First, some industry dimensions. Hospo employs nearly 1 million
Australians, or 7% of the workforce. This handy infographic below from the Australian
Government Labour market insights provides a useful overview. Past growth
of 6.4% is predicted to double in coming years to 13.2%. Yes, it’s a lower paid
industry with a low full-time share, but an industry showing growth of this
magnitude is one that will experience more spending, which means elevated cash
flows and share of wallet.
The Government’s Labour Market insights also reveals that, while industries like health and education along with professionals, have dominated discussions about jobs growth into the future (and with good reason), guess which industry comes in amongst the top five of nineteen? Accommodation and food services are predicted to be the fourth fastest growing industry of employment in the five years to 2026:
Predictions of growth for pubs, clubs and dining might seem counter-intuitive given the extreme pain inflicted by Covid lockdown policies, now compounded by predictions of a ‘mortgage cliff’ and consumer blood in the streets as the result of rising interest rates. But even taking these things into account, prospects for this industry seem solid. According to the Australian Industry & Skills Committee for example: “All Hospitality-related occupations are projected to show growth to 2026, with the strongest growth expected for Cafe and Restaurant Managers (27%), Fast Food Cooks (18%), Chefs (14%) and Waiters (12%).” The food and beverage part of the industry, which has already bounced back from the Covid lockdowns, is expected to add jobs while the accommodation part of the industry remains flat:
What’s driving that growth is said to be our growing ‘foodie culture’ (which I think means an increasing willingness to eat out and to explore new food, dining and drinking experiences?). Added to this, a growing population and a bounce back in global tourism numbers provide a further floor to support future growth.
Global industry
researchers Ibisworld are also talking
up the industry’s prospects. Their 2017-2022 analysis was understandably dour: “The
Pubs, Bars and Nightclubs industry has faced difficult trading conditions over
the past five years. Rising health consciousness has constrained per capita
alcohol consumption. Additionally, government regulations aimed at curbing
binge drinking, alcohol-related violence and problem gambling have dampened
industry performance over the period. The COVID-19 pandemic and related
restrictions have substantially affected the industry over the three years
through 2021-22, due to ongoing temporary establishment closures and subsequent
capacity limits.”
But for 2022-2027
the tone is more upbeat: “Revenue for the Pubs, Bars and Nightclubs industry
is forecast to grow over the next five years. Operators are projected to
increase their focus on high-quality food and beverage offerings to appeal to
value-conscious consumers and increase their revenue bases. Additionally,
increased local tourism campaigns and support from the wider hospitality sector
are likely to boost industry demand. Easing international border restrictions
will support inbound travel to Australia, providing a much-needed boost to
industry revenue” (while also noting that alcohol consumption per capita
may continue to fall and gambling curbs are a further mitigating factor).
The Australian Bureau of Statistics’ Monthly Household Spending Indicator provides a further insight. The latest data, which runs through to November 2022, shows that household consumer spending continued undeterred by rising interest rates or predictions of economic calamity just around the corner. And the largest increases in spending? In order they were:
- transport (+35.8%)
- hotels, cafes and restaurants (+23.8%)
- alcoholic beverages and tobacco (+10.8%).
What is it with us Australians? Faced with rising mortgages and electricity bills, you’d think we would hunker down like some economic doomsday preppers, feeding off bulk cans of baked beans and Tom Piper stew (do they still make that? A staple of my student days!) stored in locked suburban garages? But no, we continue spending on dining, drinking, entertainment and travel. And according to these predictions, we’re going to spend even more. Somehow, we’ll find the money.
Is there something of the Australian psyche at work here? A few years ago, I had a CEO role in the hospitality industry (for a wine and restaurant brand). Just after I started, the GFC hit. The US market – a key export market – stopped spending on drinking and gambling (which affected a related parent company). But the Australian market didn’t stop. It just found other ways to afford it. It’s as if we value our lifestyle – which includes the freedom to visit a pub and pay outrageous amounts for a steak and cold beer, or pay through the nose for some fancy cocktail – so highly that these things are not so much “discretionary” spending, as closer to life’s essentials.
Of course, there are a great many people genuinely doing it tough. The working wage hasn’t kept pace with costs of living for a very long time. But in the meantime, there seems a large and growing cohort of people who are sufficiently immune from economic cold winds, that they can carry on unfazed.
2023 will be an interesting year to watch what happens across the economy, given that further interest rate rises are almost certain and talk of a global recession is gathering more support. But if you thought that an industry like hospo might be vulnerable and in for another body-blow, you might be surprised at how resilient it proves to be.
Postscript: Just when there’s every reason to expect consumer confidence will take a hit, turns out the opposite is true: the Westpac Westpac-Melbourne Institute Sentiment index rose by 5 per cent in January - the largest monthly gain since April 2021.
