Hospitality’s Struggles Amid Rising Costs
This article is based on a report originally published in The Australian Business Review.
Australia’s hospitality sector is facing unprecedented pressure as business failures nearly double year-on-year, according to CreditorWatch’s Business Risk Index. Among the voices calling attention to this crisis is Phillip Di Bella, founder of Di Bella Coffee and The Coffee Commune in Brisbane, who describes the current environment as a “toxic brew” for businesses.
Di Bella highlights a perfect storm of challenges: shrinking disposable incomes, soaring expenses, and rising costs of essentials like electricity, which have jumped 40% in just 12 months. He warns that these pressures may soon push the price of an average flat white to $6 or even $7, underscoring the strain on both businesses and consumers.
“We’re doing it tough because disposable income is down, and the expenses are up, so it’s causing mayhem,” Di Bella said.
The food and beverage sector now holds the highest business failure rate of any industry, with an 8.5% rolling 12-month rate in October. This is expected to climb to 9.1% over the next year, signalling tougher times ahead for hospitality operators.
Di Bella has also urged state and federal governments to take a more thoughtful approach to policy, advocating for “responsible management of money” and fewer burdensome regulations on businesses already stretched thin.
The struggles of the hospitality industry reflect broader economic trends. Rising costs of electricity, insurance, rent, and wages are squeezing businesses, while consumers are cutting back on discretionary spending. Yet, as Di Bella’s comments highlight, there is hope that smarter management and collaborative solutions could help the sector weather this storm.
As the hospitality industry faces this uphill battle, leaders like Phillip Di Bella are at the forefront, championing innovation and resilience to ensure the survival of Australia’s vibrant café culture.