Few industries are more affected by COVID-19 than hospitality. Successive lockdowns — particularly in Victoria and New South Wales — have seen many food and beverage businesses devastatingly close for good.
The most vulnerable include CBD venues, which are suffering from lower foot traffic as remote work continues, and high-end restaurants where service and ambiance are key to the dining experience. Despite this, there are still venues evolving to the current situation, needing government assistance as they trade through a constantly changing environment.
The industry is resilient and is doing all it can to stay afloat. Over the past 18 months, venues have adapted their products and services to include delivery, takeaway, retail, and finish-at-home meals. Cafes and restaurants have reduced staff hours and sought rent reductions in a bid to shrink overheads. Many opened cautiously with capacity limits between lockdowns, choosing to trade despite the lower revenue potential.
Unfortunately, many remain on the brink of closure because there is very little else the industry can do while strained by lockdown restrictions. To ensure we all have a hospitality industry to return to as restrictions ease, financial security is critical. If customers cannot provide adequate cash flow, the money must come from somewhere else.
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Government lifeline 2.0
With the retirement of the federal government’s JobKeeper, it was with great relief that both the Victorian and NSW governments announced rescue packages to help ailing hospitality businesses in the most recent set of lockdowns. In Victoria, many are now eligible for a raft of grants that target businesses affected in different ways, for example those located in CBD areas, as well as offering rent relief.
In NSW, businesses can reduce and/or defer their payroll tax obligations. NSW Treasurer Dominic Perrottet also announced an extension to the state’s JobSaver program, allowing businesses with an annual turnover of between $75,000 and $250 million to apply for payments if they have experienced a revenue decline of 30% or more.
On closer examination, while JobSaver is designed to help all businesses affected by COVID-19, there are some business types that the government automatically determines as ‘highly impacted’.
As Australia’s largest wholesale hospitality marketplace, FoodByUs uniquely sits between a large network of suppliers and venues across food and beverage. In this regard, we see a key inconsistency with how the eligibility criteria are applied: being that the supply side of the hospitality sector is not as easily covered in the requirements compared to the venue side.
For example, because suppliers and wholesalers are not directly affected by the public health order but rather bear the brunt indirectly when venues need to shut or reduce their purchase orders, many are not considered ‘highly impacted’ within the JobSaver criteria. Rather, wholesale businesses need to satisfy the more general criteria within the JobSaver application, namely “a decline in turnover of 30% or more due to the public health order” compared to a fortnight from the same period in 2019 , the same period in 2020, or the two-week period immediately before any restrictions.
Food service is one connected chain
The JobSaver boost announcement in July was not enough to save one of Australia’s major fruit and vegetable suppliers from financial trouble. In2food, also known as Yarra Valley Farms Australia, went into administration in mid-August, evidence that the threats to the hospitality sector extended all the way down the supply chain.
In2food chief Bill Kollatos singled out “snap lockdowns” as the primary cause of its struggles. While In2Food are resilient and will likely come out of administration fighting, it is a stark reminder on the interconnectedness of consumers, venues and crucially the suppliers within the hospitality industry.
At FoodByUs, we deal with hundreds of suppliers across the country who are just as affected by rolling and snap lockdowns as venues, with less obvious recognition or support for their situation. Revenue for some wholesale food suppliers is down as much as 90%, yet these businesses cannot as easily claim support via JobSaver given they are not designated as ‘highly impacted’. While this does not prevent them from claiming, it is an oversight by the creators of the support package.
The hospitality industry is a highly interconnected chain of supply. Great supply creates great menus, and great menus create great experiences for consumers.
Therefore, without a variety of suppliers, restaurants and cafes cannot keep providing the same quality of service and innovation that consumers love and expect. The industry is already reeling from months of lockdowns; more challenges, including delivery driver shortages and truckie strikes, continue to put pressure on the entire sector.
With adequate support, the keystone segments of hospitality suppliers and wholesalers could continue to service venues. This includes both during these challenging times and — more importantly — when we come out of lockdown. We all hope like last time there is a sudden swelling in the demands placed on venues as life returns to normal — and good supply will be needed.
It’s critical that governments at all levels recognise the severe and negative impact lockdowns have on the hospitality industry and the flow on effect throughout the ecosystem.
It is heartening to see assistance in the form of grant programs and JobSaver being offered to the customer facing businesses that have suffered. However, we need to ensure all those in the supply chain under immense financial strain are also eligible to easily receive assistance.
By doing so it not only provides a holistic, supportive solution but also ensures that the industry as a whole has the best chance to thrive when they return.