Businesses within the hospitality sector most likely to fail according to CreditorWatch
One in 11 hospitality businesses could fail within the next year, according to industry data monitor CreditorWatch.
The credit reporting bureau assessed 17 industries in its latest Business Risk Index (BRI), and found that food and beverage services, which were already struggling, topped its list.
It forecasted a 9.1 per cent business failure rate over the coming year, which equates to roughly one in every 11 businesses.
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By continuing you agree to our Terms and Privacy Policy.The figure is a slight increase on the hospitality sector’s current failure rate of 7.5 per cent, and well above CreditorWatch’s 5.1 per cent average forecast for all industries.
It said the hospitality industry had the highest failure rate out of the 16 other industries it assessed because of its reliance on “discretionary spending” - that being people forking out money on non-essential expenses.
“Hospitality has a significantly higher failure rate forecast than other industries primarily because of its heavy reliance on discretionary spending, which has dried up as consumers tighten their belts to cover increases in mortgage payments, rents, power bills and other essentials,” CreditorWatch said.
A host of popular restaurant chains have collapsed in recent years, with many still reeling from the effects of COVID-19.
Restaurant-to-retail company Calia closed its two Melbourne restaurants on December 28, 2023 after being in voluntary administration for several months.
About 100 employees lost their jobs, with the company citing “COVID-related debt” and rising costs as the nail in the coffin.
In June 2023 controversial restaurant Karen’s Diner, where patrons pay for staff to insult them, suddenly closed three of its stores nationwide.
Three stores were left standing. However only one now remains in Chermside, Queensland.
The arts and recreation sector came in second with a 12-month forecast failure rate of 5.7 per cent, while transport, postal and warehousing services rounded out the top three with a 5.5 per cent failure rate.
There were only three industries with a forecast failure rate that was less than their current rate - administrative and support services, construction and manufacturing.
CreditorWatch also found more businesses are unable to pay their invoices, with rising costs and decreased demand making it harder to pay suppliers.
“Business payment invoice defaults dipped from May to June but have been trending up since the middle of 2021 and are well above pre-COVID levels,” CreditorWatch said.
Australian industries with the highest projected business failure rate over the next year
- Food and beverage services
- Arts and recreation services
- Transport, postal and warehousing services
- Education and training
- Administrative and support services
- Financial and insurance services
- Accommodation
- Retail trade
- Electricity, gas, water and waste services
- Information media and telecommunications
- Construction
- Mining
- Professional, scientific and technical services
- Manufacturing
- Wholesale trade
- Agriculture, forestry and fishing
- Healthcare and social assistance
Originally published on 7NEWS
