owner saying the industry is “besieged” by problems.

Renowned chef Kylie Kwong became the latest to hang up her hat on Monday, announcing on Instagram that her long-standing Sydney-based store Lucky Kwong will close from June 26.

The shock move comes hot on the heels of other high-profile restaurants closing recently, including Melbourne’s once-popular spot Gingerboy and hatted Sydney eatery Redbird.

It all comes as no surprise to Ronnie Atlas, who in September shut the doors on his Melbourne bistro Republic of Letters after seven years, telling TND that Covid-19 changed the industry forever.

“There are the obvious factors such as economic pressures and interest rates, but there are changes that have happened with Covid,” Atlas explained.

“The whole social life of people has shifted. They’re very happy to stay at home as opposed to going out.”

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Hospitality ‘besieged’

Atlas expects even more business owners will call it quits in the coming months under the weight of what he described as a “perfect storm” of problems facing the industry, though he predicts many will characterise their exit as retirement.

He predicts the industry will eventually adjust to new ways of doing business, with customers increasingly rethinking how they want to eat out and what they’re willing to pay for food.

“Unfortunately, because of the inflationary costs, your two eggs on toast has gone from 16 or 17 bucks to 24 bucks,” Atlas said.

“It gets to a price point where customers mentally are going, ‘well hang on a second, there’s two of us and we’ve had a couple of coffees and breakfast and it cost us $60’.”

Boaz Keeda, director of NSW cafe Fibonacci Coffee, said hospitality firms are being “besieged” by a combination of rising costs, falling sales and a rise in Australians dining in after the pandemic.

“Everybody is feeling the pinch in both directions; there’s significant fear around a reduction in revenues, and then there are increased costs … supplies, utilities and wages,” he explained.

“It’s eaten into what was already quite a slim business model.”

Demographic shift

The woes of Australia’s hospitality industry are showing up statistically too, with the latest retail figures for March showing restaurants, cafes and takeaway firms suffering a decline in revenue.

Figures from corporate regulator ASIC, meanwhile, show hospitality accounted for as much as 15 per cent of all insolvencies in April, with many businesses buckling under economic pressure.

Rachel Power, owner of Mt Field Retreat in Tasmania, says business has been slower lately and the demographics of customers are shifting towards older generations as the cost of living bites.

“With cost-of-living pressures we’ve seen a real demographic shift in the past 12 months,” Power said.

“The older demographic like hotter coffees and different foods to the younger demographic – they tend to stay longer and like to have a chat.”

That experience matches broader statistical evidence that has shown younger Australians are being hit particularly hard by the cost-of-living crisis while older Australians are spending more.

Power said she’s making the most of softer trading by investing in her business to ensure it’s ready to make the most of future growth once current economic conditions begin to improve.

“I know moving ahead that next season is going to be the biggest one we’ve ever seen,” she said.

“So I’m trying to work towards that now. Keeping active during the quieter seasons helps you be ready for what’s coming.”

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