‘Survival is the focus’: Melb’s famed hospo sector crunched by worst conditions in 30 years
Rising costs, staff shortages and falling foot traffic have pushed Melbourne’s hospitality sector to breaking point, in what has been described as the toughest conditions in over 30 years. Here’s a look at the latest venues feeling the pinch.
Melbourne’s hospitality sector is facing the toughest conditions in more than 30 years, leading insolvency experts warn, as rising costs, dwindling foot traffic and chronic staff shortages push even longstanding venues to the brink.
The dire warning follows the closure or financial collapse of a slew of high-profile venues including award-winning Japanese restaurant Shoya, Thornbury’s beloved 1800 Lasagne, the famed Lobster Cave in Bayside, and CBD hotspots Pearl Chablis and Oyster Bar.
Acclaimed bars Bar Margaux and The Everleigh, late-night spot the Carlton Club, live-music hub The Gasometer Hotel and renowned Federation Square restaurant Mabu Mabu are other locations to have fallen victim to financial pressures this year.
City fine-diner Di Stasio Città has also recently made headlines after avoiding closure when a case brought by the tax office – over $710,656 in alleged unpaid debts – was dismissed.
The data paints a striking picture – Victorian business collapses in the accommodation and food service sector have more than tripled in just four years.
The number of companies entering external administration or having controllers appointed has skyrocketed from 202 in FY22 to a whopping 723 in FY25, according to the latest ASIC data.
Jirsch Sutherland Melbourne partner Malcolm Howell told News Corp it was “a perfect storm”, and that for many operators, “survival is now the focus”.
“The hospitality sector in Melbourne is under immense strain – among the toughest conditions I’ve seen in more than 30 years,” the insolvency expert said.
“Businesses are being hit from every angle: declining patronage, rising rents, escalating costs, staff shortages and tighter consumer spending.”
Mr Howell said Melbourne’s weekday foot traffic was still well below pre-pandemic levels because of hybrid work arrangements, which was having a direct impact on sales.
“People aren’t coming into the office as much, so they’re not grabbing coffees, lunches or after-work drinks in the same numbers,” he said.
“Add in higher living costs, and discretionary spending has dropped significantly.”
It comes as the Victorian government pushes legislation to give employees the legal right to work from home for at least two days a week, if their role allows.
Business leaders have slammed the proposal, calling it unnecessary and harmful.
Melbourne is already the work from home capital of Australia, with almost two thirds of employees logging in from their home office at least once a week.
Melburnians’ WFH rate was 64.6 per cent – according to data revealed in the 2025 Australian Digital Inclusion Index – seven percentage points more than workers in Sydney and Brisbane.
Mr Howell said the state government’s support for flexible work had benefits, but for CBD hospitality, it was “devastating”.
“Many city cafes and restaurants simply can’t survive on the reduced weekday trade,” he said.
“We’re seeing businesses with great reputations and loyal customers reducing their hours and days of operation because there just aren’t enough people coming through the door.”
Mr Howell also pointed to labour shortages and wage pressure as a key driver of financial pain.
“It’s incredibly hard to find staff. Even when you can, wages are higher, penalty rates are increasing, and the Super Guarantee has risen,” he said.
“You can’t simply pass those costs on to customers without losing trade. The sector is caught in a bind – they’re paying more but earning less.”
He said “exorbitant” rents and escalating operating costs including electricity, gas, produce, insurance, compliance, packaging were also to blame.
“Landlords are dealing with rising costs of their own – higher taxes, maintenance, insurance – and they’re passing it all on,” he said.
“Every layer of tax or regulatory cost ends up with the tenant. It’s unsustainable for small operators who are already running on razor-thin margins.
“There’s been a real behavioural shift. People are eating out less, bringing their lunch from home, and being far more cost-conscious.
“Many city cafes can’t rely on coffee sales alone – they need to also sell meals, and consumers are simply spending less on dining out.
“When you add that to the inflationary pressures operators face, it’s no surprise insolvencies are rising.”
Recent venues to fill the pinch
Shoya Melbourne
The award-winning Japanese restaurant in Melbourne’s CBD shut its doors in October after collapsing into liquidation, with creditors including staff owed hundreds of thousands of dollars.
Shoya Melbourne, located on Market Lane in Chinatown, was founded in 2003 by chef Shigeo Nonaka, and has received numerous awards over the years including a Chef’s Hat in the Australian Good Food Guide.
The fine dining restaurant – which has attracted celebrities including MasterChef judge Matt Preston, Japanese chef Toshiro Kandagawa and Hong Kong food critic Chua Lam – consists of three levels which include traditional tatami seating and a sushi bar.
1800 Lasagne
Much-loved Melbourne pasta venue 1800 Lasagne went into administration in August amid a $3.3m debt pile.
The Thornbury-based restaurant, a Chefs Hat recipient that once hosted celebrity chef Jamie Oliver, owed a total of 79 employees about $277,700, alongside two secured creditors owed $186,559 and 52 unsecured creditors owed over $2.8m.
1800 Lasagne was founded as a food delivery service by Joey Kellock during Covid lockdowns, delivering Italian comfort food to those in the city’s inner north at a time of need.
Following its lockdown success, Mr Kellock opened a physical restaurant on High St where it earned a coveted Australian Good Food Guide Chefs Hat in 2023.
The restaurant gained such a following that celebrity chef Jamie Oliver dined at the venue that same year.
The venue continues to trade.
Lobster Cave
The famed Lobster Cave restaurant in Melbourne’s southeast closed its doors in October after frustrated creditors, including its landlord, voted to liquidate the business after 38 years of operation.
The venue first went under in May owing $4.2m to creditors including $500,000 to employees and more than $1.3m in unredeemed dining vouchers owed to customers.
Owner Vasilios Fergadiotis, better known as Bill Ferg, has been under severe financial strain as a number of his business ventures have collapsed leaving creditors owed millions of dollars.
Analysis of liquidation reports reveals several of Mr Ferg’s other companies, Extramile Trading, Green Earth Industries and Marsh Dairy, all collapsed last year with a combined near $17m in debt.
Pearl Chablis and Oyster Bar
The trendy seafood restaurants Pearl Chablis and Oyster Bar called it quits in July this year after a three year stint in the CBD.
Owner Jeremy Schinck told the Herald Sun at the time that growing debt, low city patronage and the cost of living crisis were contributing factors behind the collapse.
He also said finding quality staff in hospitality had become challenging post-Covid.
Bar Margaux and The Everleigh
The closure of the Everleigh Group’s flagship venues, Bar Margaux and The Everleigh, was announced in March by its founders, renowned hospitality figures Michael and Zara Madrusan.
News Corp Australia previously revealed the group’s rowdy bar Heartbreaker was also placed into administration in October amid a $1.5m debt pile, ultimately striking a deal with creditors to allow the venue to continue to trade.
The owners previously said the closures are a result of debts accumulated during Covid, followed by tough trading conditions.
It’s understood both businesses were eligible for restructuring under the federal government’s insolvency reforms, but were turned down.
Ms Madrusan told News Corp in November last year that the entire Melbourne industry was facing “really difficult challenges”.
The Everleigh made the highly coveted World’s 50 Best Bars list in 2013 and 2014 and won Australian Bartender Cocktail Bar of the Year in 2018.
Carlton Club and Windsor Castle
It was announced in March that the two beloved Melbourne hospitality venues secured a rescue buyer after they collapsed owing hundreds of thousands to creditors and the tax office.
Companies housing the Carlton Club and the Windsor Castle Hotel were placed in administration late last year with Cor Cordis administrators undertaking an urgent sale process.
The Carlton Club is a multi-level restaurant, cocktail bar and nightclub located on Bourke St in Melbourne’s CBD while the Windsor Castle is a pub near Chapel St that features a dining room, beer garden and function space.
The Ganley Group – a Melbourne hospitality group known for buying and restoring heritage buildings – has bought both venues.
The Gasometer Hotel
Live music venue, The Gasometer Hotel, announced earlier this year that it would be closing in March.
The iconic Collingwood watering hole signalled at the time that it was their hope that the closure isn’t permanent.
Venue director James Martelletti shed light on the tough realities of running a live music space telling The Music at the time, that his “pockets (were) only so deep” and that he couldn’t afford to keep the doors open himself anymore.
Mabu Mabu
Acclaimed Indigenous chef and food pioneer Nornie Bero placed her Federation Square restaurant Mabu Mabu into liquidation in March.
Bero has won acclaim for championing Indigenous cuisine, fronting the Island Echoes cooking show on SBS and penning a cookbook that was short-listed in the Book of the Year Awards.
She first opened a pop-up stall at the South Melbourne Market in 2018 and followed this with the Mabu Mabu cafe in Yarraville in 2019.
Her biggest venture, all-day bar and kitchen Big Esso, opened in the heart of Melbourne’s CBD in 2021 offering up charred crocodile and emu steaks.
Ms Bero told News Corp at the time that she was “blindsided” by the liquidation which was triggered when she changed accountants.
It’s understood the move to place Mabu Mabu into liquidation was triggered by a debt to the Australian Taxation Office.
Mr Howell’s tips for hospitality business owners
• Act early if you’re under pressure – before problems compound. The sooner you get advice, the more options you have.
• Renegotiate loans: don’t be afraid to contact your lender and ask for a better deal.
• Use cashflow forecasting and scenario planning to identify problems early.
• Stay in close contact with your accountant. Don’t just see them or communicate with them once a year.
• Keep business and personal finances separate – personal guarantees can devastate families.
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Originally published as ‘Survival is the focus’: Melb’s famed hospo sector crunched by worst conditions in 30 years
