Adelaide hospitality industry calls for urgent support amid surge of business closures and sales

The number of hospitality businesses closing their doors or deciding to sell up in Adelaide continues to grow.

Little Banksia Tree owners Fabian and Halie Folghera with kids Jasper and Lilah. Picture: Russell Millard Photography

The state’s struggling hospitality industry has reached crisis point and the current landscape is similar – or worse – than the situation faced during the Covid-19 pandemic, business owners say.

As venues continue to close around Adelaide and others battle to stay afloat, hospitality groups claim a “perfect storm” of rising business costs and increased cost-of-living pressures has left the local sector in dire straits.

They say urgent support is needed – including payroll tax reform, reduced insurance and workcover premiums and lower energy prices – to ensure the survival of the industry’s medium to smaller operators.

Little Banksia Tree co-owner Fabian Folghera has been forced to close his second cafe in Plant 3 Bowden after just eight months.

Fabian and Halie Folghera with kids Jasper and Lilah have put their Bowden business up for sale. Picture: Russell Millard Photography

He said their operational costs – including electricity and gas, plus product delivery and insurance – rose by about 20 per cent in recent months, while their revenue “fell off a cliff” after the Christmas-New Year holidays.

“People are tightening their spending. Each month, when we would evaluate what we needed to be turning over, it kept getting higher and higher,” said Mr Folghera, who employed between four and six people at Little Banksia and another 15 at Port Adelaide eatery Banksia Tree Cafe.

“That’s not so we can make a bigger profit, it’s just so we could stay open another month.

“We considered raising prices, but who’s going to buy a $5 coffee?

“It makes me sad because the whole essence of hospitality is connecting with people – and now the fiscal side of things trumps that.”

Mr Folghera said he was left with no option but to close Little Banksia Tree – with their last day of trade on Sunday – and focus on his award-winning cafe at Port Adelaide.

“That venue isn’t in trouble yet but it’s not completely safe either,” he said.

It’s a situation that has been mirrored across the state, with a string of hospitality businesses shutting their doors for good in recent weeks.

Among the venues pulling the pin include eateries such as Gouger St’s Super Bueno; cult Hills pizza restaurant Lost In A Forest; Enzo’s Ristorante, in Hindmarsh; Folklore Cafe, in Port Adelaide; Morris Bakery, on the Limestone Coast; and one of Adelaide’s oldest pubs, The Edinburgh Castle, in Currie St.

Teresa and Enzo Fazzari at Enzo's Ristorante. Picture: Mark Brake

The Stag Hotel, in Rundle St, and Mr Kim’s nightclub, in Hindley St, are up for sale, while Big Shed Brewing, at Royal Park, which has been one of the leaders of the craft beer industry in South Australia for more than two decades, has been placed in administration.

“It’s reminding me a bit of Covid. This isn’t something that’s hitting some venue owners – it’s widespread,” Mr Folghera said.

“It’s been a long time coming. The warning signs have been there for more than 12 months.

“If you look around at how many places are nearly empty all the time, or the owner is the one always working, we’re already in crisis.”

Hospitality leader and business owner Simone Douglas said the situation was worse than the Covid-19 years, describing the local sector as being in a “perma-crisis”.

She said inflated wages, increased WorkCover costs, significant increases to utility costs and insurance premiums had created a “perfect storm”.

“Many of the recent closures have come from seasoned, smart operators who have buckled under the weight of rampant increases across the board,” she said.

“It’s all outside our control and left us very little room to move on pricing because the consumer market thinks we make profit on a $15 schnitzel on a plate.”

Leading Adelaide chef Luca Guiotto said it was a “very challenging time” for hospitality.

Stag Hotel on Rundle Street Adelaide

“Wages have gone up more than 14 per cent, the cost of goods are certainly not getting cheaper and rent for commercial business is really high,” said the former Enoteca chef and now Aromi Dining owner.

“Last but not least, the skills shortage in the industry is impacting the efficiency on day-to-day operations. Combined with a lower spend per head, it’s making everyone’s life harder.”

Ms Douglas, who runs the Duke of Brunswick Hotel and Port Admiral Hotel, said more operators had been forced to sacrifice margins and spend extra hours working in their venues.

“Mum and dad or first-generation businesses are spending their evening trying to cut costs, refinance debt and make ends meet on a 10 per cent profit margin which they will then need to pay tax on,” she said.

Ms Douglas, co-founder of industry group Hospo Owners Collective, called for reforms to payroll tax and WorkCover premiums to help smaller business owners.

Australian Hotels Association SA chief executive Anna Moeller said city businesses were the worst affected by the economic downturn, mainly as a result of people still working from home.

“The cost-of-living crisis is a double hit for hospitality. Not only do patrons have less money to spend but they’ve also got increased business costs for themselves,” she said.

Ms Moeller said payroll tax relief was required as well as financial assistance to reduce the costs of running a venue.

“But you can’t live off subsidies forever. In the interim, they need financial support to nurse them through,” she said.

“But, in the end, what will make them sustainable and successful will be a vibrant CBD and more patronage.”