7 minute read
We're hurting - but not "doomed"
from Hotel SA March 2024
by Boylen
From the President
DAVID BASHEER
In recent weeks, there has been a deluge of media speculation about the viability of the hospitality industry.
Any industry participant will easily identify how much harder business has become in recent months, and I will focus on that shortly. However, much of the discussion has become alarmist, potentially spooking valuers, lenders and investors.
A recent headline claiming ‘Why the hospitality industry is doomed’ is frankly unhelpful, alarmist and inaccurate.
I will leave commentary around cafés, restaurants and other industry segments to others, but the hotel and pub game has proven to be resilient since Colonel Light landed in South Australia in 1836 and went searching for his first schooner of West End.
There is a very simple reason the hotel and pub game in South Australia has survived two pandemics, two World Wars, a depression, numerous economic downturns, changes in consumer tastes and an array of threatening Government policies.
We have always offered a quality product keenly sought by South Australians. Our industry continues to be filled by energetic business owners who invest in their product, their staff and most importantly, their communities. Being the heartbeat of any community counts when the going gets tough. With so many of our pubs being family businesses, authenticity counts.
South Australian hotels are universally regarded as the nation’s finest. Our members’ investment has produced outstanding venues people want to attend.
Mercifully, for these reasons, economic casualties in the pub world have been scarce in recent times as our industry’s resilience comes through. But not for a moment does that ignore the fact we are navigating troubled waters.
We have had the opportunity to discuss in recent times with the State Treasurer Stephen Mulligan why this is such a difficult time for hospitality.
Members don’t need to be reminded of the issues we highlighted with the Treasurer. They live it on a daily basis.
The two key issues that have caused the tightening of the economy have been interest rate rises and a sharp increase in cost of living. And whilst they are largely viewed within the prism of household spending, they have bitten business sharply.
Debt in our sector rose 15% during Covid. Low interest rates eased that pressure. However, 13 consecutive interest rate rises have put pressure on any hotel with debt, but particularly those that came out of Covid in a vulnerable financial position.
Business costs have risen across the board but rises in insurance and the constant spiralling power costs have bitten hardest. Power costs impact our sector more than most, given our heavily reliance on refrigeration and air conditioning for extended trading periods.
We did highlight to the Treasurer our frustration with the bureaucracy. They were amongst the 76% of the population whose income was not negatively affected by Covid. Seemingly, the moment Nicola Spurrier disappeared from our daily news cycle, that signalled the green light for the bureaucratic class to implement their own pent up demand, and impose unrealistic impositions on an industry deserving of a peaceful post-Covid reset. We have seen this most noticeably from the Office of Liquor and Gaming, along with Revenue SA.
Revenue SA’s new approach to Land Tax and aggregation has already hurt many of our members. Now they have turned their attention to payroll tax. We continue to stay in regular contact with the Treasurer as many of our accommodation members and now general members have been caught by a differing Revenue SA interpretation. It is important to note, there has been no legislative change to payroll tax.
And adding salt to the wound is the luxury so many of our Federal and State public servants have of working from home - a major issue for our sector.
Wages and superannuation have increased quickly. Some would say these increases were required given the current inflation rate. Maybe. But it is our members who are required to pay for this. Wages were already moving in our sector given the labour shortage.
Later in this column I will look at population, but South Australia’s modest population growth remain an impediment. It means one pub’s growth too often comes at the expense of another. We are simply moving the pie rather than growing it. The Fringe is a classic example. An iconic South Australian festival that we should all be proud of. But whilst it is a bonanza for some pubs, it coincides with the quietest trading period for others.
One topic we raised but didn’t elaborate on with the Treasurer is alcohol excise, given it is a Federal tax. However, our work in Canberra continues, as this sixmonthly imposition headlines the increased cost base for many of our members.
The issues we are experiencing at the moment are real and many of our members do need support. All of our members are entitled to see the current public service raids on our business ease off. This is because our members make a $4.5 billion annual contribution to the State’s economy, employs 26,250 South Australians and contribute a staggering 10.7% of this State’s total tax revenue.
Hotels Need Population Growth
I am just old enough to remember being in primary school when South Australia was the third most populous State and Adelaide was the nation’s third biggest city. Today, as we lag behind every other mainland State in terms of population, sadly that is a distant memory. Our share of the national population has fallen to 6.95%
Global Adelaide is an organisation formed to advocate for population growth within our capital. The AHAISA firmly backs their ambitions.
We need population to grow our economy and provide us with a sustainable workforce. A comparison with Queensland is alarming. Data provided by Global Adelaide reveals that in the last financial year, 18,039 skilled visas were granted in Queensland, compared to 16,177 in South Australia.
More worrying, Queensland received 6,888 family visas compared to South Australia’s 2,471. The population gap widens. And it will continue to widen after the 2023 immigration review saw SA’s share of skilled regional visas reduced by 82%.
Let’s fast forward to the projections for the next ten years.
In Adelaide we often hear about the brain drain, it’s become a bit of an obsession. Looking at ABS data on the movement of people internally - which is knows as Net Interstate Migration (NIM) - the June 2023 ABS data and other annual data as of the end of June over the past 5 years, it can be seen that significantly more people move to Queensland than SA through NIM. 490 more people left SA than arrived and that over the five-year period from June 2019 to June 2023, South Australia lost 4,798 people through NIM, whilst Queensland gained a total of 166,791 over the same period.
Look at predicted growth for Qld and SA, including Brisbane and Adelaide. Qld is anticipated to grow from 2,695,300 at the start of 2022-23 to 3,137,900 (growth of 442,600). By comparison, regional SA will grow from 402,900 to 418,900 (growth of 16,000). Regional Queensland projected population alone at the end of 2033-34 (3,137,900) will be significantly greater, almost double that of Adelaide’s projected population (1,628,600).
Both Premier Peter Malinauskas and his predecessor Steven Marshall have been pro -population growth. However, we are suffering from decades of planning failure. Until this is reversed, we will continue to be unable to fulfill our State’s full economic potential.
AHAISA joins Global Adelaide in its ambitions to see the long-standing population trajectory reversed.
