Restaurants still busy despite inflation

“I wonder just how healthy the bottom lines of those businesses are … we’re busier than ever, but that’s just for now, and is that sustainable?”

For Caterina Borsato, of Caterina’s on Queen Street in Melbourne, said trade has stayed strong in her high-end CBD Italian eatery, as her clientele is largely from the business community.

“Corporates have got money in their pockets because they haven’t travelled, they’ve got two years of saved up money and there’s a lot of business done over the table,” she said.

The building industry and legal sector had been particularly busy with their work meals, she said.

But bars and cafes that relied on younger clients would soon be suffering, she said, especially as they had already lost a lot of the customers who frequented their CBD venues after work as people worked remotely.

“Younger people, they have to cut back their spending, it might not be realised at this point, but interest rates will affect young people that have got mortgages, and it will be hard on the businesses that serve them.”

Loss in momentum

ANZ senior economist Adelaide Timbrell said there was a loss in momentum in restaurant spending in August after strong growth in the first half of the year.

Data from restaurant app OpenTable shows bookings have gradually declined since July, but still remain about 130 per cent higher than 2019 levels.

While spending at cafes and restaurants has increased by 22 per cent since the start of the year, according to data from the Australian Bureau of Statistics, Ms Timbrell said spending would slow as inflation bites and rates rise.

“The timing of this is hard to pin down because many mortgage holders have fixed rates or have been paying above minimum repayments, thus dulling the cashflow impacts of the first set of rate rises,” Ms Timbrell said.

“Dining is also a relatively inexpensive use of discretionary funds, so as some people sacrifice bigger things [like] car upgrades, renos, furniture, they may use dining as a consolation luxury.”

Ms Timbrell said the gradual resumption of international tourism would also weigh on restaurant spending, with Australians spending $2 overseas for every $1 an international tourist spends in Australia.

“Even though Australian residents didn’t spend the equivalent of their overseas travel budgets locally through the period of Australia’s border closure, they did spend more on Australian businesses than they otherwise would have due to those travel restrictions,” she said.

‘Perfect storm’

Mr Nicolini said hospitality businesses were already in “a perfect storm” of increasing input costs and severe staff shortages.

“You’ve got to be working with seasonal produce, you have to have strong relationships with suppliers to manage rising prices and supply chain [issues],” he said.

“And you can only pass on so much to the end user without there being an impact and I think as an industry we’ve reached that tipping point, where how much further does it need to go before things start to break.”

Ms Borsato said that the government desperately needed to act on helping with staff shortages, calling for faster and cheaper visa processes to bump up migration.

“We’re going into Christmas now and already were going into panic mode – family and friends were doing my dishes over Christmas last year, and we still can’t get dishwashers now,” she said.

“The single biggest challenge to the hospitality industry is staffing … it’s a nightmare and the government has to help us very quickly.”