Australia is a stunningly beautiful and incredibly diverse country with coasts, deserts, rainforests, cities, and unique wildlife and nature. Owing to the perfect blend of rural and urban culture, there is a lot of scope for the hospitality industry to flourish and expand.
Business travellers, tourists on short trips, and those attending events prefer to stay in urban areas, while vacationers, adventure seekers, and those looking for unique scenic destinations prefer scenic and special accommodations in rural areas.
From luxury and boutique hotels to eco-friendly resorts, beachfront resorts, and pet-friendly resorts, the ultimate aim is to provide an unforgettable guest experience and increase visitor frequency.
While hotels, resorts, and other hospitality businesses seem to be in consistent demand, they face numerous challenges, such as labour shortages, rising operational costs, high competition, evolving regulations, seasonal demand changes, and disruptions in the financial management of the hospitality business.
In this blog, let’s explore the challenges hospitality businesses face in Australia and how seeking professional help can help tackle these challenges and free up resources for more value-added activities.
Labour shortages
Hospitality is an industry that is hugely dependent on people.
Regardless of how much a hospitality business might invest in innovation and new technologies, at the end of the day, it’s the real people who can provide the much-needed unforgettable experience and personalised service to the guests.
A research report by CBRE, a global leader in real estate services and investments, states that labour shortages contribute nearly 20% of the operational challenges faced by the hospitality industry across Australia and New Zealand.
Increase in operational costs
On a macroeconomic level, factors such as economic growth, inflation, interest rates, and changes in government policies contribute to the rise in hospitality business operational costs.
Rising operational costs contribute 60% and are the major contributor to the challenges faced by the hospitality sector in the next two years, according to a survey report.
Demand in a hospitality business, which is the increase in the volume of guests visiting resorts or hotels, is directly related to the performance of an economy.
On the other hand, the supply of the hospitality industry is influenced by an increase in the cost of everything related to hotels, which includes inventory, infrastructure, and utilities.
So, an underperforming economy or a rise in supply-driven costs play a key role in increasing the operational costs of a hospitality business.
Highly competitive market
The hospitality industry is highly competitive with high demand for accommodation, food and tourism across Australia.
Factors such as ease of entry into the market for startups, high customer expectations, a tourism-dependent environment, and the presence of bigger brands that reduce the visibility of smaller or newer brands contribute to the competitive nature of the hospitality business.
Regulatory compliance
Regulations related to the hospitality sector can be complex and extensive. This industry is monitored entirely, from food hygiene, safety, employment, GST, permits, business registration, and taxation.
Failing to adhere to any of these regulations will attract fines, penalties, license suspensions, and ultimately damage to brand image, which is of the utmost importance in this industry.
Changing demand
Operating in a highly dynamic environment with frequent shifts in consumer preferences, the rise of inflation that affects spending power, technological integration, and the sudden occurrence of global events, such as the pandemic that shut many businesses down, all contribute to the changing demand of the hospitality business.
A business that is flexible and can adapt to changes quickly thrives in the highly competitive industry landscape.
Constraints in financial management
Most hospitality businesses run more than one entity, each with nuances specific to that line of business.
For example, one of our hospitality clients is an asset management company, but they develop, create, operate, and manage real estate properties.
These properties include everything from hotels to commercial and mixed-use properties, each with specific financial intricacies.
Hospitality businesses like these demand a dedicated finance team for each business line. With diversified revenue, expenses, and other bookkeeping activities, engaging a single financial team leads to sustainability issues and delays in account consolidation.
Hiring staff with prior expertise in the hospitality business, high labour costs, seasonal demand that causes a variable revenue volume, and maintaining regulatory compliance are other major constraints that can affect the financial management of hospitality businesses.
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