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Inflationary surges, rising costs and interest rates putting pressure on hospitality industry recovery

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Inflationary surges, rising costs and interest rates putting pressure on hospitality industry recovery

Deliveroo HospoVitality Index Report

Inflationary surges, rising costs and interest rates putting pressure on hospitality industry recovery 

  • Hospitality sector confidence has fallen to +11, from +32 in January 2022, which is comparable to sentiment in the midst of 2020 COVID lockdowns (+9 August 2020)
  • 40% of restaurant owners said they felt positive about the future of the hospitality sector, which is down from 52% at the start of the year
  • At the core of the decrease in optimism is rising produce prices, inflation,  increasing salaries, rental costs, state of the economy and reduction in consumer spending.
  • 62% of restaurants say food delivery will play a greater role in their business operations moving forward
  • 60% are asking for government to provide wage subsidies, 51% want visa processing times fast tracked, 51% want a special hospitality sector visa established for international workers, and 48% are asking for investment to be increased to strengthen local food supply chains

MEDIA RELEASE

[26] JULY 2022

Impacts of inflation, rising interest rates and supply chain issues are putting marked pressure on the hospitality sector, with a 21 point drop in the net confidence score to +11, only six months after recording +32. There are signs of optimism returning over the next 12 months, with two thirds (66%) feeling positive about their business prospects in 12 months’ time, according to the latest Deliveroo HospoVitality Index Report.

The survey conducted by YouGov of more than 300 restaurant owners across Australia seeks to understand the level of confidence in their own business prospects, their views on how the industry is faring, the challenges they’re facing and the measures being put in place to help manage these, as well as getting a pulse check for their outlook of the next 12 months.

The July HospoVitality Index Report revealed that restaurant owners are making both necessary business decisions and demonstrating strong innovation and resourcefulness that will enable them to navigate – and prosper – through the business pressures over the next 12 months.

Three in ten owners are temporarily no longer taking an income (31%). A further third (34%) of owners reported feeling at financial risk and some have had to put business improvement plans on hold (31%). However, many are demonstrating the resourcefulness they showed during periods of lockdowns, by hyperlocalising their food and beverage supply chain (44%), many are offering promotions to attract customers (45%), relying more on delivery platforms (42%), along with making changes to their menu (40%)and some are even growing their own produce (8%).

There was a strong correlation between those impacted by inflationary pressures and the need to access finance. Over a third(38%) of those who said they were significantly impacted by inflation have sought out financing. Perhaps an indication of the continued impacts of lockdowns in Victoria, the data found there were more restaurant owners in Victoria who sought access to finance (41%), compared to NSW (32%) and QLD (28%).

As restaurants look to offset rising overhead costs, delivery has become a core part of managing these challenges, with more than six in ten (62%) saying delivery platforms would play an even bigger role than before – the highest score since the HospoVitality Index Report was established. This was higher amongst takeaway restaurants, with 68% saying delivery will be even more important. This is  a solid increase from January 2022, which recorded 49%.

In light of these challenges, the industry is calling for government support in its first six months, with 60% wanting wage subsidies to employ more staff, 51% want visa processing times fast tracked, 51% said they’d like a special hospitality sector visa established for international workers, and 48% are asking for incentives to strengthen local food supply chains.

Ed McManus, CEO Deliveroo Australia: “We saw great optimism across the Australian hospitality industry at the beginning of this year as the country moved forward post lockdowns. However, despite the unwavering resilience amongst restaurant owners, the impacts of rising costs and inflationary pressures, and difficulties with supply chain are being felt far and wide.

“Restaurants have already demonstrated their ability to innovate and adapt through challenging periods, and it’s incredible to see how they’re responding to these current pressures by localising their supply chain – and some even growing their own produce – it is clear this innovation has not slowed.

“The hospitality industry is at the heart of all that we do at Deliveroo, and we’re proud to be a partner in supporting restaurants in whatever way makes the most sense for them.  Australia is home to some of the world’s finest and most diverse restaurants and cuisines, and we will continue to work hand in glove with the industry to support it through another challenging period.”

Notes to Editor:

The prices of produce that I as an owner have noticed has significantly increased is oil and meat. These are the main products we use for our business, you add increased costs for labour too and everything has become very difficult” 

“So many items are regularly out of stock with suppliers that I don’t know where to start.”

“I’m no longer taking a salary and am having to take money out of the till to pay for my own petrol. Price increases has meant consumers are not eating out as much anymore.”

Methodology:

The data cited in this report was collected via an online survey administered by YouGov, the international research and data analytics group. The online survey was conducted between 23rd May until 16th June 2022.

The online survey was distributed to 13,000 Deliveroo restaurant partners across Australia. Emails were sent to partners to invite them to take part in the survey and provided each with a unique survey link.

Reminder emails were sent weekly. The final sample for the survey included 226 Deliveroo restaurant partners.

About Deliveroo 

Deliveroo is an award-winning delivery service founded in 2013 by William Shu and Greg Orlowski. Deliveroo works with over 170,000 best-loved restaurants and grocery partners, as well as over 190,000 riders to provide the best food delivery experience in the world.

Deliveroo is headquartered in London, with offices around the globe. Deliveroo operates across 11 markets, including Australia, Belgium, France, Hong Kong, Italy, Ireland, Netherlands, Singapore, United Arab Emirates, Kuwait and the United Kingdom.

Key Facts:

  • Hospitality sector confidence has fallen to +11, from +32 in January 2022, which is comparable to sentiment in the midst of 2020 COVID lockdowns (+9 August 2020)
  • 40% of restaurant owners said they felt positive about the future of the hospitality sector, which is down from 52% at the start of the year
  • At the core of the decrease in optimism is rising produce prices, inflation,  increasing salaries, rental costs, state of the economy and reduction in consumer spending.
  • 62% of restaurants say food delivery will play a greater role in their business operations moving forward
  • 60% are asking for government to provide wage subsidies, 51% want visa processing times fast tracked, 51% want a special hospitality sector visa established for international workers, and 48% are asking for investment to be increased to strengthen local food supply chains

 

 

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Australian unemployment dropped in March as part-time jobs surged; but this caused an increase in under-employment

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Australian unemployment

Australian unemployment dropped in March as part-time jobs surged; but this caused an increase in under-employment

 

In March 2024, ‘real’ Australian unemployment dropped 78,000 to 1,358,000 (down 0.5% to 8.7% of the workforce) as employment reached an all-time high of over 14.2 million.

However, the composition of the workforce changed – part-time employment surged 295,000 (up 6.1%) to 5,164,000 (a new record high). Unfortunately, there was a substantial decrease in full-time employment, down 256,000 (down 2.7%) to 9,103,000 as the composition of the employment market changed significantly.

The rise in part-time employment was correlated to the increase in under-employment, up 75,000 to 1576,000 (10.1%, up 0.5%). In total a massive 2.93 million Australians (18.8%, unchanged) were unemployed or under-employed in March.

The March Roy Morgan Unemployment estimates were obtained by surveying an Australia-wide cross section of people aged 14+. A person is classified as unemployed if they are looking for work, no matter when. The ‘real’ unemployment rate is presented as a percentage of the workforce (employed & unemployed).

  • Employment reaches new record high of over 14.2 million in March:

Australian employment increased 39,000 to 14,267,000 in March. Part-time employment drove the increase, up 295,000 (up 6.1%) to a new record high of 5,164,000 while full-time employment dropped 256,000 (down 2.7%) to 9,103,000.

  • Australian Unemployment dropped in March with 78,000 fewer looking for work:

In March 1,358,000 Australians were unemployed (8.7% of the workforce, down 0.5%), a decrease of 78,000 from February driven by fewer people looking for part-time work. There were 763,000 (down 70,000) looking for part-time work and 595,000 (down 8,000) looking for full-time work.

  • Overall unemployment and under-employment was unchanged in March at 18.8%:

In addition to the unemployed, a further 1.58 million Australians (10.1% of the workforce) were under-employed, i.e. working part-time but looking for more work, up 75,000 from February. In total 2.93 million Australians (18.8% of the workforce) were either unemployed or under-employed in March.

  • Comparisons with a year ago show rapidly increasing workforce driving employment growth:

The workforce in March was 15,625,000 (down 39,000 from February, but up a massive 641,000 from a year ago) – comprised of 14,267,000 employed Australians (up 39,000 from a month ago) and 1,358,000 unemployed Australians looking for work (down 78,000).

Although unemployment and under-employment remain high at 2.93 million, there has been a surge in employment over the last year – up by 693,000 to a new record high of 14,267,000.

Australian unemployment

Roy Morgan Unemployment & Under-employment (2019-2024)
Source: Roy Morgan Single Source January 2019 – March 2024. Average monthly interviews 5,000.
Note: Roy Morgan unemployment estimates are actual data while the ABS estimates are seasonally adjusted.

Compared to four years ago in early March 2020, in March 2024 there were almost 800,000 more Australians either unemployed or under-employed (+3.2% points) even though overall employment (14,267,000) is almost 1.4 million higher than it was pre-COVID-19 (12,872,000).

ABS Comparison

Roy Morgan’s unemployment figure of 8.7% is more than double the ABS estimate of 3.7% for February but is approaching the combined ABS unemployment and under-employment figure of 10.3%.

The latest monthly figures from the ABS indicate that the people working fewer hours in February 2024 due to illness, injury or sick leave was 521,700. This is around 140,000 higher than the pre-pandemic average of the five years to February 2019 (382,100) – a difference of 139,600.

If this higher than pre-pandemic average of workers (139,600) is added to the combined ABS unemployment and under-employment figure of 1,533,000 we find a total of 1,673,600 people could be considered unemployed or under-employed, equivalent to 11.3% of the workforce.

 

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Construction Giant LVX Global Group Enters Administration, Putting 25 Jobs at Risk

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LVX Global Group

Construction Giant LVX Global Group Enters Administration, Putting 25 Jobs at Risk

 

In a significant development within the Australian construction sector, a prominent company, formerly valued at $30 million just nine months ago, has entered administration, placing 25 jobs in jeopardy.

LVX Global Group, a leading infrastructure engineering firm headquartered in Australia, took a drastic step on Wednesday morning as five of its subsidiary companies appointed administrators in a bid to revamp their financial situation. Specialising in strategy, engineering, and project management within the building sector, LVX operates primarily from its headquarters in Adelaide and boasts a global presence across more than 20 countries.

Having contributed to major national projects such as Brisbane Airport and Sydney’s Botanical Gardens, LVX has also collaborated with the Sunshine Coast Council on crucial initiatives like lighting, communications, and electrical services for the Mooloolaba seafront. Despite its illustrious portfolio, LVX now finds itself in dire straits, with administrators actively seeking potential buyers for the entire business or select assets while the fate of 25 employees hangs precariously in the balance.

LVX Global Group CEO Corey Gray

LVX Global Group CEO Corey Gray

The company’s decline from its former glory is particularly striking given recent reports suggesting plans for a lucrative stock exchange debut through an initial public offering, which pegged its value at $30 million. Now, Ken Whittingham and Mark Robinson from insolvency firm Fort Restructuring have stepped in as administrators to navigate LVX through these turbulent times.

In their statement to news.com.au, the administrators indicated that while LVX has several national projects currently underway, decisions regarding their continuation remain pending. Expressing a commitment to explore all viable options, the administrators are actively pursuing a sale of LVX as a “going concern” and are open to considering a deed of company arrangement (DOCA) to potentially salvage the situation.

Amidst earlier plans for capital raising and optimistic revenue forecasts, LVX’s financial performance took a nosedive, with revenues totalling $13.3 million in the 2022 financial year—a significant increase from $7 million in the previous comparable period. Despite projections of $15 million in revenue for the 2023 financial year, internal presentations from last year painted a different picture, highlighting the company’s downward spiral.

LVX’s unfortunate downturn adds to a growing trend of national construction companies grappling with financial woes. Earlier instances include Rork Projects, facing debts nearing $30 million across multiple states, and Project Coordination, a seasoned industry player with half a century of operations, which succumbed to administration just two weeks ago, further underscoring the widespread crisis plaguing the construction sector.

 

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CSIRO invests $20 million to drive SME innovation

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SME innovation

CSIRO invests $20 million to drive SME innovation

 

Australia’s national science agency, CSIRO, has committed a substantial $20 million investment aimed at enhancing access to crucial research and development (R&D) opportunities for small to medium enterprises (SMEs), with the goal of fostering their growth and innovation.

This funding infusion will empower CSIRO’s SME Connect team to support up to 750 SMEs through an array of comprehensive programs and initiatives. These initiatives encompass facilitation, training, dollar-matched funding, and assistance for start-ups and SMEs seeking engagement in company-led research projects.

Among the supported programs is CSIRO Kick-Start, a flagship initiative of SME Connect. Since its inception in 2017, the Kick-Start program has facilitated over 280 company-led R&D projects, boasting alumni companies with a collective market value exceeding $2 billion.

Dr. Doug Hilton, Chief Executive of CSIRO, underscores the profound significance of this investment and its transformative potential for Australia’s critical SME sector. He emphasizes the pivotal role SMEs play in driving Australia’s future, serving as bastions of innovation and solutions to societal challenges.

Dr. Hilton states, “CSIRO’s fundamental role as the national science agency is to create benefits for Australia, including driving SME productivity, sustainability, and growth through enhanced access to R&D opportunities and research support, fostering a resilient and diverse economy.”

SMEs constitute the backbone of Australia’s economy, accounting for 99.8% of businesses, contributing over half of the gross domestic product (GDP), and employing 68% of the private sector workforce.

CSIRO’s SME Connect team has a proven track record of supporting start-ups and SMEs across various industry sectors, including technology, manufacturing, agriculture, mining, energy, health, and biosecurity.

Simon Hanson, Director of CSIRO’s SME Connect, highlights how this investment bolsters Australian innovation by providing practical avenues for SMEs to leverage the expertise and facilities of the national science agency. He stresses the importance of collaboration between industry and the research sector for the longevity and success of Australian SMEs.

Hanson notes, “This funding enables us to bridge the gap between industry and academia, fostering meaningful collaborations and facilitating innovation and growth within the SME ecosystem.”

Goterra, an award-winning start-up based in Canberra, exemplifies the success stories emerging from CSIRO’s SME Connect programs. Olympia Yarger, Founder of Goterra and a CSIRO Kick-Start alumni company, developed an innovative waste management system utilizing insects to process food waste, resulting in a 97% reduction in greenhouse gases.

Yarger lauds CSIRO’s Kick-Start program for connecting Goterra with leading scientists who provided world-class research capabilities and pivotal support in exploring business opportunities, alternative technological advancements, and industry connections.

For businesses intrigued by the potential of R&D to address their challenges, CSIRO’s SME Connect offers a suite of programs tailored to support R&D initiatives. These include CSIRO Kick-Start, Innovate to Grow, Generation STEM Links, RISE Accelerator, and the Collaboration Readiness Levels tool.

For further information on CSIRO’s SME Connect programs, visit their website here.

Sidebar:

  1. CSIRO’s commitment to fostering SME innovation through R&D funding.
  2. Success stories like Goterra, showcasing the tangible benefits of CSIRO’s programs for SMEs.
  3. The diverse range of industry sectors supported by CSIRO’s SME Connect initiatives, promoting innovation across various fields.

 

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