22nd April, 2024
Summer is typically a peak time for hospitality small and medium-sized enterprises, as people gather over the festive period and summer break to socialise and celebrate.
But MYOB’s most recent anonymised data, representing tens of thousands of transactions, shows little growth YoY in the total cash received by hospitality SMEs between December 2023 and February 2024, with data pointing to a slower summer season.
While previous summers saw around 5 per cent year-on-year growth for the hospitality SME sector, the most recent data revealed growth of just 0.1 per cent. A likely contributor is declined discretionary spending.
It’s no surprise consumers are watching their spending, considering the 12 interest rate rises that took place in 2022 and 2023, alongside an increase in living costs and economic uncertainty.
For hospitality businesses, many of whom rely on the peak of the summer period to bolster their cash flow and carry them through slower periods throughout the year, it’s a worrying trend.
The most recent MYOB Business Monitor, a bi-annual survey of 1000 SME owners and operators, tells a similar story with 37% of respondents from the hospitality and retail industry reporting less revenue compared to the previous year, and 41% saying their profitability has declined in the last 12 months.
Hospitality and retail businesses are often viewed as the canary in the coal mine for consumer spending, the first place where people will curb their discretionary expenditure.
It’s a blow to an industry sector that disproportionately felt the impact of the pandemic and comes as many hospitality businesses were focused on recovery after a tough few years.
In response to this trend, hospitality businesses are looking to reach new audiences and grow their customer base, with ‘attracting new customers’ one of the top five pressures facing hospitality businesses along with the more obvious concerns of fuel prices, interest rates, profitability, and cash flow.
This need to attract new customers rather than relying on existing regulars and their previous patterns of spending is key for hospitality businesses, who are also battling a rise in the cost of sourcing produce, trying to minimise any knock-on pricing rises, and the challenges of finding staff and maintaining levels of service.
As most small business owners are aware, now is the time to get proactive when responding to the impact of the summer slowdown, including boosting income opportunities in the April school holidays and into the autumn and winter months.
This could include offers targeted at “staycationers” as well as out-of-towners, cross-promotional partnerships with other local businesses on social media, and getting creative with seasonal menu updates to entice customers in for something new.
SMEs might also explore digital engagement tools, from TikTok to third-party delivery offers. Everything counts when attracting customers.
In challenging economic times, it’s more important than ever for business owners to stay close to the books.
Having a clear view of forecasting and budgeting, with a real-time perspective of the financial position of the business, will help SMEs to stay on track during leaner months.
With the school holidays upon us, a time when many Australians travel and gather with family and friends, the sector will be looking to appeal to out-of-town visitors as well as those holidaying at home.
With 53% of hospitality businesses predicting an economic decline in the coming year, optimism is in short supply for the retail and hospitality industry, but a lift in April trade could make all the difference to the year ahead.
Now is the time for consumers to rally behind the nation’s 2.5+ million small businesses when making plans for April holidays and beyond.
We know many are tightening their belts, but, where possible, buying a coffee from a local cafe or choosing small businesses for essential purchases will all add up and help the nation’s hospitality businesses.
This article originally appeared here: https://www.kochiesbusinessbuilders.com.au/slow-summer-for-hospitality-businesses-but-theres-still-time-to-turn-it-around/
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