Something’s gotta give in the hospitality industry

The hospitality industry is facing some of its toughest times ever. And if we don’t act swiftly and smartly, we could end up losing the very thing that so many of us love about our country, writes Wes Lambert.

The overwhelming media, union and public outcry against restaurants, cafes and caterers has resonated throughout Australia in recent times as restaurant owners are called out for underpaying staff.

Many say this is due to an extremely complex award rate system devised by FairWork. There is no excuse, however, for underpaying staff as there are vast resources available to calculate and pay wages per the award, regardless of its complexity.

However as you may expect, the story is much more complex.

The restaurant industry in Australia is facing some of its toughest times ever.

In the past 10 years wages are up 36 per cent. Rents, historically up 3-5 per cent a year, are now up 35-60 per cent a year. Food and beverage costs continue to rise, as the wages and costs of those suppliers go up. Electricity is up 238 per cent. Gas is up 50-158 per cent. App-based food delivery usage has skyrocketed, with the added costs of commissions taken from revenue before any other wages and costs are paid. And all the other costs of doing business, like insurance, telephones, internet, also go up each year.

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Yet, in the same time period, the CPI is up just 21 per cent and the price of a steak or cup of coffee has barely risen. This is an impossible situation.

A decade ago, restaurants enjoyed up to 15 per cent profit margins. Now they are lucky to make between 2-4 per cent, with many just breaking even or worse, some closing their doors forever.

The recent controversies surrounding chef George Calombaris and his Melbourne restaurants highlighted many issues the industry is currently facing. Picture: supplied

It is now estimated that for FY19, the ABS may report more businesses in the accommodation and food service sector will close than open.

And with Australia having experienced tourism growth of 5 per cent in 2018, and projected growth in FY19 and beyond, how will we hope to maintain our world class reputation with every other restaurant, cafe or caterer closed on Saturdays and Sundays due to penalty rates?

The industry is also facing a dire skills shortage, as TAFE and VET enrolments for hospitality and cookery courses continue to plummet, and apprenticeships go unfilled. Some estimates show a shortage of 60,000 plus apprenticeships, a number that is expected to reach nearly 80,000 by 2023 — a rate higher than any other subsector in the Australian economy.

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This dilemma starts at the secondary school level, when many students are steered towards university and away from TAFE and VET courses. Now we are facing an oversupply of university graduates, which in any market leads to lower and slower wage growth.

Just days ago, the Minster for Skills and Vocational Education renewed the government’s commitment to VET, which should be applauded, but we need to do more to encourage Australia’s youth that they can be successful in a vocation, especially in hospitality and cookery.

There are so many variables effecting the hospitality industry right now. Picture: iStock.

In addition to this, the industry continues to suffer as Australia has severely restricted its borders to cooks and hospitality managers since the changes in 457 visas. The number of visas requested and issued has had a major negative effect on the hospitality industry to source the skilled staff they need to maintain their businesses, especially in the absence of sufficient numbers of skilled and willing domestic employees.

Something’s got to give if Australia hopes to maintain its amazing restaurant, cafe and catering reputation both locally and abroad.

When locations close due to crushing financial pressure and lack of skilled staff, neighbourhoods lose their favourite local dining spots, GST and payroll tax is lost, tourists get a bad taste in their mouths when they can’t find food to eat, and no one is employed.

It seems that reasonable pressure release valves for the industry are slower award rate growth in line with inflation, a fair increase in prices, and an increase in skilled staff from locally and abroad.

Australia has some of the best chefs, cooks, hospitality managers, staff and restaurants, cafes and caterers in the world. It’s time we the industry a fair go!

Wes Lambert is the Restaurant and Catering Industry Association’s chief executive officer.

Originally published as Something’s gotta give in the hospitality industry