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  2. HospoVitality Index Report: Inflationary surges, rising costs and interest rates putting pressure on hospitality industry recovery
HospoVitality Index Report: Inflationary surges, rising costs and interest rates putting pressure on hospitality industry recovery

HospoVitality Index Report: Inflationary surges, rising costs and interest rates putting pressure on hospitality industry recovery

  • Hospitality sector confidence has fallen to +11, from +32 in January 2022, which is comparable to sentiment in the midst of 2020 COVID lockdowns (+9 August 2020)
  • 40% of restaurant owners said they felt positive about the future of the hospitality sector, which is down from 52% at the start of the year
  • At the core of the decrease in optimism is rising produce prices, inflation, increasing salaries, rental costs, state of the economy and reduction in consumer spending
  • 62% of restaurants say food delivery will play a greater role in their business operations moving forward
  • 60% are asking for government to provide wage subsidies, 51% want visa processing times fast tracked, 51% want a special hospitality sector visa established for international workers, and 48% are asking for investment to be increased to strengthen local food supply chains

26 JULY 2022

Impacts of inflation, rising interest rates and supply chain issues are putting marked pressure on the hospitality sector, with a 21 point drop in the net confidence score to +11, only six months after recording +32. There are signs of optimism returning over the next 12 months, with two-thirds (66%) feeling positive about their business prospects in 12 months' time, according to the latest Deliveroo HospoVitality Index Report.

The survey conducted by YouGov of more than 300 restaurant owners across Australia seeks to understand the level of confidence in their own business prospects, their views on how the industry is faring, the challenges they're facing and the measures being put in place to help manage these, as well as getting a pulse check for their outlook of the next 12 months.

The July 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 ten owners are temporarily no longer taking an income (31%). A further third (34%) of owners reported feeling at financial risk and some have had to put business improvement plans on hold (31%). However, many are demonstrating the resourcefulness they showed during periods of lockdowns, by hyperlocalising their food and beverage supply chain (44%), many are offering promotions to attract customers (45%), relying more on delivery platforms (42%), along with making changes to their menu (40%) and some are even growing their own produce (8%).

There was a strong correlation between those impacted by inflationary pressures and the need to access finance. Over a third(38%) of those who said they were significantly impacted by inflation have sought out financing. Perhaps an indication of the continued impacts of lockdowns in Victoria, the data found there were more restaurant owners in Victoria who sought access to finance (41%), compared to NSW (32%) and QLD (28%).

As restaurants look to offset rising overhead costs, delivery has become a core part of managing these challenges, with more than six in ten (62%) saying delivery platforms would play an even bigger role than before - the highest score since the HospoVitality Index Report was established. This was higher amongst takeaway restaurants, with 68% saying delivery will be even more important. This is a solid increase from January 2022, which recorded 49%.

In light of these challenges, the industry is calling for government support in its first six months, with 60% wanting wage subsidies to employ more staff, 51% want visa processing times fast-tracked, 51% said they'd like a special hospitality sector visa established for international workers, and 48% are asking for incentives to strengthen local food supply chains.

Ed McManus, CEO Deliveroo Australia: "We saw great optimism across the Australian hospitality industry at the beginning of this year as the country moved forward post lockdowns. However, despite the unwavering resilience amongst restaurant owners, the impacts of rising costs and inflationary pressures, and difficulties with supply chain are being felt far and wide.

"Restaurants have already demonstrated their ability to innovate and adapt through challenging periods, and it's incredible to see how they're responding to these current pressures by localising their supply chain - and some even growing their own produce - it is clear this innovation has not slowed.

"The hospitality industry is at the heart of all that we do at Deliveroo, and we're proud to be a partner in supporting restaurants in whatever way makes the most sense for them. Australia is home to some of the world's finest and most diverse restaurants and cuisines, and we will continue to work hand in glove with the industry to support it through another challenging period."

You can download the full report here.

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