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Tips on Thriving During Inflation
Many publicans with grey in their hair are philosophical about increasing inflation. Having successfully traded through decades of high, double-digit inflation, they know what has to change to stay profitable.
cost of living adjustments to wages meant people were getting a pay rise every 13 weeks – and they tended to spend. In 2022, the new Federal Government is committed to a “real increase” in wages.
A large part of that change is a mental shift.
People forget that spending during the 1980s was quite strongly.
“We’ve got accustomed to zero inflation, wages remaining stable and costs being steady,” said one publican.
Another hotelier said it was important to lock in lower prices where possible, such as long term electricity contracts.
Now most cost inputs are rising. Everything from electricity and insurance to food and beverage.
Ask for advance of warning from major suppliers, enabling you to buy in bulk at the lower price and stockpile.
“We will see enduring inflation. It will have pluses and minuses but you can do very well. “I’m old enough to remember having to learn to trade with inflation and then with zero inflation. “But inflation does not have to hurt profits.” THE SOLUTION The obvious change in strategy is to increase prices to keep pace with rising costs. For example, the average daily rate for rooms will go up, providing a higher return. (In the US, hotel rates rose by 1% to 3.7% each month in the first four months this year.) Increasing prices can have a negative impact if patrons respond by staying away – but history suggests this need not be the case. In Australia during the last inflationary period, quarterly 12 | Hotel SA | W W W . A H A S A . A S N . A U
“...inflation does not have to hurt profits.” Other points: • For those carrying debt, remember that inflation dissipates the real value of your debt. • As the rest of the world is experiencing inflation, it could be argued that it’s best for Australia to be “in step” to keep down the cost of imports. • Construction costs are rising. This requires a much tighter focus on input costs, tight documentation and rigorous project management. PROFESSIONAL VIEWPOINT In a recent report, commercial real estate company Back to Contents
