'HOSPO' - the hospitality industry

There are nineteen broad industry categories in Australia (based on the Australian and New Zealand Standard Industrial Classification) and 96 subdivisions. The attention-getters are things like retail trade, construction, professional/scientific/technical, education, and health care/social assistance. But what about the quiet achievers? What about, for example, the ‘hospo’ (accommodation and food services) industry, which has proven to be surprisingly resilient despite being practically outlawed during Covid lockdowns, and which by many accounts will continue to enjoy growth despite rising interest rates and abundant stories of falling consumer confidence?

First, some industry dimensions. Hospo employs nearly 1 million Australians, or 7% of the workforce. This handy infographic below from the Australian Government Labour market insights provides a useful overview. Past growth of 6.4% is predicted to double in coming years to 13.2%. Yes, it’s a lower paid industry with a low full-time share, but an industry showing growth of this magnitude is one that will experience more spending, which means elevated cash flows and share of wallet.

The Government’s Labour Market insights also reveals that, while industries like health and education along with professionals, have dominated discussions about jobs growth into the future (and with good reason), guess which industry comes in amongst the top five of nineteen? Accommodation and food services are predicted to be the fourth fastest growing industry of employment in the five years to 2026:

Predictions of growth for pubs, clubs and dining might seem counter-intuitive given the extreme pain inflicted by Covid lockdown policies, now compounded by predictions of a ‘mortgage cliff’ and consumer blood in the streets as the result of rising interest rates. But even taking these things into account, prospects for this industry seem solid. According to the Australian Industry & Skills Committee for example: “All Hospitality-related occupations are projected to show growth to 2026, with the strongest growth expected for Cafe and Restaurant Managers (27%), Fast Food Cooks (18%), Chefs (14%) and Waiters (12%).”  The food and beverage part of the industry, which has already bounced back from the Covid lockdowns, is expected to add jobs while the accommodation part of the industry remains flat:

What’s driving that growth is said to be our growing ‘foodie culture’ (which I think means an increasing willingness to eat out and to explore new food, dining and drinking experiences?). Added to this, a growing population and a bounce back in global tourism numbers provide a further floor to support future growth.

Global industry researchers Ibisworld are also talking up the industry’s prospects. Their 2017-2022 analysis was understandably dour: “The Pubs, Bars and Nightclubs industry has faced difficult trading conditions over the past five years. Rising health consciousness has constrained per capita alcohol consumption. Additionally, government regulations aimed at curbing binge drinking, alcohol-related violence and problem gambling have dampened industry performance over the period. The COVID-19 pandemic and related restrictions have substantially affected the industry over the three years through 2021-22, due to ongoing temporary establishment closures and subsequent capacity limits.”

But for 2022-2027 the tone is more upbeat: “Revenue for the Pubs, Bars and Nightclubs industry is forecast to grow over the next five years. Operators are projected to increase their focus on high-quality food and beverage offerings to appeal to value-conscious consumers and increase their revenue bases. Additionally, increased local tourism campaigns and support from the wider hospitality sector are likely to boost industry demand. Easing international border restrictions will support inbound travel to Australia, providing a much-needed boost to industry revenue” (while also noting that alcohol consumption per capita may continue to fall and gambling curbs are a further mitigating factor).

The Australian Bureau of Statistics’ Monthly Household Spending Indicator provides a further insight. The latest data, which runs through to November 2022, shows that household consumer spending continued undeterred by rising interest rates or predictions of economic calamity just around the corner. And the largest increases in spending? In order they were:

1. transport (+35.8%)
2. hotels, cafes and restaurants (+23.8%)
3. alcoholic beverages and tobacco (+10.8%).